INTEGRATED REPORT 2023

X
CREATING SUSTAINABLE VALUE

MATERIAL ISSUES, RISKS AND OPPORTUNITIES

MANAGING MATERIAL ISSUES

The material issues are reviewed annually by applying the following process:

IDENTIFY

factors that could have a material impact on the Group

DETERMINE

material issues

  • Based on the outcome of the identification assessment, determine the issues that are likely to have the most material impact on performance in the year ahead, as well as in the long term
  • Strategic and tactical plans to resolve these issues are reviewed by executive management, and presented to and endorsed by the board
  • The material issues are aligned with the Group’s Business Philosophy, strategic objectives, plans and projects
  • Measurable deliverables from the strategic plans and projects are incorporated in the performance targets for executives
INTEGRATE

material issues

  • Short and medium-term operational plans are developed annually for managing each material issue
  • Key performance indicators are determined to monitor the progress in managing the material issues
  • Risks and mitigation plans are outlined for each material issue
  • Medium-term opportunities are identified which highlight the potential to create value over a two to four-year time horizon
REPORT

on material issues

  • Report to shareholders and other stakeholders on the material issues in the integrated report and at bi-annual results presentations
  • Report to the board and board committees on material issues at quarterly meetings
  • In these reports, outline progress in delivering on the operational plans, performance against targets and challenges impacting the material issues

MATERIAL ISSUES

MATERIAL ISSUES ARE THE FACTORS THAT ARE LIKELY TO HAVE THE MOST MATERIAL IMPACT ON REVENUE, PROFITABILITY AND SUSTAINABILITY, AND THEREFORE INFLUENCE THE GROUP’S ABILITY TO CREATE AND SUSTAIN VALUE, OR LIMIT VALUE EROSION, FOR STAKEHOLDERS.

MATERIAL ISSUES FOR 2024

Following the review of the material issues in applying the process outlined above, the material issues for Truworths and Office for the 2024 period are set out below.

Human capital has been identified as a new material issue for the 2024 reporting period and is reported on for Truworths and Office together; this is due to the increasingly challenging human resources environment caused by the scarcity and competition for specialist skills globally, the potential impact of skills shortages and the loss of key talent, as well as succession at a senior level.

The material issues for 2024 are as follows:

Aspirational fashion Aspirational fashion
Supply chain Supply chain
Account management Retail presence
Retail presence

Human capital

MAJOR GROUP RISKS

THE RISK HEAT MAP IS BASED ON RESIDUAL RISK AND FOCUSES ON ‘MODERATE’ TO ‘HIGH’ RISKS IMPACTING THE GROUP’S OPERATIONS. ACCORDINGLY, IDENTIFIED RISKS WITH A RESIDUAL RISK RATING OF ‘LOW’ ARE NOT INCLUDED IN THE HEAT MAP ALONGSIDE.

RESIDUAL RISK
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Electricity load shedding in South Africa impacting ability to trade   Managing the impact of volatile Rand/US dollar exchange rate on retail selling prices of imported merchandise   Scarcity of specialist skills and succession for key executives and senior employees   Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy   Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period   Management of credit risk in Truworths   Debt relief legislation enabling the National Credit Regulator to extinguish certain debts owed to credit providers   Increasing competition from online and traditional retailers could impact the sustainability of margins   Civil unrest impacting ability to trade and posing a threat to employees and customers, and risk of damage to assets   Disruption in the local and international supply chain   Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage   Non-compliance with legislation and regulation could result in financial penalties, trading sanctions and reputational damage
REPORT REFERENCE
Truworths Material Issue: Retail Presence   Truworths Material Issue: Aspirational Fashion   Truworths and Office Material Issue: Human Capital   Truworths Material Issue: Account Management   Truworths Material Issue: Supply Chain;
Office Material Issue: Supply Chain
  Truworths Material Issue: Account Management   Truworths Material Issue: Account Management   Truworths Material Issue: Aspirational Fashion;
Office Material Issue: Aspirational Fashion
  Truworths Material Issue: Supply Chain; Truworths Material Issue: Retail Presence   Truworths Material Issue: Supply Chain;
Office Material Issue: Supply chain
  Truworths Material Issue: Supply Chain;
Office Material Issue: Supply chain
  Governance creating value

MATERIAL THEMES

Material themes have been introduced into the integrated report for the first time to provide shareholders with insight into the major factors currently influencing management’s decision making. While the five material issues detailed in this report are aligned with the Group’s business and operating model, the material themes are more dynamic and reflect current retail trends, major macroeconomic factors impacting the business and strategic focus areas internally. These material themes are addressed within the context of the Group’s five material issues and in other relevant sections of the integrated report.

The material themes have been determined with reference to the main risks on the Truworths and Office risk registers, along with a detailed analysis of the macroeconomic environment and the main topics frequently addressed by investors with the Group’s investor relations panel.

Ultimately, the material themes are management’s view of the most pertinent factors affecting the Group in the reporting period, and are expected to be the most relevant themes in managing the business in the 2024 period.

  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing the risk of fashion
  • Managing inventory levels
  • Managing in-house credit risk
  • Mitigating disruption in the supply chain
  • Attracting and retaining critical skills and managing succession in general
  • Optimising retail presence
  • Capitalising on opportunities in a highly competitive retail landscape
  • Managing data privacy and cybersecurity

TRUWORTHS

ASPIRATIONAL
FASHION

SUPPLY
CHAIN

ACCOUNT
MANAGEMENT

RETAIL
PRESENCE

OFFICE

ASPIRATIONAL
FASHION

SUPPLY
CHAIN

RETAIL
PRESENCE

GROUP

HUMAN
CAPITAL

ASPIRATIONAL
FASHION

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing the risk of fashion
  • Managing inventory levels
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Aspirational fashion in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Continue to drive sales growth in areas where we are confident of growing market share, including in key under‑represented categories.  
  • Positive market share gains in certain key categories where Truworths is under‑represented.
  • Ladieswear retail sales increased by 8%.
  • Sync and Fuel brands increased sales by 26% and 40% respectively.
Showcase merchandise with improved visual merchandising in the Truworths Emporium Re‑imagined.  
  • Truworths Emporium Re‑imagined launched in July 2023, with first store in V&A Waterfront.
Enhance focus on kids’ business across brands and expand presence, including in the baby category.  
  • Truworths Kids Emporium retail sales increased by 8%.
  • One stand-alone Truworths Kids Emporium store opened (total stores: seven) with other stores opened within the Truworths Emporium.
  • Greater focus on baby offering based on overall growth opportunity. Testing new products to expand our ranges and will react based on customer response.
  • Emporium store format enables shopping across all kidswear brands.
Ongoing focus on expanding the Context store concept.  
  • Eight Context stores opened during the year: six in Truworths Emporium stores and two within Loads of Living stores.
  • Context will be expanded in retail environments that are appropriate for the brand’s sophisticated curated ranges.
Incorporate Fuel into a further 14 emporium stores and one stand‑alone store to be opened in the first half of the 2023 financial year.  
  • Fuel incorporated into 16 emporium stores.
  • One stand-alone store opened (total stand-alone stores: seven).
  • Total store and department count 49.
Continue to experiment with and grow the Sync product offering in the value segment of the market.  
  • Three Sync stores opened (total stores: 19).
Ongoing upgrading of websites to enhance customer shopping experience and order fulfilment.  
  • Shopper experience enhanced through visual update of the website, inclusion of further brand landing pages, addition of size guides as well as a feature for product recommendations based on user behaviour.
  • Additional payment options introduced.
  • Investment in improved customer relationship management capabilities.
  • Order fulfilment benefited from increased focus on picking  e‑commerce orders from stores and new ‘last mile’ delivery service.
CHALLENGES ENCOUNTERED IN 2023
  • Constrained retail sales environment due to weak economic conditions in South Africa which was compounded by load shedding, resulted in slower sales and additional markdowns to clear excess inventory.
  • Managing the impact of the rapid depreciation and volatility of the Rand on product pricing.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to drive sales growth in product areas where we are confident of growing market share, including in key underrepresented categories.
  • Renew focus on creating differentiated and elevated product across all brands, with their own DNA.
  • Expand the presence of Fuel and continue testing Sync.
  • Add product extensions to ensure all appropriate fashion lifestyles are covered.
  • Continuous website and e‑commerce improvement in the areas of user experience, personalisation, product offering, payments, account management and order fulfilment.
Medium-term

OPPORTUNITIES

  • Continue to expand new brands as they prove their sustainability.
  • Continue to introduce and grow new experimental brand concepts.
  • Optimise markdown system.
  • Utilise the expanded facilities and the opportunities presented by the new distribution centre.
RISKS AND MITIGATION STRATEGIES

Managing the impact of volatile Rand/US dollar exchange rate on retail selling prices of imported merchandise.

