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Deacons net earnings fall blamed on supply snag

Fashion retailer Deacons says a product supply hitch from its South African partners is the major cause of a 3.1 per cent dip in revenue to Sh2.3 billion for the year to December, which pushed the firm into loss-making territory.

Deacons says supplies received from SA’s Truworths and Mr Price between August and October last year did not meet their demand, eating into their revenue expectations by between 12 and 16 per cent.

The retailer chain’s chief executive Muchiri Wahome says the depressed economic conditions in South Africa and a systems upgrade at Truworths and Mr Price led to the undersupply.

“Our franchise partners undertook a system update which never went as planned. This affected distribution to all their clients over a period. This has since been resolved,” Mr Wahome told Business Daily in an interview.

“Additionally, the South African market has experienced a slowdown with the weakening of the local currency and it is possible that both partners had not ordered optimally.”

This one-off shortage of supplies, reduced footfall at their stores in shopping malls, delayed opening of others such as Two Rivers, and the capping of bank interest rates all led to the firm posting a loss Sh278 million, he added.

In the previous year. Deacons posted a net profit of Sh100.6 million.

Mr Wahome reckons that, while there are more shopping malls across the country, the number of buyers has not increased due to lower purchasing power which he says invalidates the growing middle class narrative.

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