Deacons shops for male buyers as it lists at the NSE

If any retailer captured the interest of Tobias Dickinson, a 42-year old businessman in Nairobi over Christmas, then it was Deacons, the clothing and lifestyle goods dealer.

Mr Dickinson had to give his wife a special gift for Christmas — a bathroom makeover which would include buying new curtains, toilet seat covers and floor covers, all of which had to come in beige.

“We tried six different shops and most of them were like, try Deacons or try Woolworths,” he said. Woolworths, the Deacons-operated store did it for them. Although his wife shops at Deacons stores, he rarely does.

And so later this year, as it plans to list its shares on the Nairobi Securities Exchange (NSE) through introduction, Deacons Kenya is making a big push to attract male professionals, like Mr Dickinson, into its stores, tapping into the region’s growing middle class to grow sales in the face of increasing competition from supermarkets and international brands.
“One of our targets this year is to meet the man’s needs in more ways than we are doing,” said Deacons chief executive Muchiri Wahome adding that the retailer is searching for a men’s brand.

The majority of the shoppers in Deacons outlets are women, 70-80 per cent of all shoppers, according to Mr Wahome.

This is because most of the brands and items it stocks are associated with women’s shopping.

Other plans on the retailer’s cards are opening more stores in Uganda, finalising plans to enter the school uniforms distribution market from 2013 and selling more gym equipment in the upcoming hotels and apartment blocks in the region.

In the six months to June 2011, Deacons’ sales grew by 38 per cent to $11.7 million compared with the same period last year. Profits after tax grew 51 per cent to $507,700 compared with the previous year.

Three more outlets are planned for Uganda this year to add onto its existing Mr Price store. Mr Wahome said their expansion in Uganda has been supported by more shopping malls coming up in the country.

Deacons holds the franchise of a number of global fashion brands in the region including Woolworths in Kenya, Mr Price in Kenya, Uganda and Rwanda, Truworths in Kenya and Tanzania, Adidas in Kenya and Identity in Kenya and Tanzania.

The company also has its own brands 4U2 and Angelo.

In total, it has 34 outlets in the region with the bulk in Kenya. In December 2011 Deacons made an entry into Rwanda, opening two shops.

The retailer’s target clientele range from people in permanent employment in the city, who use both public and private transport and stay in middle income housing estates to expatriates, chief executives and top ranking government officials.

The former is classified to occupy the Living Standards Measures (LSM) 7 and the latter LSM 17. LSM is a measure of affluence with a higher number denoting a more affluent class. LSM 17 class denotes the most affluent in society.

According to a Synovate survey, 22 per cent of Kenya’s adult population occupies LSM7 to LSM 17, Deacons key market segment.
Entry into the school uniform market will help Deacons penetrate a totally different but growing market segment.

The retailer is currently undertaking research on how best to enter the school uniform market, with the plan to launch in 2013.

“It is a very big market. Every child in Kenya wears a uniform. But the thing is where we will get the best return on investment,” Mr Wahome said.

Selling gym equipment to the growing number of hotels, gated communities and upcoming middle and high income apartment blocks is another market Deacons is eyeing through its Life Fitness brand.

Already, Deacons has clinched the deal to supply President Paul Kagame’s gym equipment at his official residence.

Mr Wahome said Life Fitness is one of the fastest growing products, contributing $2 million of sales, about eight per cent of turnover, in 2011 two years since it was introduced.

The brand is doing well in the region including in Tanzania where it has faced a number of challenges from lack of shopping malls and consumer spending that is not as high as it is in Kenya, Uganda and Rwanda.

“It still is an agrarian economy and not consumerised like in the rest of the region,” said Mr Wahome of the Tanzanian economy.

Dar es Salaam has two shopping malls only, which makes it hard to set up shop for Deacons target market, according to Mr Wahome.

He said Deacons’ board will meet at the end of January on the way forward on their Tanzanian operations.

Tanzania has also been tough because Deacons does not own the Woolworths brand, which is operated by Tanzanian Ali Mufuruki under Woolworths Tanzania.

The retailer is facing increased competition in this segment as supermarkets set up their lifestyle and fashion stores while exhibitions shops targeting the middle class and offering the same quality of clothes mushroom in East Africa’s urban areas.

Tuskys, the retail chain supermarket, operates Enkarasha, a fashion retailer, with two stores in Nairobi.

There are other independent shopping malls such as Ivory Stores, Manix, which has four men’s specialty stores, and Jade, all targeting the same clientele as Deacons. Ivory stores said it plans to open two shops this year, one in Mombasa and another in Uganda.

Deacons raised $8 million out of a targeted $9 million in a public offering in November 2010, with the cash used to aid its expansion. The shares well sold at US cents 71 and trade on the over the counter market.

However, analysts say there has been very little activity on the counter since the beginning of the year, but expect demand to pick up as investors buy the shares hoping to acquire them before they list on the NSE.

“The shares are not usually very liquid but the price has been rising because investors want to get in before it lists,” said an analyst who requested for anonymity because he is not the firm’s spokesperson.

Deacons’ shares trade at US cents 76 up from US cents 71.