Deacons East Africa has cited withdrawal of strategic franchises, increased competition and the informal sector as key factors that have plummeted the fortunes of the company, associated with retired President Mwai Kibaki.
Deacons lost Mr. Price franchise to MRP Kenya limited in April this year. At the time, it blamed its financial woes on the credit crunch following interest rate cap and competition in the retail sector due to an oversupply of malls.
Mr. Price Group, which is listed on the Johannesburg Stock Exchange, has 962 southern Africa stores and 29 franchise stores in Africa including Kenya, Nigeria and Ghana dealing in clothing, footwear, sportswear, sporting goods, and home-wares.
While it had also targeted WoolWorths in a bigger way, they opted to launch direct operations in more African countries and in Kenya it established a firm called Woolworth’s Kenya Proprietary Limited where it owns a 51 per cent stake with the remaining share held by Deacons.
In a statement published in local dailies, the company’s Chairman Sam Oduor added that drop in gross and operating margins, collapse of anchor tenants at malls (Nakumatt and Uchumi) and cost of investment for the company’s expansion strategy combined to compel the firm to be placed under administration.
“As a result, for the financial year 2017 the company reported a loss of sh841 million. This compounded by a reduction of 62 per cent in sales turnover and a further loss of sh328 million incurred during the half year ended June 2018”, read the statement in part.
It added that the continued losses have made it increasingly difficult for the company to meet its financial obligations as and when they fall due.
Mr. Oduor added that through the proposed Administration process, the company will continue to trade and operate as a going concern to enable it achieve a successful turnaround.
Deacons was suspended from trading at the Nairobi Securities Exchange (NSE) on Monday after going into administration last week. The board appointed Peter Kahi and Atul Shah of PKF Consulting as joint administrators of the company.
Once the Administrators take over, the directors will cease to have the power to deal with assets and affairs of the company unless otherwise directed by the joint administrators.
“While we regret the financial difficulties the company is facing, we have full confidence that through Administration, the company stands a better chance of success”, the statement added.
The family of the late businessman Charles Mwangi Gathuri, co-founded the business alongside Mr. Kibaki.
Deacons operates in Kenya, Rwanda, Mauritius, and Uganda.