Former Woolworths partner Deacons East Africa has announced it will close and sell its assets. The sale was announced by its administrators in the Kenyan press. The company, which was founded in 1958, owns 4U2, FNF, Adidas and Bossini clothing and footwear stores in Nairobi and Kigali.
The era of another mainstay of retail in Kenya, Deacons has come to an end. With it, the company’s stores in Nairobi malls the Sarit Centre, Two Rivers Mall, Yaya Centre, Village Market, Garden City as well as its operations in Rwanda will either be closed or sold.
Deacons was once a powerhouse of clothing retail in East Africa – with operations in Kenya, Rwanda, Tanzania and Uganda. The company listed on the Nairobi in 2016. It mostly exited Tanzania in 2012 after five years of losses and has closed its stores in Uganda earlier this year. In November 2018 the company was placed into administration. Potential losses to investors are estimated to be KSh1.9bn ($18.8m).
Deacons has struggled for years. Annual revenues are now Ksh646m ($6.4m) compared to an average of Sh2.3bn (£22.3m) in better years. In 2016 Deacons sold back its 49% share in Woolworths Kenya to the South African retailer, noting a challenging retail environment but calling it a strategic exit. The Woolworths franchise, which Deacons had held since 2013, accounted for approximately a quarter of Deacon’s revenues. In February 2018, it sold back its Mr Price franchise to the Mr Price Group. It had operated the Mr Price franchise since 2007, and it accounted for half of Deacon’s revenues – in the first part year after the Mr Price sale Deacons revenues fell by 21%. That year Deacons borrowed over $12.5m at 21% interest rate, a much higher cost than the maximum allowed for ordinary bank loans, which are capped at 14% by Kenyan authorities. It also lost the Angelo footwear franchise.
Deacons placed much of the blame on the failures of Nakumatt and Uchumi: the reduction of footfall into malls where those supermarket chains were located fell by 60% as they failed. Deacons franchises were typically colocated with them. Deacons also bet on an online platform it optimistically hoped would bring in cut operating costs by 20% and increase revenues by 10%.
Because Deacons’ closure has effectively happened in slow motion, the impact on the retail scene in Kenya will be minimal. But it forms part of a growing picture of vulnerability, poor management and decisionmaking by longstanding Kenyan retailers, who have found themselves unable to weather a modest period of difficult trading without ramping up debt.