  • Forward exchange contracts (FECs) are used to cover merchandise imports to lessen the impact of exchange rate volatility.
  • Continue to seek opportunities to increase the local supply base and the source of supply internationally.
  • Improved fabric and product procurement processes, including capitalising on economies of scale through the in‑house design centre.
 

Increasing competition from online and traditional retailers could impact the sustainability of margins.

  • Continue to invest in fashion intelligence capability through the in‑house Fashion Studio to identify relevant fashion trends.
  • Continue to differentiate and elevate product.
  • Leverage credit to facilitate sales to the target market.
  • Utilise local design capability and local supply base to manufacture quick response fashion.
  • Manage inventory levels to achieve terminal stockholding targets at the change of each season.
  • Balance local and international supply base to achieve optimal product mix.
  • Launch new retail store concepts and continue to enhance the online offering to create a seamless omni-channel experience.
  • Focus on merchandise categories where Truworths is under‑represented to grow market share.

SUPPLY CHAIN

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Managing inventory levels
  • Mitigating disruption in the supply chain
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Supply chain in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Grow Truworths-owned local design division and key cut-make-trim (CMT) suppliers, and invest in systems and processes to improve efficiencies in both.  
  • Acquired ladieswear apparel design centre, Bonwit, a long‑standing exclusive supplier to Truworths.
  • Bonwit design department incorporated into Truworths Africa Design Division alongside Barrie Cline design department (acquired in 2021) and the Truworths design department.
  • Systems integration underway to standardise processes across the three previously separate design centres.
  • Design departments now conveniently located nearer the fashion buyers, thereby improving time to create samples and therefore speed to market.
  • Continued investment in CMT partners to secure local apparel production to support Truworths' fast fashion and quick response models.
Investment in strategically important fabrics to enable improved local production.  
  • Centralised fabric warehouse commissioned with bond and rebate store facilities.
  • Common system implementation underway, across the three design departments, for better fabric control.
  • Investment proved beneficial for the summer 2022 season where fabric on hand was used to replenish top selling garments.
Finalise the design of the building and the materials handling solutions for the new distribution centre (DC).  
  • Building design approved and construction nearly completed.
  • Design of the materials handling equipment completed and procurement currently in progress.
Commence construction of the new DC in the second half of the 2023 financial year.  
  • Construction commenced as planned in the second half of the 2023 financial period and is scheduled for completion by November 2023.
CHALLENGES ENCOUNTERED IN 2023
  • The local supply chain is under financial pressure and ongoing electricity load shedding is further impacting the sustainability of the CMT base. CMT facilities are forced to close during periods of load shedding as they cannot afford to invest in generators or to pay prohibitive fuel costs. Load shedding also affects other participants in the production chain, including garment wash and dye houses and printers.
  • The depreciating Rand/US dollar exchange rate is adversely impacting the cost of imported merchandise, although this has been partially offset by the reduction in shipping freight rates over the past year.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to integrate design departments and standardise systems and processes to extract synergies and efficiencies across the Truworths Africa Design Division to increase speed to market.
  • Complete the construction of the new DC building by November 2023.
  • Commence the installation of the materials handling equipment in the DC for completion by October 2024.
  • Continue to support selected strategic CMTs.
Medium-term

OPPORTUNITIES

  • Commission the new DC by late 2024 to accommodate growth in the business.
  • Leverage the merchandise allocation and replenishment opportunities facilitated by the new DC to drive sales growth.
  • Create an operationally efficient vertically integrated local design division that is sustainable and supports quick response and fast fashion through alliances with strategic CMTs.
  • Identify alternative countries of origin to further strengthen and mitigate risk in the international supply chain.
RISKS AND MITIGATION STRATEGIES

Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.

  • All distribution centre assets are adequately insured.
  • Fire and flood protection installed at all distribution centres.
  • Disaster recovery plans in place.
 

Civil unrest impacting ability to trade and posing a threat to employees and customers, and risk of damage to assets.

  • Work with a geographically diversified local supply base to mitigate impact of civil unrest on one specific region.
  • Assess product categories that may present alternate sources of supply across regions.
  • Assess supplier orders to ensure a spread across facilities, provinces and countries of origin.
 

Disruption in the local and international supply chain.

  • Review supplier base to ensure the business has a well-balanced and sustainable range of suppliers across the wide range of product types.
  • Identify alternative sources of supply and diversify countries of origin where necessary to manage supply chain risk.
  • Continue to seek opportunities to increase local merchandise procurement to reduce reliance on imports with the benefit of shorter lead times and lower exchange rate risk.
 

Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.

  • Truworths' code of conduct included in all supplier agreements and compliance with the code is monitored through an internal audit process.
  • Manufacturers are required to comply with ethical standards, labour, health and safety, and environmental legislation.
  • Legislative compliance audits are conducted as part of the new supplier enrolment process in South Africa.

ACCOUNT
MANAGEMENT

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing in-house credit risk
  • Capitalising on opportunities in a highly competitive retail landscape
  • Managing data privacy and cybersecurity

Refer to Account management in the Truworths Operational Review for more detail.

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Invest in new account acquisition data and analytics, with new sources of data and improved integration of internal data and acquisition channels to optimise strategies.  
  • Upgrades to core modelling capability completed.
  • A number of new channels for account acquisition were opened.
  • Digital channels were optimised to increase return on investment.
  • New scorecards developed to improve predictive power in account management.
  • A number of new strategies were implemented based on our champion/challenger evaluation process.
  • Implemented new work flow to improve digital conversion.
Implement new point-of-sale (POS) system and an upgraded e-commerce capability to create an omni-channel experience.  
  • Enhancements made to our retail engagement online services capability with significant upgrade to cloud services.
  • An enhanced POS system has been developed and is currently being piloted in several stores for implementation in all stores towards the end of 2024.
  • Existing POS was enhanced to facilitate better management of the credit capability.
Enhance account collections analytics and strategy development.  
  • An account collections 'health-check' with external consultants was performed to identify opportunities to improve collections processes and strategies with a number of improvements already implemented.
  • Ongoing monitoring of agency performance with reallocation of accounts to those performing optimally.
  • Account collections strategies redesigned to cater for an environment with heightened credit stress.
Continue testing the newly introduced account products.  
  • Alternative account products successfully tested, adjusted and redeployed for further testing.
Expand range of customer payment channels and increase the number of customers making account payments using non-store channels.  
  • Additional digital payment channels and payment gateways introduced.
  • A 9% increase in the number of customers paying accounts through non-store channels.
  • Commenced testing of various communication channels to enhance collections and facilitate payments.
Test new promotions and offers enabled by the new omni-channel solutions.  
  • Omni-channel promotions aimed at improving the portfolio and spend on account were developed and tested.
CHALLENGE ENCOUNTERED IN 2023
  • Increased debt servicing costs due to rising interest rates, together with other cost-of-living inflationary pressures, impacted customers' ability to pay accounts. Credit management strategies were adjusted to reduce exposure to higher risk customer groups while maintaining strategies for customers where the payment performance has been more consistent.

