Office has asked its landlords to allow it to hand back the keys to many of its UK stores as early as next month, as the business struggles to cope with the impact of Covid-19.
The footwear retailer says it is under “substantial financial strain” as a result of the lockdown, which has lasted more than nine weeks.
The company has experienced a collapse in sales and doesn’t expect its position to improve significantly even when shops are able to reopen from June 15.
Joel Hills analyses the latest situation with Office
In correspondence with the landlords of some of its worst-performing stores, the chief financial officer, Kerry Van der Merwe, said she “anticipates a severe reduction in footfall and severely depressed sales” even when restrictions lift, and that trading will be “extremely challenging” for the next 12 to 18 months.
Van der Merwe added that Office needs to take "immediate action to mitigate our precarious financial position”.
Office is under pressure from its lenders to cut costs and wants landlords to agree to allow it to terminate lease agreements either by June 30 or by March 30 next year, when the government’s business rates holiday comes to an end.
The company has around 100 shops in the UK and employs more than 2000 staff, many of whom have been furloughed under the government’s Job Retention Scheme.
It isn’t clear how many of its leases Office wishes to surrender but it is understood to be a substantial part of its estate.
This is an unusual attempt at a solvent restructuring of a business. If landlords don’t agree to the proposals then it’s highly likely that Office will end up in some form of insolvency process.
Office is owned by Truworth, a South African retailer, which bought the business in December 2015 for £250m.
In a trading statement on Monday, Truworth warned that the Covid-19 lockdown had “materially affected” the Office chain in the UK, that the value of the business (including its store leases) would be written down and that “various restructuring options” were being considered.
Truworth has engaged Alvarez & Marsal to advise it. Truworth couldn’t be reached for comment. Alvarez & Marsal declined to comment.