The South African owner of UK footwear chain Office will close about 58 of its loss making-stores in a bid to return the business to profitability.

Truworths CEO Michael Mark reportedly told analysts of the decision on Friday (4 September) after the group had carried out a review of the business.

Last month Truworths booked impairment charges of up to GBP131m related to the challenges faced by the Office business trading in the midst of the coronavirus pandemic and the liquidity of the unit.

For the 52 weeks ended 28 June, Truworths said revenue for Office fell 17.4% year-on-year to GBP230m (US$289m).

Earlier this year the South African group, which sells  clothes, shoes, jewellery and homeware, confirmed it was exploring all options for the footwear chain after group revenues were materially reduced since stores were forced to shut and that it was "actively engaged" in trying to mitigate the impacts of this "unprecedented and continuously evolving situation." 

In addition to the Covid-19 impact, Office has been compounded by uncertainty over Britain's departure from the European Union and by the collapse of department store House of Fraser, where it had several concessions.

Last July, Truworths said it had entered into debt restructuring talks with lenders to explore options for the business. Around the same time, it was reportedly mulling the closure of 15 of its 139 stores over the next two years.  

"In the restructuring process of Office, we really had a good look at it and it became very clear to us...that you know Office has its challenges but let's look and make sure that we don't overreact to this crisis," Mark told analysts on Friday according to Reuters.

About 28 stores are planned for closure during Truworths' 2021 financial year as leases expire, while a further 30 will be closed during 2022 to 2024 financial years. Management is also hoping in the next two to three years to grow its private label shoe brands, which have shrunk to about 10% of overall brands at Office in order to improve gross profit margins as those brands are high in margin.

Truworths International could not be reached for comment.

In a comment to just-style, associate retail analyst for GlobalData, Pippa Stephens said a leaner store estate for Office is necessary.

"Despite offering a wide range of desirable casual trainer brands, Office continues to be outshone by both multichannel and online rivals in the form of JD Sports and ASOS, with range overlap reducing its top of mind appeal among its core youth customer base and resulting in increased discounting. COVID-19 has exacerbated Office's issues in recent months, as clothing & footwear is forecast to be the hardest hit sector, with UK spend expected to fall by 25.6% in 2020 and footwear set to fare worse than clothing as consumers forgo purchasing new shoes.

"The retailer 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, leaving Office's 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 necessary to drive its recovery."