Office profits hurt by discounts and House of Fraser collapse

By

Sandra Halliday

Published
Feb 11, 2019

Office Shoes, The Truworths-owned UK footwear retailer, saw its profits plunging in its latest financial year as more markdowns and the collapse of the House of Fraser business hit it hard.

The company, which operates 116 stores and 40 concessions in the UK, Ireland and Germany, generated sales of £285.5 million in the 52 weeks to last July, and while that was down from £298.7 million in the previous year, that earlier year had covered 53 weeks so the comparison was skewed.

But even without the latest year having had the benefit of an extra week to boost its headline figure, it was clear that the 12-month period was a tough one. The gross margin for the latest period was only 44.4%, mainly due to markdowns making up a bigger part of the sales mix after the previous year’s margin had been 46%.

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That meant pre-tax profits fell from £23.4 million to £14.5 million with the company also having been owed £0.7 million by House of Fraser for the year. Office, which has 116 stores and 40 concessions across the country, said it was owed the money from concession sales at HoF and "according to the administrators, it is unlikely that this amount will be received by the company.”

The House of Fraser collapse last summer, with debts approaching £500 million, left a number of UK names facing big holes in their accounts, from mass- and mid-market suppliers to high-end brands such as Mulberry.

Given that concessions are an important part of the Office business, and in the face of general weakness in the UK department stores sector, is it rethinking its approach?

It would appear not at the moment. The company said it’s in talks with House of Fraser’s new owner regarding the future links between the two and its shoes are still available via HoF’s website.

Office, which has been owned by Truworths since 2015 when its purchase valued it at £256 million, said the retail trading environment is expected to remain uncertain, "with continued concerns over Brexit and depressed consumer demand.”

But it added in the accounts that the group is a “well-funded and cash generative business and as such intends to continue the expansion of its integrated multichannel business. The board is confident that the Office group is in a strong position to continue to grow and invest for the future.”