Deacons agrees to sell Mr Price franchise, expects profit to drop by 25 percent

NAIROBI, KENYA: Clothing and household goods retailer Deacons has agreed to sell its Mr Price Kenya franchise to South African company Mr Price Group.

The sale which has been in the offing since October last year, has seen Deacons finally agree to Mr Price Group’s  terms and will be offloading the Kenyan franchise to the South African company.

“Further to the cautionary notice by Deacons East Africa PLC published on October 9 2017 in relation to the proposed sale of the Mr Price Franchise in Kenya by Deacons to the Mr Price Group, the board of directors at Deacons would like to notify its shareholders that Deacons has entered into a sale agreement in relation to the proposed transaction. Mr Price shall now purchase the Mr Price Kenya franchise from Deacons,” a notice from the listed retailer read.

When the deal is finally approved by the various regulatory authorities, it will see Mr Price Group operate all the 11 Mr Price retail outlets in Kenya.

Deacons operates other outlets in the country including Truworths, Identity, 4U2, Mr Price, Angelo, Adidas, Life Fitness and babyshop.

The high-end fashion retailer which carries out similar businesses in Rwanda, Tanzania, Uganda and Mauritius has been going through tough times having announced that its profits will dip by at least 25 per cent for the full year to December.

This simply means that its total net earnings will at least dip by Sh208 million, a situation the firm's CEO Muchiri Wahome blamed on the credit crunch due to the rate cap and closure of Nakumatt spaces which previously were driving traffic to its shops.

“Apart from that, the expected drop in profits was also brought about by the presidential elections in Kenya which resulted in decreased consumer demand and spending," Mr Muchiri said.

Deacons again two years ago sold its Woolworth franchise in Kenya to another South African fashion retailer Woolworths Holdings in a deal resembling this one with Mr Price PLC.

Mr Price serves the lower end of the Deacons’ market and since the Woolworth brand was sold, it has been the flagship brand at Deacons. It has also been contributing more than half of Deacon's earnings.