2024

PLANS FOR THE YEAR AHEAD

  • Improve the predictive power of credit scorecards through the use of additional data sources and new model building techniques.
  • Optimise customer acquisition process across channels.
  • Refine credit limit management decision service to balance short-term customer needs with customer lifetime value potential.
  • Implement further strategies to improve customer payments, including new payment channels, timing of communication, and updated collections performance criteria.
  • Refine alternative new account product.
Medium-term

OPPORTUNITIES

  • Optimise customer acquisition process across channels, reduce costs and improve efficiency.
  • Improve our ability to engage with customers digitally to provide a seamless digital experience throughout the credit lifecycle.
  • Significantly reduce the cost to service customers without compromising on customer satisfaction.
  • Grow customer lifetime value by retaining customers for longer.
  • Improve profitability of credit portfolio by reviewing the profit model to ensure that all metrics contribute to longer-term profit.
RISKS AND MITIGATION STRATEGIES

Management of credit risk in Truworths.

  • Apply account risk criteria and processes consistently using advanced analytics, artificial intelligence (AI), machine learning, scorecards and models.
  • Review and refine account management, collections and acquisition strategies regularly to leverage new data and predictive models.
  • Implement and maintain best-of-breed account management tools that accurately execute policies, processes and strategies.
 

Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.

  • Ongoing improvement and delivery of cybersecurity prevention technologies and strategies.
  • Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
  • Policy introduced to ensure information and data security through responsible use of AI to protect against business risks.
 

Debt relief legislation enabling the National Credit Regulator (NCR) to extinguish certain debts owed to credit providers.

  • Engaged in prior years with the NCR through the National Clothing Retail Federation and other industry bodies to have legislation amended or withdrawn.
  • Contingency plans developed across the account operations and account risk management areas should the legislation be implemented.
  • The expected credit loss allowance under IFRS 9 includes a provision relating to the potential impact of debt relief legislation.

Shareholders should note that while there have been no material developments on this legislation or proposed regulations during the reporting period, this remains a risk to the Group

RETAIL
PRESENCE

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Optimising retail presence
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Retail presence in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Trading space to be expanded by approximately 2%.  
  • Trading space increased by 1.4%.
  • 24 stores opened across all brands, 14 stores closed.
  • Remaining four stores damaged in the civil unrest in KwaZulu-Natal in July 2021 were reopened.
  • 33 stores expanded, consolidated, converted or relocated.
  • 795 stores at period-end (2022: 785).
R236 million committed to store development.  
  • R300 million (2022: R222 million) invested in store development.
  • R40 million spent on backup power solutions during the year, with 87% of South African sales protected by period-end.
Continued rationalisation and consolidation of space to improve trading densities, and close underperforming stores.  
  • 14 stores closed, including two where the trading space has been allocated to other brands.
  • Trading space reduced in nine stores.
Launch Truworths Emporium 'store of the future' concept.  
  • The 'store of the future' concept has been positioned as the Truworths Emporium Re-imagined.
  • The first Truworths Emporium Re-imagined store opened in July 2023 in the V&A Waterfront, Cape Town.
CHALLENGES ENCOUNTERED IN 2023
  • Ongoing electricity load shedding negatively affected trade.
  • Increasing incidence of damage to electricity substations resulted in certain areas being without power for extended periods, impacting trade in nearby stores.
  • Escalating mass protest action against poor municipal service delivery resulted in the temporary closure of stores in affected areas for several hours, and in serious cases for a number of days, to ensure the safety of employees, customers and company assets.

2024

PLANS FOR THE YEAR AHEAD

  • Trading space to be expanded by approximately 2%.
  • R286 million committed to store development, including further backup power solutions.
  • Implement the Emporium Re-imagined store concept to further large format Truworths stores in selected locations.
  • Ongoing rationalisation and consolidation of space to improve trading densities, and close underperforming stores.
  • Continue to grow our online sales contribution while enhancing fulfilment processes to reduce cost and delivery lead times.
  • Improve functionality of the online offering to match the services received in-store.
Medium-term

OPPORTUNITIES

  • Ongoing expansion of trading space.
  • Continued expansion of new store concepts and formats.
  • Growing our online presence to complement the physical store network and enhance the omni-channel experience.
RISKS AND MITIGATION STRATEGIES

Electricity load shedding in South Africa impacting ability to trade.

  • At period-end, 87% of South African store sales were covered by alternative power sources either installed by the business or provided by landlords, with plans to extend this to approximately 92% in the 2024 financial period; remaining stores are either not severely impacted by load shedding or have adequate lighting to continue trading offline.
  • R40 million spent in current period on backup power solutions.
  • Distribution centres equipped with generators.
  • Ongoing engagement with shopping centre owners to connect malls to central generators or solar installations.
  • Invested in generators for some local suppliers and manufacturers.
 

Civil unrest impacting ability to trade and posing a threat to employees and customers, and risk of damage to assets.

  • Business continuity plans to ensure contingency measures are implemented where possible in the event of disruptions to store trading.
  • Adopt a cautious approach to protect the safety of customers and staff and close stores when disruption takes place in close proximity to stores.
  • Review insurance cover annually.

ASPIRATIONAL
FASHION

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing the risk of fashion
  • Managing inventory levels
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Aspirational fashion in the Office Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Maintain mutually beneficial relationships with brand partners through relevant initiatives that are strategically aligned with the partners' plans.  
  • Key brand partnerships strengthened with several joint marketing and brand alliance events undertaken.
  • Levels of support from all major partners reflected in marketing, stock allocations and the store remodelling programme.
Improve stock availability to drive sales growth.  
  • Minimal stock availability issues on made-to-order (MTO) range as logistics and shipping returned to normal.
  • Availability of branded product also returned to normal.
  • Improved stock allocation through enhanced brand relationships.
  • Alignment with Truworths' merchandise management methodologies to improve stock turn and reduce out-of-season (aged) stock levels.
Ensure credit insurance is restored for suppliers to improve brand and supplier relationships and payment terms.  
  • Credit insurance restored and all suppliers are on standard payment terms.
Increase MTO contribution and introduce new MTO ranges.  
  • MTO contribution 8% (2022: 11%) with improved gross margin.
  • Focus has been on growing existing MTO footwear offering rather than on introducing new ranges.
  • Implemented several changes in the MTO team, including enhanced collaboration with Truworths.
  • Increased frequency of travel to Europe and China by merchandise team has improved price negotiations and strengthened relationships.
Grow and introduce emerging brands into the market.  
  • Management highly receptive to seeding new brands in Office and Offspring.
  • Expanded the brand portfolio with the inclusion of seven new branded footwear partners during the year.
  • Office is recognised by brands and customers as an exciting retailer for launching brands with its reputation for showcasing the latest styles and brands and 'must-have' shoes for the season.
Progress the project to replace legacy merchandise management system.  
  • Project to replace merchandising system has recommenced and will be a key focus in the 2024 financial year.
CHALLENGES ENCOUNTERED IN 2023
  • Consumer spending and confidence has been muted due to the high levels of inflation, concerns over energy costs and rising interest rates.
  • MTO product offering continued to underperform.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to diversify the brand mix.
  • Ensure Office is at the forefront of fashion trends and is efficiently stocked to meet customer demand.
  • Grow the MTO offering across ladies', men's and kids' ranges.
  • Focus on casual footwear and seasonality in MTO offering.
  • Substantial progress in design and development of new merchandise management system for implementation in 2025.
Medium-term

OPPORTUNITIES

  • Growing men's MTO range.
  • Introduce new MTO product categories and range extensions.
  • Growing men's sports and branded ranges with new 'in-fashion' brands and styles.
RISKS AND MITIGATION STRATEGIES

Increasing competition from online and traditional retailers could impact the sustainability of margins.

