Deacons in franchise deal with Britain’s F&F

Deacons has inked a franchise deal with F&F, the fashion subsidiary of UK’s largest grocery and general merchandise store Tesco, seeking to fill a gap left by termination of a similar contract with South Africa’s Woolworths.

The NSE-listed fashion retailer says it will open two F&F stores at Sarit Centre in Westlands and The Hub in Karen in December at a cost of about Sh100 million.

F&F, a 15-year-old brand that has a presence in six European markets as well as 17 other markets including the United States and Asia, stocks a wide range of family clothes and accessories.

“We’re delighted to have selected Deacons to be our franchise partner in Kenya,” said F&F’s global partnerships director Marcus Chipchase in a statement.

Tesco, the world’s third-largest retailer by revenue, houses F&F stores within its supermarkets. It relies on the franchise model to expand outside the UK.

The Deacons partnership is its first in Africa.

“Deacons has a strong track record and we’re looking forward to working together to bring F&F’s affordable fashion to the region.”

Deacons had for years been the exclusive franchise holder of South Africa’s luxury brand, Woolworths. In 2012 the multinational opted to trade locally through a joint venture with Deacons in which it owned a 51 per cent stake.

This new partnership ended late last year when Woolworths bought Deacons’ minority stake and opted to go it alone in the Kenyan market.

Woolworths contributed 49 per cent of Deacons’ overall revenues and the fallout dented its portfolio, even delaying the firm’s listing on the Nairobi Securities Exchange (NSE).

READ: Why Deacons took step to list on NSE after four-year wait

Deacons’ chief executive, Muchiri Wahome, says the company used part of the proceeds from the buyout to fund the F&F franchise deal.

“After the partnership ended, we have not adequately catered to some customer segments,” Mr Wahome said Wednesday at the announcement of the partnership.

“Some on-demand products that we have not adequately stocked include lingerie and men’s formal wear. Through the F&F franchise, we are out to strategically get our space back. Woolworths watch out.”

Wide appeal

Jeddida Thotho, Deacons’ retail director, said the F&F brand is “fashionable”, has a “broad appeal” and that products will be priced for their target customers aged between 25 and 45.

Deacons says its rollout agreement with F&F lays out five stores to be opened over five years, with the possibility that some of the remaining three outlets will be located in Rwanda or Uganda.

Mr Wahome added that the company could also get into partnerships with retailers like Nakumatt and Tuskys to set up standalone H&H stores inside their premises.

Deacons, which also sells household goods, posted an 85.3 per cent growth in net profit to Sh113.8 million for the year to December on higher revenues and the sale of its stake in Woolworths’ business.

The growth was attributable to a 23.6 per cent jump in sales to Sh2.4 billion.

Tesco, which is located in 11 countries including China and India, has hit a rough financial patch in recent past years, posting a pre-tax loss of Sh793 billion for the year to February 2015, the highest in Britain’s corporate history.

In the financial year to February 2016, it recorded a pre-tax profit of Sh20.1 billion, a resurgence partly attributable to the growing success of the F&F fashion line.