South African fashion retailer Mr Price recorded a Sh84 million loss in its Kenyan operation in the 10 months ended March, largely driven by start-up costs.
The multinational in May last year spent R19 million (Sh133 million) to acquire 12 stores as part of its buyout of the franchise from its former partner Deacons East Africa.
“From the date of acquisition, revenue contributed was R146 million (Sh1 billion) and net loss contributed was R12 million (Sh84 million), affected by once-off start-up costs,” Mr Price said in a trading update.
The performance shows that the business is headed to profitability, having narrowed the net loss from Sh91 million reported in the first five months of operation.
The company currently lists 11 stores in Kenya — six mrpApparel branches (stocking clothing) and five mrpHome stores (selling home decor).
At Sh1 billion, revenue in the period surpassed the Sh378 million turnover posted by Deacons in the six months ended June 2018, explaining the impact of the franchise loss on the Nairobi Securities Exchange-listed firm which subsequently became insolvent.
Woolworths and Mr Price were the major franchises lost by Deacons, which went into a voluntary administration of PKF Consulting in November 2018 after it was unable to pay its debt to suppliers and banks.
Mr Price inherited the staff previously employed by Deacons. The two companies had fallen out ahead of the deal, with Deacons blaming its former partner for its deeper losses in the year ended December 2017.
Deacons said Mr Price reduced its trading margins, initiated the franchise takeover transaction and meanwhile withdrew product supply ahead of the critical Christmas season.
After the takeover, Mr Price launched a website with a detailed catalogue of its men, ladies and kids’ apparel and footwear.
A strong online presence is seen as critical in the fashion world that is trying to attract younger shoppers with an ability to view, order and have their items delivered to them.
Most purchases in Kenya, however, continue to be made at the stores that are mostly in shopping malls. Competition in the formal fashion market is intensifying with the expansion of more brands including Mango and Hugo Boss.