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Material Issues, risks and opportunities

Office Turnaround

The COVID-19 pandemic has continued to impact on Office’s profitability and liquidity as stores across the UK were closed for a total of 18 weeks of the financial period due to three periods of lockdown, further hampering the implementation of the turnaround strategy which commenced early in the 2020 financial period.

The turnaround programme, which is aimed at restoring Office’s profitability and ensuring the long-term sustainability of the business has, however, gained traction in 2021 and the benefits are expected to start being realised from the 2022 financial period.


Performance against plans



Implement staff redundancy programme.

  • Redundancy programme to be finalised in October 2021.

  • Redundancies to date resulted in a 15% reduction in head office payroll costs.

Rationalise the store and concession footprint by exiting non-profitable stores as leases expire.

  • Closed 28 marginal and loss-making stores and 3 concession outlets.

  • Trading space reduced by 22.0%.

  • Renewed nine store leases on a short-term flexible basis.

  • Rent-free periods and rental reductions negotiated during COVID-19 pandemic.

Accelerate development of omni-channel capabilities.

  • New Offspring e-commerce website launched in October 2020.

  • Online payment options expanded with introduction of Apple Pay and Google Pay.

  • Online sales continued while stores were closed for 18 weeks of UK lockdown, accounting for 63% of retail sales for the financial period.

Ongoing management of turnaround strategy:

  • Trading: focus on merchandise performance and stock to reduce markdowns by managing stock position.

  • Short-term essentials project: aimed at prioritising Office’s operational and capital expenditure.

  • Marketing and brand: focus on marketing and communications strategies, branding and brand relationships.

  • Office used the COVID-19 period to reduce stock levels and address legacy stock issues.

  • Inventory levels 17% lower at period-end despite store closures affecting stock management.

  • Operating and capital expenditure significantly reduced to preserve cash and support profitability.

  • Relationships with leading global brand partners strengthened during COVID-19 lockdown through proactive and constructive engagement.

Challenges affecting Office performance and turnaround strategy

  • Turnaround programme was interrupted for several months owing to impact of COVID-19 and the related lockdown store closures and cash flow constraints.
  • Continuing decline in high street footfall with customer preference for online shopping which was accelerated during the COVID-19 lockdown.
  • Office leases have historically been concluded for an average of 10 years with upward rental adjustments only, making it difficult and expensive to exit leases in loss-making stores.


Plans for the year ahead

  • Continue to rationalise the store and concession footprint by exiting non-profitable stores as leases expire.
  • Focus on merchandise performance and stock management to further reduce markdowns.
  • Utilise different countries of origin to both improve margin and also shorten quick response lead times to enable trade based on customer demand.
  • Increase contribution of sustainable product into the ranges.
  • Further strengthen the brand positively through elevated digital content and engagement with the London fashion-leading consumer.
  • Focus on innovative in-store display that links to the online experience and entices customers back into the store environment.
  • Develop a design for the Office store of the future.
  • Grow higher-margin made-to-order offering.
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Key risks and mitigation strategies

Risk of online sales substituting store sales in a fast-changing UK retail landscape.

  • Ongoing review of store portfolio to exit marginal and loss-making stores.
  • Drive customer footfall into stores through improvements in the omni-channel offering including ‘click & collect’ and online returns in store.

Footfall in London substantially reduced from previous years due to the COVID-19 pandemic.

  • Management focus and monitoring of the London stores with new initiatives to encourage footfall.
  • Reassessment of the contributions from London stores based on lower footfall.
  • Compensate for reduction in sales through higher e-commerce sales in London.

Refer to Chief Executive Officer’s Report for more detail.