Footwear retailer Office will close 10 to 15 of its loss-making stores in the next two years.
Revealing that operating profit at the footwear retailer fell by 55% to £7.3m for the year to 30 June 2019, Office’s parent company, South African retail group Truworths, announced the closures on Friday.
Group CEO Michael Mark said Office’s overall portfolio would shrink to around 110 stores from its current 124 total before the retailer “starts getting going again”. It closed 14 stores in the last financial year and last month hired restructuring adviser Alvarez & Marsal to assess the company’s financial position.
Mark told analysts: “We have closed three of the four problematical concessions and we hope to close loss-making stores – probably about 10 to 15 – over the next two years or so. Not many in the current year but the following year.
“They are the loss-making stores where the leases come up,” he added.
It is not yet known which stores will be affected.
Office’s EBITDA for the year to 30 June fell 44% to £12.2m and retail sales decreased by 1% to £254m.
However, online retail sales grew by 10% to £94m and now comprise 34% of the total. Store sales were down 6%.
Office owes £42.5m to its UK lenders. It has a cash balance of £28m-£32m and its net debt levels are currently between £10m and £15m.
Truworths said: “Given current levels of profitability, cash generation, solvency and liquidity, no major business restructuring is appropriate.”
On the footwear retailer’s turnaround, Mark said: “It’s back to basics – even making sure people in the stores are motivated – and then eventually growing the business. But the focus for the short term is on digital, [Office’s sports footwear fascia] Offspring, and improving assortment and supply chain.”
He added: “I can’t tell you we’re going to have a good six months. I don’t know. But we started well.”