News Column

Deacons Cuts Net Loss but Business Remains Low

July 30, 2014

Constant Munda

DEACONS Kenya's strategy of selling its flagship Woolworths collections on credit failed to lift sales to meet a targeted annual growth of 40 per cent during the first half of the year.

The clothing retailer said revenues dropped 3.8 per cent during the first six month of the year to Sh781.8 million on "recurrent insecurity alerts and incidences" that kept away customers from malls. where most of their outlets are located.

The firm however said it managed to cut net losses to Sh1.21 million after it "streamlined supply chain and right-sized operations". This boosted its operating margins by 26.9 per cent to Sh417.3 million.

"Expenses slumped by a modest 4.1 per cent to Sh423.8 million on operational efficiencies that included addition of two stores in late 2013", Deacons said in a note to investors, some of whom helped raise Sh700 million by buying 11,215,824 shares in a sale that targeted Sh800 million in December 2010.

The company would have suffered a loss before taxation of Sh252.5 million in the first half of 2013 but the sale of a 49 per cent Woolworths Holdings of Mauritius for Sh394.6 million in April helped slash it to Sh142.1 million.

It partnered with consumer finance firm afb on November 6, 2013 to finance customers to buy Woolworths merchandise on loans to be repaid in six months.

"Availability of credit enables customers to purchase what they want when they want it," chief executive Muchiri Wahome had said. "Saving for a specific purchase often leads to disappointment when you find the item has been sold."

Customers were to access Woolworths store cards only after successfully showing proof of regular income while those in informal sector were to be cleared by a credit rating bureau first.

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Source: AllAfrica

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