Deacons EA released its half-year 2017 results, which show a 32% drop in net profit following a reduction in margin by a major brand reducing sales volume. The group registered a loss after tax of Ksh180.4 million compared to a loss of Ksh 52.6 million in 2016.
The fashion franchise registered 5% increase in revenue collected from Ksh1.016 billion recorded in 2016 to Ksh1.007 billion. Operating expenses also went up by 12% due to an increase in number of stores and staff rationalisation effected in May 2017.
Deacons EA Plc Chief Executive Officer Muchiri Wahome outlined some of the struggles they have faced in the first half. The prolonged drought that led to higher prices leading to a 11.7% inflation, reduced sales by a margin of 13% resulting from reduced average customer spending rate by 17%, compared to the same period last year.
Increased retail space from 169,516 square feet in 2016 to 190,341 square feet in 2017 which was not matched by an increase in traffic. Several major supermarkets also reduced stocking. The effects of just-ended elections were also felt in the same period.
A number of their franchises are, however, recording positive growth in the Kenyan market.
The new F&F stores located at The Hub and Sarit Centre registered upward trend results which gives hope for more growth. Adidas and LifeFitness brands also had positive results, signaling potential growth opportunities in the wellness and leisure market.
Deacons EA Plc is expected to focus more on profit making brands as they open new outlets in Nairobi and Mombasa in the year due to increase in malls in the country. They are also headed to introduce an e-commerce platform by Q1 of 2018 in order to reach a wider market while reducing on operation expenditure.
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The company is also working with the Export Processing Zone towards a partnership that will see Deacons EA Plc’s stock EPZ Products in all its 4U2 stores.
Deacons EA Plc Chairman Peter Njoka assured the public of the commitment by the board to turn around the company and steer it to make profits. Some of the undertakings include approving the closure of Angelo brand, reducing its overall staff by 70 positions and consolidating two warehousing and logistics operations into one facility.
The board will also approve the termination of the Babyshop franchise contract and source products directly from the open market, in order to improve the overall value proposition of the segment. This consolidation strategy will further rationalize its brand portfolio by year end.
The company says it remains committed to grow its customer base by offering lifestyle solutions to East Africa through its international brands and to attract more shareholders.
