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Operational Review – Office
- Leading brand portfolio
- Aspirational fashion
- Supply chain
- Retail presence
- Human capital
Retail presence – Office®
Office is an omni-channel retailer with a portfolio of stores and concession outlets in the UK (83 stores), Germany (8 stores) and Republic of Ireland (7 stores). The physical store offering is complemented by an established, world-class online business which contributed 63% (2020: 44%) of retail sales in the reporting period.
The ability to trade from stores continued to be severely impacted by government lockdown restrictions. UK stores were closed for 18 weeks during the 2021 financial period, 25 weeks in the Republic of Ireland and 20 weeks in Germany. Online sales continued during lockdowns when stores were closed, resulting in the strong growth in online sales contribution during the period.
Refer to Material issues, risks and opportunities for more detail.
CONTINUING SHIFT TO ONLINE SHOPPING
Online sales grew by 18.2% while store sales declined by 45.3% for the period, reflecting the impact of the store closures.
Declining store sales coupled with increasing national minimum wages and high local authority rates are impacting on the profitability of stores and management continually reviews the real estate portfolio to exit unprofitable stores or renegotiate leases on more favourable terms. Extensive rates holidays and furlough scheme benefits received during the period assisted to mitigate store losses to some extent.
UK retail store leases have historically been agreed for periods of 10 years or longer, with rent reviews every five years to re-price rentals to market rates, with upward adjustments only. While lease negotiations have been challenging in the current weak trading environment, the COVID-19 lockdown has resulted in Office being granted rent reductions on several leases in respect of lockdown periods and negotiations are ongoing.
STORES
Office closed 28 marginal and loss-making stores and three concession outlets during the period, resulting in a reduction in trading space of 22.0% (2020: reduction of 4.8%). Office renewed nine store leases on short-term flexible terms during the period.
A further 48 stores have lease expiries or break options between 2022 and 2024, and decisions relating to these leases will be made at the time taking into account trading conditions and outlook, location and lease terms. While the ongoing rationalisation of the store portfolio is a key management focus area to improve Office’s profitability, real estate decisions need to be balanced with the omni-channel strategy.
Following the successful renovation of the Oxford Street, London, flagship store in 2019, planning on the evolution of the ‘store of the future’ concept has recommenced post lockdown, for roll-out to a London-based store in the 2022 and 2023 financial years.
CONCESSIONS
Trading through concession outlets allows Office and Offspring to access customer footfall within leading department stores, both physically in the stores and online, while simultaneously offering a more flexible physical footprint and cost base. Office and Offspring work closely with the concession partners to review performance and assess the need to open, relocate, adjust or close space within the host store portfolio. At the end of the period Office had 3 concessions and Offspring 10.
ONLINE AND E-COMMERCE
Office and Offspring continue to grow their e-commerce capability with strong support on social media, with over one million followers on Instagram and Facebook.
In the post-lockdown focus on Office’s omni-channel capability, digital receipting was introduced across the store estate. E-receipt data is fed securely into the customer relationship management system to create future omni-channel sales and marketing opportunities.
The Office.co.uk website was enhanced with the implementation of technology to improve the customer experience.
The new Offspring website was launched in October 2020 and incorporates a forward-thinking design and best-in-class product photography in line with the long-term aspirations of the brand.