  • Continued engagement with brand partners to maintain and enhance brand relationships.
  • Continued focus on Office's core customer to strengthen point of differentiation and secure brand support and product allocation.
  • Continued focus on expanding MTO product ranges, including collaboration with Truworths' trend forecasting and buying teams.
  • Grow the store footprint in strategically important locations, supplemented by a best-in-class online offering to deliver a seamless omni-channel customer experience.

SUPPLY CHAIN

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Managing inventory levels
  • Mitigating disruption in the supply chain
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Supply chain in the Office Operational Review for more detail.

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Finalise carrier contract for international deliveries.  
  • International delivery contract extended.
Review freight forwarder operations to ensure maximum value and efficiency.  
  • Benchmarking and renegotiation of the European Union freight operations was completed and improvements are expected to be realised in the new financial year.
  • A new airfreight provider was engaged to operate alongside the current operator, ensuring competitive rates are achieved and routing choices expanded.
Roll out express 'click & collect' service.  
  • Development of express 'click & collect' completed and undergoing testing.
  • Service expected to be launched on the Office and Offspring websites in the first half of the 2024 financial period.
Implement a new merchandise returns platform.  
  • Project no longer considered a priority and placed on hold.
CHALLENGES ENCOUNTERED IN 2023
  • The warehouse in Kilmarnock has been under pressure during peak trading periods following the closure of the second warehouse in Greenford in 2022. This has been compounded by the increase in stock holding to pre‑COVID‑19 levels and the reduced availability of agency workers, which factors pose a risk to store stock replenishment and customer service levels.
  • Labour shortages affected courier delivery operations during the peak festive season trading period.
  • Higher fuel costs and other inflationary pressures have increased courier costs across the market.

2024

PLANS FOR THE YEAR AHEAD

  • Extend lease on Kilmarnock warehouse and remodel facility to improve distribution efficiencies and lower costs.
  • Implement express 'click & collect' service.
  • Tender process to be undertaken for UK e-commerce courier contract.
  • Tender process to be undertaken for UK store distribution contract.
Medium-term

OPPORTUNITIES

  • Evaluate new courier management software integration to expand e-commerce customer delivery choices to ensure lowest cost deliveries while meeting service expectations of customers.
  • Identify alternative sources of supply to further strengthen the MTO supply chain and improve margins.
  • Reinitiate the merchandise returns platform project.
RISKS AND MITIGATION STRATEGIES

Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.

  • Warehouse assets are adequately insured.
  • Fire and flood protection installed at warehouse.
  • Disaster recovery plans in place.
  • Improve systems and processes to increase inventory turn.
 

Disruption in the local and international supply chain.

  • Regularly review the supplier base to ensure Office has a well‑ balanced and sustainable range of suppliers across the MTO range.
  • Identify alternative sources of supply to manage supply chain risk.
 

Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.

  • Apply and monitor adherence to anti-corruption and bribery policy.
  • Suppliers required to accept working practices in Office's Code of Ethics and Good Business Practice.
  • Ensure adherence by suppliers to Modern Slavery Act statement (available on Office website).
  • Implemented controls to safeguard against tax avoidance in the supply chain in line with legislation.

RETAIL
PRESENCE

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Optimising retail presence
  • Capitalising on opportunities in a highly competitive retail landscape
  • Managing data privacy and cybersecurity

Refer to Retail presence in the Office Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Invest in the store portfolio with the planned opening of two new stores and modernising of four strategically important stores.  
  • New stores opened in Cardiff (Wales) and Battersea Power Station (London).
  • Flagship London stores in Carnaby Street and King's Road modernised.
  • New and remodelled stores performing ahead of expectations.
Renew leases based on the strategic importance and profitability of stores, while closing non-profitable or poorly located stores.  
  • Secured more appropriate tenure in key locations when leases were renewed.
  • Reduction in business rates in the UK from April 2023 has improved store profitability.
  • 13 unprofitable or poorly located stores closed; six in the UK and all seven in Germany as Office exited that country.
  • Trading space reduced by 12.6%.
  • 81 stores (2022: 92), including 11 concessions (2022: 11) at period-end.
Implement new store design concept in all new and remodelled stores.  
  • New store design concept implemented in modernised Carnaby Street and King's Road stores in London.
  • New design will be applied to all new and modernised stores.
Introduce in-store 'buy now, pay later' payment option.  
  • In-store 'buy now, pay later' system successfully launched in October 2022.
  • The payment arrangement is between the payment provider and the customer, and Office carries no payment risk.
CHALLENGES ENCOUNTERED IN 2023
  • Recruitment and retention of staff in stores which are being addressed through focusing on pay rates, staff structures and recruitment processes.
  • Attracting increased website traffic proved challenging early in the period. The combination of employees focusing specifically on customer acquisition and the appointment of a new search agency has driven cost-effective traffic to the websites with a higher customer conversion rate than in the 2022 period.
  • Lower than targeted customer retention, which is being addressed through a new customer relationship management solution.

2024

PLANS FOR THE YEAR AHEAD

  • Maximise the store portfolio by securing tenure in the best locations at affordable occupancy costs.
  • Trading space planned to increase by approximately 10% and capital expenditure of £3.8 million committed to store development.
  • Capitalise on new store opportunities, with the planned opening of three new stores (including a new flagship Offspring store in King's Cross, London) and three store relocations.
  • Apply the new store design in modernising up to 10 stores.
  • Identify opportunities to increase trading space in existing stores.
  • Complete the implementation of the new customer relationship management system.
Medium-term

OPPORTUNITIES

  • Maintain the profitability of the store portfolio through efficient lease management and take advantage of new store location opportunities.
  • Improve customer retention through personalised communications and offer key customers priority notifications of new products and sales.
  • Introduce chatbot as first line of customer contact.
  • Develop new mobile app to enable personalised communication with targeted customers.
RISKS AND MITIGATION STRATEGIES

Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.

  • Ongoing improvement and delivery of cybersecurity strategies.
  • Compulsory General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCIDSS) training provided to all employees.
  • Adherence to GDPR and PCIDSS in line with legislation.
  • Amended contracts with third-party suppliers who process data on behalf of Office.
  • Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
  • Policy introduced to ensure information and data security through responsible use of artificial intelligence (AI) to protect against business risks.

