SUMMARY

  • Spike in inflation has eroded many consumers’ purchasing power
  • Deacons posted a net loss of Sh278 million last year compared to a Sh100.6 million profit in 2015
  • Nakumatt, Uchumi currently struggle to pay suppliers
  • Job loses in recent past has affected Kenyans purchasing power

The high-end retail sector is feeling the pinch of tough economic times, with fashion retailer Deacons being the latest to scale down its operations.

The retailer is set to close down one of its logistics centres this month and merge its two warehouses to further save on costs.

The franchise behind Mr Price said it had shed some of its workforce and has had to close some of its stores due to subdued sales, which have forced it to restructure its business.

“The year has been a tough one and going forward, we need to appreciate in a much bigger way trade relationships with our customers,” said Deacons East Africa Chief Executive Muchiri Wahome in a recent interview.

The fashion retailer’s full-year results saw it post a net loss of Sh278 million last year compared to a Sh100.6 million profit in 2015.

Mr Wahome said some of its stores such as LifeFitness and F&F, which replaced South Africa’s Woolworths, have been doing well despite the slump in the overall business.

The local retail market has been facing tough times, a trend that has seen mega chain stores, including Nakumatt and Uchumi supermarkets, struggle to pay suppliers and maintain optimal stock while piling up debts.

A spike in inflation in the past few months has seen the purchasing power of many Kenyans diminish, countering the narrative of the country’s ‘ballooning’ middle class.

Job losses and rising political temperatures ahead of next week’s polls coupled with the capping of interest rates have also reduced Kenyans’ disposable income and squeezed economic growth.

“Generally in an election year when the economy slows down by one or two per cent, in the retail sector we get a four per cent slow-down because people only buy basic things such as unga and soap. No one wants to buy high-value unnecessary things,” said Retail Trade Association of Kenya Chief Executive Wambui Mbarire.

“And on the supply side, stocks tend to be affected because they are not sure if their goods will move during this period.”