On a hot Friday afternoon in London last month, Truworths International’s Office store on the bustling King’s Road was among the busiest outlets in that iconic shopping destination.
Anecdotally, it speaks of the long-awaited turnaround at the Office shoe chain — which evergreen Truworths group CEO Michael Mark described in the recent investor presentation as primarily a women’s-focused fashion shoe store that sells styles from all the major sneaker brands.
Office was Truworths’ standout performer for the group’s recent annual results, contributing 32% of the group’s retail sales in an otherwise muted, if not disappointing, set of results.
Office — which sells brands including Doc Martens, Ugg, Nike, adidas, Birkenstock, Timberland and New Balance — had margin expansion, notwithstanding an 11.4% increase in trading space. Mark said this part of the business continued to benefit from its strong brand partnerships and digital presence, growing sales by 10.8% to £290m.
Online sales jumped by almost 14% and contributed about 46% of the footwear chain’s retail sales. Office’s performance is heartening. Truworths bought it in 2015 for about £260m and initially struggled with loss-making stores.
By 2020 it had written down almost R5bn in impairments. Along the way Truworths closed all Office stores in Germany to focus on the UK and Ireland, where the brand had a stronger presence and more potential for growth. The rest of Truworths, made up of the eponymous fashion retailing brands as well as Identity, YDE and Loads of Living in South Africa, found the going a little tougher.
The group cut its annual dividend 6.4% to 529c a share in line with a 6.5% drop in diluted headline earnings to 806c a share. It did increase overall retail sales by 3.6% to R21.4bn.
But Truworths Africa sales were down 6.9% in the second half of the year after slipping only 0.3% in the interim period. Credit sales fell 2.5% and cash sales were down 4.7%.
A report from HSBC says Office UK’s progress in its turnaround is positive and it looks well positioned to build on improved performance, supported by store modernisation efforts and a more profitable portfolio.
Nick Webster, head of HSBC Global Research, notes that UK trading space is planned to increase by about 11% for financial 2025, with store openings for the first time in three years. He says Truworths’ core South African market, coming off a low base, should support growth into the new financial year due to macroeconomic tailwinds, more interest rate cuts and the new two-pot retirement system. “The focus domestically remains on accelerating growth of existing brands via upgraded and expanded retail concepts and developing new ones, with further expansion of Identity, Fuel and Sync to drive sales.”
The group disclosed that retail sales for the first nine weeks of the 2025 financial year had increased by 5%, with sales up increasing by 2.5% in Truworths in rand terms and 11.2% in Office in sterling.
The group has previously looked at new opportunities in Australia, but there is now a preference for the northern hemisphere
Mark said Truworths Africa had been the “struggling part of the business” during this challenging period, characterised by pressure on disposable income and low consumer confidence. The group also had to cope with congestion at local ports and shipping delays, which affected optimum inventory levels and merchandise mix from November into the early months of winter this year.
The unusually late onset of cold weather also led to delayed sales of “winter” product and higher promotional activity to clear stock. The group’s gross profit margin decreased from 52.5% to 52.3%, with the gross margin in Truworths stores contracting by 50 basis points to 54.9%.
By contrast, the gross margins of Office stretched by 180 basis points to 47%. Office’s margin in the financial year ahead will be interesting to gauge, considering the continued investment in digital marketing as well as new store openings and the remodelling and extension of existing stores. With investor sentiment for fashion retailers still fairly subdued, the topic of share buybacks will be front of mind.
Truworths has consistently bought back shares over the past few years, and Mark expects it will start a share buyback again in a year or two “if we don’t come across a meaningful acquisition”. The group has previously looked at new opportunities in Australia, but there is now a preference for the northern hemisphere. Mark has said a purchase wouldn’t necessarily be in the shoe business but could be a fashion business that sells to the same customers who shop at Office.
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