Companies

Deacons expansion on ice as profit set to fall

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A customer shops at a Deacons outlet. The firm's 2016 profits will fall by at least a quarter, meaning that it will not exceed Sh85.4 million. PHOTO | FILE

Nairobi Securities Exchange (NSE)-listed fashion retailer Deacons has hit the brakes on expansion plans after it issued a profit warning for the year to December 2016 attributed to depressed Christmas sales and delays in opening its stores at The Hub in Karen and Two Rivers.

Deacons, which operates in Kenya, Rwanda, Mauritius and Uganda, says it expects last year’s profits to drop by at least a quarter, indicating that they will not exceed Sh85.4 million going by last year’s numbers.

Muchiri Wahome, the retailer chain’s chief executive, says Christmas revenues declined by 10 per cent year-on-year.

Delays in the opening of The Hub, Karen (from December 2015 to February 2016) and multiple postponements of the Two Rivers mall from the initial launch date of October 2015 to February 2017 also impacted sales negatively, he said.

“It’s going to be a tough year. Obviously, we shall slow down on expansion and consolidate what we have even as we watch the Kenyan space,” Mr Wahome said in an interview.

READ: Centum postpones Two Rivers shopping mall opening to February

The profit warning reverses an 85.3 per cent growth in net profit to Sh113.8 million that the firm registered in the 2015 full-year on higher revenues and a gain from the completed sale of its stake in Woolworths’ business in Kenya.

The retailer also booked a Sh64.9 million gain following the conclusion of a transaction where it sold its remaining 49 per cent stake in a joint marketing venture to South Africa’s Woolworths.

“I don’t think we will be doing more stores this year except for a small Adidas shop in Mombasa in February and the second F&F store which is being opened in Sarit Centre later this month,” said Mr Wahome.

Deacons currently operates 41 stores in the region, having opened three last year.

The Hub, a 376,000 square feet shopping mall located in Karen, opened its doors to the public in February 2016, a few of months behind schedule.

Deacons has a presence in the shopping complex with its latest shop, F&F, opening mid last month following a franchise deal with UK’s largest grocery and general merchandise store Tesco.

Mr Wahome said the plan was to open two of these stores – at the Sarit Centre and at The Hub – in late September, but constraints in receiving shipments from China saw the business miss this target.

“We had supply chain backlogs in China and some of our shipments, especially shop fittings, delayed. It is for this same reason that we have pushed opening of the second F&F store by a month to January 19,” he said.

Deacons also missed out on the Christmas shopping rush after Centum for the umpteenth time delayed opening of its upcoming Two Rivers shopping mall.

Deacons plans to have Mr Price Apparel, Mr Price Home, Bossini and Adidas stores at the shopping complex.

READ: Deacons inks franchise deal with UK-based fashion retailer

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