HUMAN
CAPITAL

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Attracting and retaining critical skills and managing succession in general
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Truworths Human capital and Office Human capital for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Refresh Values (enhanced to raise the importance of inclusive and diverse teams to the company) contained in the Business Philosophy to align Truworths and Office Values and create one shared Values system for the Group.  
  • Reviewed Values and moved from separate Values for Truworths and Office to shared Values for the Group.
  • A full awareness and training campaign relating to the Business Philosophy, including the refreshed Group Values was conducted in Office during 2023.
  • All Truworths employees are undergoing training interventions on the refreshed Group Values statement.
Increase investment in skills development (Truworths).  
  • R122 million invested in skills development of Truworths employees (2022: R116 million).
  • Total of 11 523 employees trained (2022: 10 541).
  • R122 million invested in skills development of Truworths employees (2022: R116 million).
  • Total of 11 523 employees trained (2022: 10 541).
Improve black and female representivity towards achieving Employment Equity Plan 2019 - 2024 goals (Truworths).  
  • Increase in black senior management representivity to 20.5% (2022: 15.5%), with target of 23.0% for 2024.
  • Female representivity is consistent with the 2022 financial period.
Ongoing improvement in B-BBEE rating.  
  • B-BBEE rating level 5 (2022: level 6).
  • Improved points on B-BBEE scorecard to 75.56 (2022: 73.69).
Reduce staff turnover in Office.   Staff turnover in Office normalised with vacancies at acceptable levels.
Ensure gender pay equality in Office.   In Office the gender pay gap median is favourable to female employees by 1.6%, based on the 2022 gender pay gap report prepared in compliance with the UK Equality Act.
CHALLENGES ENCOUNTERED IN 2023

Truworths

  • Attracting and retaining scarce and critical skills with pressure on employers for more flexibility and higher salaries while competing with international companies willing to pay foreign currency for remote working from South Africa. This has been further compounded by emigration from South Africa being an attractive option for younger talent.

Office

  • Attracting and retaining critical skills with pressure on employers for higher salaries due to the high levels of inflation in the UK and employees wanting more flexibility following the remote working experience during the COVID-19 pandemic.

2024

PLANS FOR THE YEAR AHEAD

  • Progress the phased succession plan for top management and senior executives in general.
  • Monitor reward structures and retention mechanisms for scarce and critical skills in Truworths and Office.
  • Extend performance reward strategies for top talent in Office and extend training programmes for critical skills in Office.
  • Increase focus on diversity, equity and inclusion, aligned to the Value of 'embracing the power of inclusive teams'.
  • Focus on transformation and create opportunities for black and female employees to feel empowered to succeed and for females to feel supported by the business.
  • Ongoing focus on aligning the human resources processes in Office with those of Truworths.
Medium-term

OPPORTUNITIES

  • Progress the phased succession plan for top management and senior executives aligned with Truworths' transformation plans as well as retention of key individuals.
RISKS AND MITIGATION STRATEGIES

Scarcity of specialist skills and succession for key executives and senior employees.

  • Two Joint Deputy CEOs were appointed in October 2022 as part of the phased transition to ensure stability in the leadership of the Group.
  • CEO and Joint Deputy CEOs responsible for implementing a medium-term top management succession process in Truworths and Office.
  • Group executive leadership team is supported by seven directors and 10 divisional directors in Truworths and five directors and divisional directors in Office, with an average length of service of 20 years.

TRUWORTHS

ASPIRATIONAL
FASHION

ASPIRATIONAL
FASHION

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing the risk of fashion
  • Managing inventory levels
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Aspirational fashion in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Continue to drive sales growth in areas where we are confident of growing market share, including in key under‑represented categories.  
  • Positive market share gains in certain key categories where Truworths is under‑represented.
  • Ladieswear retail sales increased by 8%.
  • Sync and Fuel brands increased sales by 26% and 40% respectively.
Showcase merchandise with improved visual merchandising in the Truworths Emporium Re‑imagined.  
  • Truworths Emporium Re‑imagined launched in July 2023, with first store in V&A Waterfront.
Enhance focus on kids’ business across brands and expand presence, including in the baby category.  
  • Truworths Kids Emporium retail sales increased by 8%.
  • One stand-alone Truworths Kids Emporium store opened (total stores: seven) with other stores opened within the Truworths Emporium.
  • Greater focus on baby offering based on overall growth opportunity. Testing new products to expand our ranges and will react based on customer response.
  • Emporium store format enables shopping across all kidswear brands.
Ongoing focus on expanding the Context store concept.  
  • Eight Context stores opened during the year: six in Truworths Emporium stores and two within Loads of Living stores.
  • Context will be expanded in retail environments that are appropriate for the brand’s sophisticated curated ranges.
Incorporate Fuel into a further 14 emporium stores and one stand‑alone store to be opened in the first half of the 2023 financial year.  
  • Fuel incorporated into 16 emporium stores.
  • One stand-alone store opened (total stand-alone stores: seven).
  • Total store and department count 49.
Continue to experiment with and grow the Sync product offering in the value segment of the market.  
  • Three Sync stores opened (total stores: 19).
Ongoing upgrading of websites to enhance customer shopping experience and order fulfilment.  
  • Shopper experience enhanced through visual update of the website, inclusion of further brand landing pages, addition of size guides as well as a feature for product recommendations based on user behaviour.
  • Additional payment options introduced.
  • Investment in improved customer relationship management capabilities.
  • Order fulfilment benefited from increased focus on picking  e‑commerce orders from stores and new ‘last mile’ delivery service.
CHALLENGES ENCOUNTERED IN 2023
  • Constrained retail sales environment due to weak economic conditions in South Africa which was compounded by load shedding, resulted in slower sales and additional markdowns to clear excess inventory.
  • Managing the impact of the rapid depreciation and volatility of the Rand on product pricing.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to drive sales growth in product areas where we are confident of growing market share, including in key underrepresented categories.
  • Renew focus on creating differentiated and elevated product across all brands, with their own DNA.
  • Expand the presence of Fuel and continue testing Sync.
  • Add product extensions to ensure all appropriate fashion lifestyles are covered.
  • Continuous website and e‑commerce improvement in the areas of user experience, personalisation, product offering, payments, account management and order fulfilment.
Medium-term

OPPORTUNITIES

  • Continue to expand new brands as they prove their sustainability.
  • Continue to introduce and grow new experimental brand concepts.
  • Optimise markdown system.
  • Utilise the expanded facilities and the opportunities presented by the new distribution centre.
RISKS AND MITIGATION STRATEGIES

Managing the impact of volatile Rand/US dollar exchange rate on retail selling prices of imported merchandise.

  • Forward exchange contracts (FECs) are used to cover merchandise imports to lessen the impact of exchange rate volatility.
  • Continue to seek opportunities to increase the local supply base and the source of supply internationally.
  • Improved fabric and product procurement processes, including capitalising on economies of scale through the in‑house design centre.
 

Increasing competition from online and traditional retailers could impact the sustainability of margins.

  • Continue to invest in fashion intelligence capability through the in‑house Fashion Studio to identify relevant fashion trends.
  • Continue to differentiate and elevate product.
  • Leverage credit to facilitate sales to the target market.
  • Utilise local design capability and local supply base to manufacture quick response fashion.
  • Manage inventory levels to achieve terminal stockholding targets at the change of each season.
  • Balance local and international supply base to achieve optimal product mix.
  • Launch new retail store concepts and continue to enhance the online offering to create a seamless omni-channel experience.
  • Focus on merchandise categories where Truworths is under‑represented to grow market share.

