Deacons now sounds profit warning

Fashion retailer, Deacons East Africa has issued a profit warning for the full year ended December 2016.

The high-end clothing retailer expects its profit after tax to be slashed by at least a quarter compared to the earnings reported during a similar period in 2015, due to what its management said was as a result of poor sales during the December festive season.

“The board of Deacons (East Africa) PLC wishes to announce that the earnings for the current financial year are expected to be lower by at least 25 per cent than the earnings reported for a similar period in 2015,” the retailer’s board said in a statement signed by Company Secretary J Maoga yesterday.

“This announcement is based on the unaudited financial statement for the company for the period ended September 30, 2016 and a comparatively lower Christmas trading season in 2016.”

The retailer also blamed the poor profit outlook on some top-range stores and malls, which were supposed to be opened by the tail-end of 2016, but were not opened in time.

“The drop in profits was primarily occasioned by delayed opening of the Adidas, Bossini and F&F stores at The Hub Karen. Also, the postponement of the opening of the Two Rivers Mall to February 2017, where the company was fully invested and ready to trade in four flagship stores by September 2016, occasioned the slump in profits,” said the board in the statement.

However, the retailer noted that even with the delayed launch of the F&F store at The Hub Karen, which was eventually opened on December 16, sales are expected to pick up with time, which could result in positive returns in future.

For the past two years, the firm has enjoyed impressive returns across all its East African retail outlets.

In 2015, Deacons’ after tax profits stood at Sh100.5 million. This was up from Sh58 million which the company registered in 2014. The rise in profits was as a result of a 24 per cent increase in sales across its 31 stores in Kenya, Uganda and Rwanda.

Deacons is known to follow a strategy where it targets newly opened malls to attract new middle class clientele. Its most profitable outlets are the Bossini and Mr Price stores in the Acacia Mall in Kampala, Uganda and its outlet in Nairobi’s Garden City Mall.