Deacons to Close Four Stores in Nairobi few days after Selling Mr Price Franchise

Deacons East Africa, the Kenya-based company engaged in retailing of franchise products has announced plans to shut down four of its stores in some malls in Nairobi this year. The stores to be closed are; the Baby Shop and Angelo store at the Junction mall, 4U2 at Capital Center and Discount Store at Thika Road Mall.

The decision to close the stores comes barely a month after the NSE listed fashion retailer sold off its eleven Mr Price Kenya shops to South Africa’s Mr Price Group Limited, the franchise owner. Deacons has been operating the Mr Price franchise for 10 years and the deal is expected to be completed by April this year.

The company’s CEO Wahome Muchiri in an interview with Capital FM says the decision to shut down the four stores is largely driven by increased competition over the last few years.

“We are looking at the cost base, understanding what customers are looking for. I must say that competition is on the up, new brands are coming to the market so we have to respond to those requirements.” Wahome was quoted by Capital FM.

In the opinion of the CEO, Deacons had a tough year in 2017 because of the election cycle, suppressed consumer demand, and the collapse of anchor tenants in shopping malls such as Nakumatt Supermarket. In addition, Muchiri said that Deacons lost 100 days of trading due to frustrations brought about by political mobilisations that took place during the election period.

In May last year, Deacons had announced it would shut down undisclosed number of unprofitable stores due gloomy sales as a result of increased competition which forced the company to restructure its business model.

In December, Deacons issued a second profit warning since listing saying it expects full year net earnings to be lower than 25% or more compared to 2016’s earnings.

Deacons EA Share price since May 2016 (FT)
Deacons EA Share price since May 2016 (FT)

The company in August 2016 listed listed 123,558,228 shares on the Nairobi Securities Exchange (NSE) at an offer price of Ksh 15.00. On Monday (Feb 12, 2018) the stock closed at Sh 2.90 per piece which represents a loss of 80.6% since listing. This is equivalent to a drop in shareholder wealth by Sh 1.495 Billion against listing valuation of Sh 1.853 Billion.