SUPPLY
CHAIN

SUPPLY CHAIN

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Managing inventory levels
  • Mitigating disruption in the supply chain
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Supply chain in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Grow Truworths-owned local design division and key cut-make-trim (CMT) suppliers, and invest in systems and processes to improve efficiencies in both.  
  • Acquired ladieswear apparel design centre, Bonwit, a long‑standing exclusive supplier to Truworths.
  • Bonwit design department incorporated into Truworths Africa Design Division alongside Barrie Cline design department (acquired in 2021) and the Truworths design department.
  • Systems integration underway to standardise processes across the three previously separate design centres.
  • Design departments now conveniently located nearer the fashion buyers, thereby improving time to create samples and therefore speed to market.
  • Continued investment in CMT partners to secure local apparel production to support Truworths' fast fashion and quick response models.
Investment in strategically important fabrics to enable improved local production.  
  • Centralised fabric warehouse commissioned with bond and rebate store facilities.
  • Common system implementation underway, across the three design departments, for better fabric control.
  • Investment proved beneficial for the summer 2022 season where fabric on hand was used to replenish top selling garments.
Finalise the design of the building and the materials handling solutions for the new distribution centre (DC).  
  • Building design approved and construction nearly completed.
  • Design of the materials handling equipment completed and procurement currently in progress.
Commence construction of the new DC in the second half of the 2023 financial year.  
  • Construction commenced as planned in the second half of the 2023 financial period and is scheduled for completion by November 2023.
CHALLENGES ENCOUNTERED IN 2023
  • The local supply chain is under financial pressure and ongoing electricity load shedding is further impacting the sustainability of the CMT base. CMT facilities are forced to close during periods of load shedding as they cannot afford to invest in generators or to pay prohibitive fuel costs. Load shedding also affects other participants in the production chain, including garment wash and dye houses and printers.
  • The depreciating Rand/US dollar exchange rate is adversely impacting the cost of imported merchandise, although this has been partially offset by the reduction in shipping freight rates over the past year.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to integrate design departments and standardise systems and processes to extract synergies and efficiencies across the Truworths Africa Design Division to increase speed to market.
  • Complete the construction of the new DC building by November 2023.
  • Commence the installation of the materials handling equipment in the DC for completion by October 2024.
  • Continue to support selected strategic CMTs.
Medium-term

OPPORTUNITIES

  • Commission the new DC by late 2024 to accommodate growth in the business.
  • Leverage the merchandise allocation and replenishment opportunities facilitated by the new DC to drive sales growth.
  • Create an operationally efficient vertically integrated local design division that is sustainable and supports quick response and fast fashion through alliances with strategic CMTs.
  • Identify alternative countries of origin to further strengthen and mitigate risk in the international supply chain.
RISKS AND MITIGATION STRATEGIES

Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.

  • All distribution centre assets are adequately insured.
  • Fire and flood protection installed at all distribution centres.
  • Disaster recovery plans in place.
 

Civil unrest impacting ability to trade and posing a threat to employees and customers, and risk of damage to assets.

  • Work with a geographically diversified local supply base to mitigate impact of civil unrest on one specific region.
  • Assess product categories that may present alternate sources of supply across regions.
  • Assess supplier orders to ensure a spread across facilities, provinces and countries of origin.
 

Disruption in the local and international supply chain.

  • Review supplier base to ensure the business has a well-balanced and sustainable range of suppliers across the wide range of product types.
  • Identify alternative sources of supply and diversify countries of origin where necessary to manage supply chain risk.
  • Continue to seek opportunities to increase local merchandise procurement to reduce reliance on imports with the benefit of shorter lead times and lower exchange rate risk.
 

Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.

  • Truworths' code of conduct included in all supplier agreements and compliance with the code is monitored through an internal audit process.
  • Manufacturers are required to comply with ethical standards, labour, health and safety, and environmental legislation.
  • Legislative compliance audits are conducted as part of the new supplier enrolment process in South Africa.

ACCOUNT
MANAGEMENT

ACCOUNT
MANAGEMENT

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing in-house credit risk
  • Capitalising on opportunities in a highly competitive retail landscape
  • Managing data privacy and cybersecurity

Refer to Account management in the Truworths Operational Review for more detail.

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
nvest in new account acquisition data and analytics, with new sources of data and improved integration of internal data and acquisition channels to optimise strategies.  
  • Upgrades to core modelling capability completed.
  • A number of new channels for account acquisition were opened.
  • Digital channels were optimised to increase return on investment.
  • New scorecards developed to improve predictive power in account management.
  • A number of new strategies were implemented based on our champion/challenger evaluation process.
  • Implemented new work flow to improve digital conversion.
Implement new point-of-sale (POS) system and an upgraded e-commerce capability to create an omni-channel experience.  
  • Enhancements made to our retail engagement online services capability with significant upgrade to cloud services.
  • An enhanced POS system has been developed and is currently being piloted in several stores for implementation in all stores towards the end of 2024.
  • Existing POS was enhanced to facilitate better management of the credit capability.
Enhance account collections analytics and strategy development.  
  • An account collections 'health-check' with external consultants was performed to identify opportunities to improve collections processes and strategies with a number of improvements already implemented.
  • Ongoing monitoring of agency performance with reallocation of accounts to those performing optimally.
  • Account collections strategies redesigned to cater for an environment with heightened credit stress.
Continue testing the newly introduced account products.  
  • Alternative account products successfully tested, adjusted and redeployed for further testing.
Expand range of customer payment channels and increase the number of customers making account payments using non-store channels.  
  • Additional digital payment channels and payment gateways introduced.
  • A 9% increase in the number of customers paying accounts through non-store channels.
  • Commenced testing of various communication channels to enhance collections and facilitate payments.
Test new promotions and offers enabled by the new omni-channel solutions.  
  • Omni-channel promotions aimed at improving the portfolio and spend on account were developed and tested.
CHALLENGES ENCOUNTERED IN 2023
  • Increased debt servicing costs due to rising interest rates, together with other cost-of-living inflationary pressures, impacted customers' ability to pay accounts. Credit management strategies were adjusted to reduce exposure to higher risk customer groups while maintaining strategies for customers where the payment performance has been more consistent.

2024

PLANS FOR THE YEAR AHEAD

  • Improve the predictive power of credit scorecards through the use of additional data sources and new model building techniques.
  • Optimise customer acquisition process across channels.
  • Refine credit limit management decision service to balance short-term customer needs with customer lifetime value potential.
  • Implement further strategies to improve customer payments, including new payment channels, timing of communication, and updated collections performance criteria.
  • Refine alternative new account product.
Medium-term

OPPORTUNITIES

  • Optimise customer acquisition process across channels, reduce costs and improve efficiency.
  • Improve our ability to engage with customers digitally to provide a seamless digital experience throughout the credit lifecycle.
  • Significantly reduce the cost to service customers without compromising on customer satisfaction.
  • Grow customer lifetime value by retaining customers for longer.
  • Improve profitability of credit portfolio by reviewing the profit model to ensure that all metrics contribute to longer-term profit.
RISKS AND MITIGATION STRATEGIES

Management of credit risk in Truworths.

  • Apply account risk criteria and processes consistently using advanced analytics, artificial intelligence (AI), machine learning, scorecards and models.
  • Review and refine account management, collections and acquisition strategies regularly to leverage new data and predictive models.
  • Implement and maintain best-of-breed account management tools that accurately execute policies, processes and strategies.
 

Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.

  • Ongoing improvement and delivery of cybersecurity prevention technologies and strategies.
  • Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
  • Policy introduced to ensure information and data security through responsible use of AI to protect against business risks.
 

Debt relief legislation enabling the National Credit Regulator (NCR) to extinguish certain debts owed to credit providers.

  • Engaged in prior years with the NCR through the National Clothing Retail Federation and other industry bodies to have legislation amended or withdrawn.
  • Contingency plans developed across the account operations and account risk management areas should the legislation be implemented.
  • The expected credit loss allowance under IFRS 9 includes a provision relating to the potential impact of debt relief legislation.

