Fashion retailer Deacons East Africa Plc #ticker:DCON has singled out the decline of Nakumatt and Uchumi supermarkets at the malls it operated in as among the factors that led to financial troubles that will see the firm placed under administration.
The chairman of the company’s board of directors, Sam Oduor, said reduced foot traffic in malls where the supermarkets operated as anchor tenants hit Deacons hard.
Combined with other factors including lost revenue after selling Kenya’s Mr Price stores to South African franchise owner Mr Price Group of South Africa and increased competition, the firm says the trend led to a drop in its performance.
“The financial performance of Deacons East Africa PLC has been declining since 2016. This is attributed to a combination of several factors key amongst them being the withdrawal of some strategic franchises and collapse of anchor tenants of malls (Uchumi and Nakumatt),” the company said in a notice today.
The two supermarkets have in the past one year closed stores across major malls in Nairobi, Mombasa and neighbouring Uganda and Tanzania under the weight of huge debts.
In December last year, Deacons said that it expected its losses to increase owing to closure of Nakumatt in some of the shopping malls it operates.
Nakumatt exited The Junction Mall along Ngong Road, Galleria Mall in Lang’ata and its major Mombasa outlets at Nyali City Mall and Likoni.
Deacons now says these key events combined with other factors and a downturn in economic conditions in Kenya led to a Sh841 million loss posted by Deacons for the 2017 Financial Year. It further suffered a Sh2328 million loss in the half year ended in June.
The fashion retailer appointed Peter Kahi and Atul Shah of PKF Consulting Limited as the firm’s joint administrators.
Deacons is the second listed firm after ARM Cement #ticker:ARM to invoke the Insolvency Act No.8 of 2015 that gives companies going through financial distress to appoint administrators in order to explore other possibilities of rescuing troubled firms.
The sale of Mr Price completed in May earned the firm Sh108.6 million for the equipment and operating lease covering Mr Price stores in the country.
It was to receive an additional Sh24.7 million for similar items in respect of Mr Price stores in Uganda.