Material Issues, risks and opportunities
Aspirational Fashion
2021
Performance against plans
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PLANS FOR 2021 |
PERFORMANCE AGAINST PLANS |
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Grow made-to-order (MTO) offering and benefit from the refined product strategy using Truworths’ ‘own-brand’ expertise. |
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Ensure effective planning and stock management to manage markdowns and increase margins. |
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Continue to develop brand relationships and mutually agreeable payment terms. |
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Ensure relevance with consumer by reacting quickly to test and trial new product. |
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Challenges encountered
- Extended store closures due to COVID-19 lockdown restrictions in all countries of operation.
- Disruption in production caused by lockdowns in different countries of origin, shipping disruption, and delays in delivery logistics.
- Administrative delays in the early period post Brexit.
- Greatly reduced tourism affected footfall.
- Reduced footfall in key city locations driven by lockdowns, risk of COVID-19 infection and working from home.
- Continued aggressive discounting and promotions across the UK high street.
- Under-performance of MTO footwear impacting negatively on Office gross margin.
2022
Plans for the year ahead
- Further develop the range of unique MTO product.
- Deliver effective planning and stock management to meet demand and increase margins.
- Continue to grow brand relationships.
- Focus on adopting an insight-driven approach to ensure that the product offering is in line with customer requirements.
- Continue to rationalise the store and concession footprint by exiting non-profitable stores as leases expire.
- Commence with the project to replace the ageing merchandise systems.
Medium-Term
Opportunities
- Increase the MTO product mix as a percentage of Office sales to increase gross margin and ensure a balanced range.
- Continue to focus on sustainability by improving sourcing network, introducing sustainable products as well as reducing the usage of plastics and paper packaging.
- Improve the Office brand customer experience to be more personalised, exciting and inspiring in our omni-channel approach which supports both physical stores and e-commerce platforms.
Key risks and mitigation strategies
Suitability and sustainability of Office’s ageing merchandise management system, having become dependent on highly skilled scarce internal and external resources.
- Commenced project to replace legacy merchandise system and complete vendor selection process. Project to replace these systems will begin in the first half of the 2022 financial year.
- Moved current merchandise system to new server.
Reliance on third-party brands
- Continued engagement with partner brands to maintain and enhance brand relationships.
- Increase MTO as a percentage of the total sales mix.
- Identify and introduce new and emerging brands.
Impact on gross margin of changing product mix within sports and MTO ranges.
- Continued focus on MTO product, including collaboration with Truworths trend forecasting and buying teams.
- Improve systems and processes to increase inventory turn.
Ineffective management of merchandise and buying decisions over stock ranges and volumes.
- Apply proven merchandise processes and key executive interventions throughout the merchandise life cycle aimed at managing and mitigating the risk of fashion.
- Utilise the merchandise management system to control stock levels and ensure the ideal level of stockholding.
- Continue to implement effective processes and controls.
Refer to Aspirational Fashion for more detail.
Material Issues, risks and opportunities
Supply Chain
2021
Performance against plans
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PLANS FOR 2021 |
PERFORMANCE AGAINST PLANS |
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Continue relationships with third-party stock clearance partners. |
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Improve fulfilment options by completing the implementation of the same-day delivery and express ‘click & collect’ services. |
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Investigate named day and time delivery service to improve fulfilment options. |
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Mitigate the risk of disruption to the business supply chain posed by Brexit. |
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Continue to strengthen key supplier relationships through ongoing constructive engagement on significant matters. |
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Challenges encountered
- Managing the continued impact of the Brexit transition with delays in border clearances.
- Increased returns from European online customers due to additional Brexit-related duties and taxes.
- Disruption in international shipping due to COVID-19 as well as the Suez Canal blockage which caused late delivery of merchandise.
- Continued impact of COVID-19 on key suppliers.
2022
Plans for the year ahead
- Initiate a tender process for key carrier contracts.
- Implement a new returns platform.
- Improve omni-channel services through the full roll-out of same-day delivery and express ‘click & collect’.
- Initiate project to design the distribution model of the future.
- Commence replacement of merchandise planning, warehouse and distribution systems to position the business for growth.
Medium-Term
Opportunities
- Implement future distribution model to realise efficiencies.
- Implement new merchandise and warehouse management system.
- Evaluate new courier management software to ensure lowest cost deliveries while meeting service expectations of customers.
Key risks and mitigation strategies
Reliance on third-party brands to secure reliable product.
- Diversify the range and styles across and within the different brands.
- Increase Office MTO contribution.
- Office considered a strategic partner by all major international brands due to its national coverage and access to certain target markets.
Unethical behaviour within the supply chain.
- Apply and monitor adherence with anti-corruption and anti-bribery policy.
- MTO suppliers required to provide written confirmation that they accept the working practices in Office’s supplier manual.
- Ensure adherence by suppliers to Modern Slavery Act statement available on Office website.
- Communicate the Office code of ethics to new suppliers, and obtain acknowledgement and signature.
- Implemented documentation controls to safeguard against tax avoidance in the supply chain in line with legislation.
Refer to Supply Chain for more detail.
Material Issues, risks and opportunities
Retail Presence
2021
Performance against plans
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PLANS FOR 2021 |
PERFORMANCE AGAINST PLANS |
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Plan to close up to 28 under-performing stores through lease expiries and break clauses. |
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Improve efficiency in staff scheduling in stores. |
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Planned launch of Offspring website in October 2020. |
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Expand online payment options. |
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Enhance e-commerce and digital retail by elevating personalisation, and optimising merchandising strategies and marketing. |
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Challenges encountered
- The physical store environment remained challenging and this was compounded by stores being unable to trade due to further lockdowns in winter 2020/2021.
- High street footfall continued to decline due to COVID-19, particularly in major city centre locations which are dependent on office workers and tourists.
2022
Plans for the year ahead
- Plan to close up to 22 marginal or loss-making stores through lease expiries and break clauses.
- Implement the updated ‘store of the future’ concept in a London-based store.
- Improve digital user experience, including site search optimisation, product launch improvements and image optimisation.
- Launch ‘buy now, pay later’ payment option.
- Further enhance the customer experience through full roll-out of same-day delivery and express ‘click & collect’, and an improved returns process.
- Remodelling of important high-profile stores.
Medium-Term
Opportunities
- A total of 48 stores have lease expiries or break clauses between 2022 and 2024 which provides the opportunity for further store closures and renegotiation of terms.
- Integrate multichannel information to flow into a single database to target sales opportunities.
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.
- As tourism increases footfall is steadily returning to pre-COVID levels.
- Ongoing review of store portfolio to exit marginal and loss-making stores.
- Compensate for reduction in sales through higher e-commerce sales in London.
Non-compliance with the General Data Protection Regulation (GDPR) which has changed laws relating to the collection, storage and usage of customer data.
- Compulsory GDPR training provided to all employees.
- Adherence to GDPR in line with legislation.
- All store-based information paperless from the end of the 2021 financial period as required in terms of the GDPR.
Payment Card Industry Data Security Standard (PCIDSS) non-compliance.
- Implementation of PCI-compliant omni-channel payment processor.
- PCIDSS training provided to all key employees.
- Adherence to PCIDSS in line with legislation.
Refer to Retail Presence for more detail.