Shareholders should note that while there have been no material developments on this legislation or proposed regulations during the reporting period, this remains a risk to the Group

RETAIL
PRESENCE

RETAIL
PRESENCE

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Optimising retail presence
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Retail presence in the Truworths Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Trading space to be expanded by approximately 2%.  
  • Trading space increased by 1.4%.
  • 24 stores opened across all brands, 14 stores closed.
  • Remaining four stores damaged in the civil unrest in KwaZulu-Natal in July 2021 were reopened.
  • 33 stores expanded, consolidated, converted or relocated.
  • 795 stores at period-end (2022: 785).
R236 million committed to store development.  
  • R300 million (2022: R222 million) invested in store development.
  • R40 million spent on backup power solutions during the year, with 87% of South African sales protected by period-end.
Continued rationalisation and consolidation of space to improve trading densities, and close underperforming stores.  
  • 14 stores closed, including two where the trading space has been allocated to other brands.
  • Trading space reduced in nine stores.
Launch Truworths Emporium 'store of the future' concept.  
  • The 'store of the future' concept has been positioned as the Truworths Emporium Re-imagined.
  • The first Truworths Emporium Re-imagined store opened in July 2023 in the V&A Waterfront, Cape Town.
CHALLENGES ENCOUNTERED IN 2023
  • Ongoing electricity load shedding negatively affected trade.
  • Increasing incidence of damage to electricity substations resulted in certain areas being without power for extended periods, impacting trade in nearby stores.
  • Escalating mass protest action against poor municipal service delivery resulted in the temporary closure of stores in affected areas for several hours, and in serious cases for a number of days, to ensure the safety of employees, customers and company assets.

2024

PLANS FOR THE YEAR AHEAD

  • Trading space to be expanded by approximately 2%.
  • R286 million committed to store development, including further backup power solutions.
  • Implement the Emporium Re-imagined store concept to further large format Truworths stores in selected locations.
  • Ongoing rationalisation and consolidation of space to improve trading densities, and close underperforming stores.
  • Continue to grow our online sales contribution while enhancing fulfilment processes to reduce cost and delivery lead times.
  • Improve functionality of the online offering to match the services received in-store.
Medium-term

OPPORTUNITIES

  • Ongoing expansion of trading space.
  • Continued expansion of new store concepts and formats.
  • Growing our online presence to complement the physical store network and enhance the omni-channel experience.
RISKS AND MITIGATION STRATEGIES

Electricity load shedding in South Africa impacting ability to trade.

  • At period-end, 87% of South African store sales were covered by alternative power sources either installed by the business or provided by landlords, with plans to extend this to approximately 92% in the 2024 financial period; remaining stores are either not severely impacted by load shedding or have adequate lighting to continue trading offline.
  • R40 million spent in current period on backup power solutions.
  • Distribution centres equipped with generators.
  • Ongoing engagement with shopping centre owners to connect malls to central generators or solar installations.
  • Invested in generators for some local suppliers and manufacturers.
 

Civil unrest impacting ability to trade and posing a threat to employees and customers, and risk of damage to assets.

  • Business continuity plans to ensure contingency measures are implemented where possible in the event of disruptions to store trading.
  • Adopt a cautious approach to protect the safety of customers and staff and close stores when disruption takes place in close proximity to stores.
  • Review insurance cover annually.

OFFICE

ASPIRATIONAL
FASHION

ASPIRATIONAL
FASHION

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Managing the risk of fashion
  • Managing inventory levels
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Aspirational fashion in the Office Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Maintain mutually beneficial relationships with brand partners through relevant initiatives that are strategically aligned with the partners' plans.  
  • Key brand partnerships strengthened with several joint marketing and brand alliance events undertaken.
  • Levels of support from all major partners reflected in marketing, stock allocations and the store remodelling programme.
Improve stock availability to drive sales growth.  
  • Minimal stock availability issues on made-to-order (MTO) range as logistics and shipping returned to normal.
  • Availability of branded product also returned to normal.
  • Improved stock allocation through enhanced brand relationships.
  • Alignment with Truworths' merchandise management methodologies to improve stock turn and reduce out-of-season (aged) stock levels.
Ensure credit insurance is restored for suppliers to improve brand and supplier relationships and payment terms.  
  • Credit insurance restored and all suppliers are on standard payment terms.
Increase MTO contribution and introduce new MTO ranges.  
  • MTO contribution 8% (2022: 11%) with improved gross margin.
  • Focus has been on growing existing MTO footwear offering rather than on introducing new ranges.
  • Implemented several changes in the MTO team, including enhanced collaboration with Truworths.
  • Increased frequency of travel to Europe and China by merchandise team has improved price negotiations and strengthened relationships.
Grow and introduce emerging brands into the market.  
  • Management highly receptive to seeding new brands in Office and Offspring.
  • Expanded the brand portfolio with the inclusion of seven new branded footwear partners during the year.
  • Office is recognised by brands and customers as an exciting retailer for launching brands with its reputation for showcasing the latest styles and brands and 'must-have' shoes for the season.
CHALLENGES ENCOUNTERED IN 2023
  • Consumer spending and confidence has been muted due to the high levels of inflation, concerns over energy costs and rising interest rates.
  • MTO product offering continued to underperform.

2024

PLANS FOR THE YEAR AHEAD

  • Continue to diversify the brand mix.
  • Ensure Office is at the forefront of fashion trends and is efficiently stocked to meet customer demand.
  • Grow the MTO offering across ladies', men's and kids' ranges.
  • Focus on casual footwear and seasonality in MTO offering.
  • Substantial progress in design and development of new merchandise management system for implementation in 2025.
Medium-term

OPPORTUNITIES

  • Growing men's MTO range.
  • Introduce new MTO product categories and range extensions.
  • Growing men's sports and branded ranges with new 'in-fashion' brands and styles.
RISKS AND MITIGATION STRATEGIES

Increasing competition from online and traditional retailers could impact the sustainability of margins.

  • Continued engagement with brand partners to maintain and enhance brand relationships.
  • Continued focus on Office's core customer to strengthen point of differentiation and secure brand support and product allocation.
  • Continued focus on expanding MTO product ranges, including collaboration with Truworths' trend forecasting and buying teams.
  • Grow the store footprint in strategically important locations, supplemented by a best-in-class online offering to deliver a seamless omni-channel customer experience.

SUPPLY
CHAIN

SUPPLY CHAIN

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Managing inventory levels
  • Mitigating disruption in the supply chain
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Supply chain in the Office Operational Review for more detail.

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Finalise carrier contract for international deliveries.  
  • International delivery contract extended.
Review freight forwarder operations to ensure maximum value and efficiency.  
  • Benchmarking and renegotiation of the European Union freight operations was completed and improvements are expected to be realised in the new financial year.
  • A new airfreight provider was engaged to operate alongside the current operator, ensuring competitive rates are achieved and routing choices expanded.
Roll out express 'click & collect' service.  
  • Development of express 'click & collect' completed and undergoing testing.
  • Service expected to be launched on the Office and Offspring websites in the first half of the 2024 financial period.
Implement a new merchandise returns platform.  
  • Project no longer considered a priority and placed on hold.
CHALLENGES ENCOUNTERED IN 2023
  • The warehouse in Kilmarnock has been under pressure during peak trading periods following the closure of the second warehouse in Greenford in 2022. This has been compounded by the increase in stock holding to pre‑COVID‑19 levels and the reduced availability of agency workers, which factors pose a risk to store stock replenishment and customer service levels.
  • Labour shortages affected courier delivery operations during the peak festive season trading period.
  • Higher fuel costs and other inflationary pressures have increased courier costs across the market.

2024

PLANS FOR THE YEAR AHEAD

  • Extend lease on Kilmarnock warehouse and remodel facility to improve distribution efficiencies and lower costs.
  • Implement express 'click & collect' service.
  • Tender process to be undertaken for UK e-commerce courier contract.
  • Tender process to be undertaken for UK store distribution contract.
Medium-term

OPPORTUNITIES

  • Evaluate new courier management software integration to expand e-commerce customer delivery choices to ensure lowest cost deliveries while meeting service expectations of customers.
  • Identify alternative sources of supply to further strengthen the MTO supply chain and improve margins.
  • Reinitiate the merchandise returns platform project.
RISKS AND MITIGATION STRATEGIES

Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.

