Truworths International of South Africa has started talks with lenders to restructure the debt of Office, the British footwear retail chain that it bought at the end of 2015 for £250 million (€278.7m-$310.3m). It has appointed Alvarez & Marsal Europe and Deloitte as advisors.
Office is reported to have debts of circa £45 million (€49.8m-$55.8m), a significant portion of which is due to be settled through a lump sum payment at maturity in December 2020.
The causes of the financial problems at Office are mainly a depressed retail trading environment in the U.K. due to uncertainty around Brexit, weak consumer sentiment, an increasing shift to online retailing and high property costs in the country, the company said in a statement.
As a result, a large number of retail chains are currently unable to generate profits. These include big players like New Look, Arcadia, Mothercare, Debenhams and Monsoon Accessorize. Moreover, Office has also suffered from the collapse of the department store chain House of Fraser, which entered into insolvency proceedings 11 months ago. Office was owed £0.7 million (€0.8m-$0.9m) by House of Fraser for trading in its concessions.
Although Office will continue to experience a difficult trading environment in the medium term, the management of the company believes that the discussions with the lenders and the debt restructuring will not impact the operations of the group in South Africa and the rest of Africa.
Selling men's and women's shoes, Office currently operates about 100 stores in the U.K., in addition to concessions at Selfridges, Topshop and House of Fraser. The chain also has a few shops in Ireland and Germany.
Analysts believe that Office suffered from the competition of multichannel retailers like JD Sports Fashion, which recently acquired Footasylum, and online rivals such as Asos, which offer similar items and address similar youth customers, resulting in increased discounting. They feel that Office should reduce the number of physical stores and further boost its online operations, which already account for 33 percent of its total revenues.