Office shoe chain 'mulls CVA' as shoe retail proves tough in UK and beyond
Jul 1, 2019
Footwear chain Office is believed to be the latest retailer on the verge of filing a company voluntary arrangement (CVA) with news on Monday that it has appointed advisers.
Sky News reported that the company has tasked specialist Alvarez & Marsal (A&M) with putting together a CVA plan that could mean the closure of some of its shops. Deloitte is also reportedly involved on behalf of Office’s lenders.
The company currently operates 100 stores in the UK and it's unclear how many would be at risk if a CVA does happen. At the moment that's not a certainty, with sources also telling the news organisation that the business could pursue alternative restructuring options.
Office is owned by publicly listed South African holding company Truworths International, which bought the chain for around £250 million four years ago.
But being owned by a giant international company has not made Office immune from the problems that are besetting the wider UK fashion retail sector. Even though Office has a large online business, it still has too many physical shops to support.
And the chain, which also trades from shops in Ireland and Germany, couldn't even benefit from exposure to buoyant international markets as both of those countries have their own retail challenges at present. However, Sky had no information on whether the Irish and German operations would be affected if the company launches a CVA.
Office and Truworths haven’t commented and it could be several weeks before we hear more, but if a CVA is the final outcome of the current deliberations, it would make the company just one of many to have gone down that route in the last couple of years. The combined effects of Brexit-induced consumer caution and the UK being one of the leading markets for online retail have left businesses with large numbers of stores unable to generate profits.
These include New Look, Arcadia, Mothercare, Debenhams and Monsoon Accessorize, among others. The Monsoon CVA is unusual in that it doesn't include store closures, but the ability to shut down underperforming shops and escape onerous lease terms is one of the key attractions of a company voluntary arrangement.
As well as the problems cited above, Office also suffered from House of Fraser's administration filing as it was owed £0.7 million by the department store for trading in its concessions there.
Retail analyst Kate Ormrod of GlobalData on Monday said that she believes the company also had other problems caused by general industry trends, but also some of its own making.
‘‘Office has been outshone by both multichannel and online rivals in the form of JD Sports and Asos, with range overlap the primary reason for the specialist’s difficulties, reducing its top-of-mind appeal among its core youth customer base and resulting in increased discounting,” she said. “With Footasylum now under JD Sports’ wing, the pressure will only grow.
“Office has also struggled as leading sports footwear brands such as Nike and Adidas refocused on their retail operations and scaled back third party distribution on key lines. This has left its own brand offer exposed – with a need to better justify prices via investment in quality and design. With online already accounting for 33% of its global retail sales, and the channel not yet fully exploited, a leaner store estate is a must to drive its recovery.”
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