  • Warehouse assets are adequately insured.
  • Fire and flood protection installed at warehouse.
  • Disaster recovery plans in place.
  • Improve systems and processes to increase inventory turn.
 

Disruption in the local and international supply chain.

  • Regularly review the supplier base to ensure Office has a well‑ balanced and sustainable range of suppliers across the MTO range.
  • Identify alternative sources of supply to manage supply chain risk.
 

Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.

  • Apply and monitor adherence to anti-corruption and bribery policy.
  • Suppliers required to accept working practices in Office's Code of Ethics and Good Business Practice.
  • Ensure adherence by suppliers to Modern Slavery Act statement (available on Office website).
  • Implemented controls to safeguard against tax avoidance in the supply chain in line with legislation.

RETAIL
PRESENCE

RETAIL
PRESENCE

MATERIAL THEMES
  • Trading in the weak and volatile macroeconomic environment
  • Growing revenue, profit and shareholder returns
  • Optimising retail presence
  • Capitalising on opportunities in a highly competitive retail landscape
  • Managing data privacy and cybersecurity

Refer to Retail presence in the Office Operational Review for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Invest in the store portfolio with the planned opening of two new stores and modernising of four strategically important stores.  
  • New stores opened in Cardiff (Wales) and Battersea Power Station (London).
  • Flagship London stores in Carnaby Street and King's Road modernised.
  • New and remodelled stores performing ahead of expectations.
Renew leases based on the strategic importance and profitability of stores, while closing non-profitable or poorly located stores.  
  • Secured more appropriate tenure in key locations when leases were renewed.
  • Reduction in business rates in the UK from April 2023 has improved store profitability.
  • 13 unprofitable or poorly located stores closed; six in the UK and all seven in Germany as Office exited that country.
  • Trading space reduced by 12.6%.
  • 81 stores (2022: 92), including 11 concessions (2022: 11) at period-end.
Implement new store design concept in all new and remodelled stores.  
  • New store design concept implemented in modernised Carnaby Street and King's Road stores in London.
  • New design will be applied to all new and modernised stores.
Introduce in-store 'buy now, pay later' payment option.  
  • In-store 'buy now, pay later' system successfully launched in October 2022.
  • The payment arrangement is between the payment provider and the customer, and Office carries no payment risk.
CHALLENGES ENCOUNTERED IN 2023
  • Recruitment and retention of staff in stores which are being addressed through focusing on pay rates, staff structures and recruitment processes.
  • Attracting increased website traffic proved challenging early in the period. The combination of employees focusing specifically on customer acquisition and the appointment of a new search agency has driven cost-effective traffic to the websites with a higher customer conversion rate than in the 2022 period.
  • Lower than targeted customer retention, which is being addressed through a new customer relationship management solution.

2024

PLANS FOR THE YEAR AHEAD

  • Maximise the store portfolio by securing tenure in the best locations at affordable occupancy costs.
  • Trading space planned to increase by approximately 10% and capital expenditure of £3.8 million committed to store development.
  • Capitalise on new store opportunities, with the planned opening of three new stores (including a new flagship Offspring store in King's Cross, London) and three store relocations.
  • Apply the new store design in modernising up to 10 stores.
  • Identify opportunities to increase trading space in existing stores.
  • Complete the implementation of the new customer relationship management system.
Medium-term

OPPORTUNITIES

  • Maintain the profitability of the store portfolio through efficient lease management and take advantage of new store location opportunities.
  • Improve customer retention through personalised communications and offer key customers priority notifications of new products and sales.
  • Introduce chatbot as first line of customer contact.
  • Develop new mobile app to enable personalised communication with targeted customers.
RISKS AND MITIGATION STRATEGIES

Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.

  • Ongoing improvement and delivery of cybersecurity strategies.
  • Compulsory General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCIDSS) training provided to all employees.
  • Adherence to GDPR and PCIDSS in line with legislation.
  • Amended contracts with third-party suppliers who process data on behalf of Office.
  • Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
  • Policy introduced to ensure information and data security through responsible use of artificial intelligence (AI) to protect against business risks.

GROUP

HUMAN
CAPITAL

HUMAN
CAPITAL

MATERIAL THEMES
  • Growing revenue, profit and shareholder returns
  • Attracting and retaining critical skills and managing succession in general
  • Capitalising on opportunities in a highly competitive retail landscape

Refer to Truworths Human capital and Office Human capital for more detail

PERFORMANCE AGAINST PLANS
PLANS FOR 2023   PERFORMANCE IN 2023
Refresh Values (enhanced to raise the importance of inclusive and diverse teams to the company) contained in the Business Philosophy to align Truworths and Office Values and create one shared Values system for the Group.  
  • Reviewed Values and moved from separate Values for Truworths and Office to shared Values for the Group.
  • A full awareness and training campaign relating to the Business Philosophy, including the refreshed Group Values was conducted in Office during 2023.
  • All Truworths employees are undergoing training interventions on the refreshed Group Values statement.
Increase investment in skills development (Truworths).  
  • R122 million invested in skills development of Truworths employees (2022: R116 million).
  • Total of 11 523 employees trained (2022: 10 541).
  • R122 million invested in skills development of Truworths employees (2022: R116 million).
  • Total of 11 523 employees trained (2022: 10 541).
Improve black and female representivity towards achieving Employment Equity Plan 2019 - 2024 goals (Truworths).  
  • Increase in black senior management representivity to 20.5% (2022: 15.5%), with target of 23.0% for 2024.
  • Female representivity is consistent with the 2022 financial period.
Ongoing improvement in B-BBEE rating.  
  • B-BBEE rating level 5 (2022: level 6).
  • Improved points on B-BBEE scorecard to 75.56 (2022: 73.69).
Reduce staff turnover in Office.   Staff turnover in Office normalised with vacancies at acceptable levels.
Ensure gender pay equality in Office.   In Office the gender pay gap median is favourable to female employees by 1.6%, based on the 2022 gender pay gap report prepared in compliance with the UK Equality Act.
CHALLENGES ENCOUNTERED IN 2023

Truworths

  • Attracting and retaining scarce and critical skills with pressure on employers for more flexibility and higher salaries while competing with international companies willing to pay foreign currency for remote working from South Africa. This has been further compounded by emigration from South Africa being an attractive option for younger talent.

Office

  • Attracting and retaining critical skills with pressure on employers for higher salaries due to the high levels of inflation in the UK and employees wanting more flexibility following the remote working experience during the COVID-19 pandemic.

2024

PLANS FOR THE YEAR AHEAD

  • Progress the phased succession plan for top management and senior executives in general.
  • Monitor reward structures and retention mechanisms for scarce and critical skills in Truworths and Office.
  • Extend performance reward strategies for top talent in Office and extend training programmes for critical skills in Office.
  • Increase focus on diversity, equity and inclusion, aligned to the Value of 'embracing the power of inclusive teams'.
  • Focus on transformation and create opportunities for black and female employees to feel empowered to succeed and for females to feel supported by the business.
  • Ongoing focus on aligning the human resources processes in Office with those of Truworths.
Medium-term

OPPORTUNITIES

  • Progress the phased succession plan for top management and senior executives aligned with Truworths' transformation plans as well as retention of key individuals.
RISKS AND MITIGATION STRATEGIES

Scarcity of specialist skills and succession for key executives and senior employees.

  • Two Joint Deputy CEOs were appointed in October 2022 as part of the phased transition to ensure stability in the leadership of the Group.
  • CEO and Joint Deputy CEOs responsible for implementing a medium-term top management succession process in Truworths and Office.
  • Group executive leadership team is supported by seven directors and 10 divisional directors in Truworths and five directors and divisional directors in Office, with an average length of service of 20 years.
INTEGRATED REPORT 2023