INTEGRATED REPORT 2023

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Truworths has continued to follow its proven successfully launched strategy of ...

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TRUWORTHS RETAIL PRESENCE

OPERATIONAL REVIEW: OFFICE

OFFICE

RETAIL PRESENCE

OFFICE, WHICH INCLUDES THE OFFSPRING BRAND, IS AN OMNI-CHANNEL RETAILER WITH A PORTFOLIO OF STORES AND CONCESSION OUTLETS IN THE UK (74 STORES) AND REPUBLIC OF IRELAND (SEVEN STORES). THE PHYSICAL STORE OFFERING IS COMPLEMENTED BY AN ESTABLISHED, WORLD-CLASS ONLINE BUSINESS CONTRIBUTING 45% OF RETAIL SALES IN THE REPORTING PERIOD.

STORE AND ONLINE SALES AS A PERCENTAGE OF RETAIL SALES

RATIONALISATION OF STORE PORTFOLIO

After consolidating the physical store base in recent years and closing loss-making and poorly located stores, Office began to reinvest in modernising and selectively expanding and upgrading its store estate in the reporting period.

The first new store in three years was opened in Cardiff in November 2022, followed by the opening of a new store in the high-profile Battersea Power Station development in London shortly before year end.

Flagship London stores in Carnaby Street and King’s Road were modernised with a new store design concept which will be applied to all new and modernised stores in the future. The new and remodelled stores have traded well ahead of expectations.

Office secured longer rental tenures in most strategic locations, with lease renewals generally concluded for five or 10 years with a break clause after year five.

Office continued its strategy of closing unprofitable stores. Trading space reduced by 12.6% as six stores in the UK and all seven in Germany were closed as Office exited that country.

Accessibility of the Office brand is a key attraction for customers and brand partners, with its blend of online and stores in key locations and markets, with the current retail sales mix of 55% in-store and 45% online. In the reporting period, in-store sales increased by 16.4% and e-commerce sales by 17.4%.

CONCESSION OUTLETS

Trading through concession outlets allows Office and Offspring to access customer footfall within leading department stores, both physically and online, while simultaneously offering a more flexible physical footprint and cost base. At the end of the period Offspring had 10 concession outlets (eight in Selfridges and two in Brown Thomas) and Office had one (Selfridges).

ONLINE AND E-COMMERCE

Office continued to invest in its e-commerce capability to enhance the digital user experience. A leading-edge customer relationship management (CRM) application was implemented late in the financial year. This CRM solution will enable Office to personalise communications with its customer base, improve customer retention and reduce the volume of dormant customers through improved segmentation and targeted communication.

The branded footwear market is heavily influenced by social media. Office and Offspring continued to grow their e-commerce capability with strong support on social media, with over 1.2 million followers across Instagram, TikTok, Pinterest and Facebook.

To extend the payment options available to customers, the third-party ‘buy now, pay later’ option, which was launched on the Office website in November 2021, was successfully launched for in-store purchases in October 2022. The payment arrangement is between the payment provider and the customer, and Office carries no payment risk.

RETAIL PRESENCE IN 2024

In the new financial year Office plans to maximise the store portfolio by securing tenure in the best locations at market-related occupancy costs and where internal investment criteria are satisfied. Trading space is planned to increase by approximately 10%. Capital expenditure of £3.8 million has been committed for store development which includes the planned opening of three new stores and three store relocations. This includes a new flagship Offspring store in King’s Cross in London which will be opened in October 2023. A number of additional new store opportunities, have been identified and could increase the number of store openings in the year ahead, which may increase capital expenditure on new and remodelled stores.

A further eight to 10 stores will be modernised based on the refreshed store design. In modernising stores, Office will take advantage of opportunities to increase trading space in existing stores by regaining space typically used for larger-than-required stock rooms and converting this into productive space.

While most marginal and loss-making stores have been exited or lease terms renegotiated in the last three years, a few remain and the rentals for some of these, where possible, will be renegotiated or if applicable closed in the year ahead.

INTEGRATED REPORT 2023