Fashion retailer Deacons targets middle class for regional expansion

Fashion retail chain Deacons is targeting middle class shoppers in large towns outside Nairobi as it looks to double revenue to Sh6 billion in the next four years.
The retailer, which lists by introduction Tuesday on the Nairobi Securities Exchange, counts only one outlet outside of Nairobi on its Kenyan portfolio— the Mr Price shop at Nyali Plaza in Mombasa.

The retailer has set a target to have 60 outlets across East Africa by 2020 from the 38 it operates currently in order to hit the revenue target, with the chief executive officer Muchiri Wahome saying they will look to open four or five new stores per year.

“We have only got one store in Mombasa, we think that city can take two more brands or branches,” said Mr Wahome.

“There is also opportunity within the other bigger county headquarters that are showing aggressive commercial interest both from a property development and consumerisation perspective, such as Kisumu, Nakuru, Eldoret, Meru, and Kisii. We are in negotiations with various parties in these towns.”

Deacons also has three stores in Uganda and two in Rwanda, although it exited Tanzania in 2012 citing a tough operating environment.

READ: Deacons listing puts CEO shares at Sh65m

The company will be targeting new malls in these urban centres for its branches, which include Mr Price, Mr Price Home, Truworths, Adidas, Angelo, 4u2, Identity and Bossini.

These branches stock male and female clothes, footwear and accessories, home textiles, kitchenware, sports apparel, fitness equipment and baby products.

Rising sales in new branches last year helped Deacons record revenue of Sh2.83 billion in 2015, which resulted in a net profit increase of 73 per cent to Sh100.5 million compared to Sh58 million in 2014.

The expansion is to be financed mainly through debt, which as a result of the 2015 expansion had ballooned to Sh655 million at the end of the year. It has paid down the debt this year cutting it to Sh300 million.