8 of 2023

Newsletter No 8/3 March 2023                              


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Why the rag trade is a risky trade

By the Finance Ghost

Clothing retail offers high rewards when everything goes right, but the odds are stacked against it in 2023

Clothing retail is high risk, and investors should probably avoid the sector this year.
Walking from one end of your local regional mall to the other, you’ll be enveloped by clothing shops. People care deeply about what they wear, regardless of their spending power, and a plethora of businesses compete to satisfy their needs at different price points.

Fashion is arguably the riskiest retail format, combining expensive shop rentals and long working-capital cycles with the whims of consumerism. For investors seduced by juicy gross margins at these retailers, understanding the risks is important.

As a start, the products are not homogenous, so there’s the risk of misreading the season’s fashion. Shoprite and Pick n Pay don’t take a risk when they decide to stock milk, bread or chicken. In contrast, clothing retailers make critical style decisions every season, and from time to time they get them horribly wrong. This is even true in basic clothing, as the latest poor results from Ackermans (part of Pepkor) demonstrate.

A bad season creates a flywheel effect that investors need to be wary of. It starts with disappointing sales and ends with an overstocked warehouse. The stock needs to be cleared, so end-of-season markdowns will be more significant than usual, driving a lower proportion of full-price sales and decreased gross margin. When combined with a drop in sales, that’s an ugly outcome for gross profit.

Operating costs are the same regardless of how appealing the clothes are, so the double-whammy impact of falling sales and margins is severe. Of course, this downside risk is balanced by the upside reward of getting the fashion and pricing exactly right. The fixed costs work in your favour when times are good. This is known as operating leverage, or the flywheel effect mentioned above.

In some cases, a fashion business loses its way over time. This is what happened at Woolworths, and the management team is making a concerted effort to turn this around. In other cases, operating profit can swing violently. This is something you don’t often see at the likes of grocery and pharmaceutical retailers, which is why they tend to trade at higher (more defensive) multiples than fashion retailers.

In addition to operating leverage,  financial leverage (debt) is fraught with danger. When retailers go bankrupt, it’s usually because the balance sheet fell apart based on high debt.

An interest burden that is too high makes it progressively harder to compete, as cash ends up servicing interest rather than being reinvested in the business. Other retailers smell blood and turn up the heat to squeeze the vulnerable player out of the market.

When the flywheel starts to spin against you, it is difficult to get out of the hole. A loss of market share requires a great deal of investment to recover. As the financial position deteriorates, the capital for that investment dries up. Eventually, there’s a change of ownership or the stores disappear altogether. Edcon, anyone?

To add to this competitive bloodbath, there’s the threat of new entrants. Years ago, names such as H&M or Zara did not have dominant positions in South African shopping centres. But with a relatively simple supply chain compared with grocery retailers (there is no cold chain), international clothing groups can enter the South African market with ease.

A recent development is the arrival of SHEIN, a significant issue for value clothing retailers. We can’t be sure whether this is the reason for recent pressure at the likes of Mr Price and Ackermans, but it can’t be helping. Consumers are cash-strapped and in search of bargains, so SHEIN’s Chinese supply chain offers prices that almost seem too good to be true.

You don’t have to do much searching online to find out why the prices are so low. Let’s just say that if supply chain ethics matter to you,  you should probably shop elsewhere.

We also can’t discount the entry of new local brands, such as  Pick n Pay Clothing. It was supported by existing infrastructure, incubated in grocery stores, and today it is a powerful standalone player that has taken a bite out of the value fashion market with strong growth in the most recent trading period.

Despite being in a bright red ocean teeming with sharks, management teams further complicate their lives by looking for acquisitions, often in faraway lands

Specialist stores also emerge from time to time, though it takes a long time to build a meaningful footprint. Kingsley Heath and Freedom of Movement are perfect examples.

Despite being in a bright red ocean teeming with sharks, management teams further complicate their lives by looking for acquisitions, often in faraway lands. It’s all about the pursuit of growth, particularly for market leaders struggling to move the needle. Successful new entrants are often built with an entrepreneurial flair that is missing in corporates, with the result that corporates buy them.

Offshore markets are no easier, even if they have electricity. Woolworths is finally about to unscramble the David Jones egg, letting that disaster in Australia go and hanging on to Country Road as a consolation prize. The UK market has also claimed a few scalps, including Brait’s spectacular destruction of value with New Look. If retail executives struggle to succeed abroad, desktop balance-sheet jockeys should absolutely avoid that strategy.

A patchy peer-group track record in offshore deals hasn’t scared Pepkor away, and its recent acquisition of Brazilian retailer Avenida has brought a South American flavour to the JSE. It’s not a showstopper for the group, contributing low single digits to group revenue. That’s a good thing, showing Pepkor has learnt from the mistakes of others and chosen to dip its toes in the water instead of diving straight into the high street.

Speaking of the high street (or lack thereof), the best thing about this deal is that South America is a lot more like SA than London or Sydney. Brazil is the the biggest economy in Latin America, with a higher GDP per capita than SA, a population that is around three-and-a-half times larger and much lower unemployment. Avenida’s positioning in the market will be familiar to Pepkor, aimed squarely at clothing, accessories and cellphones for the average Brazilian family.

Other retailers have gone with a “local is lekker” approach, especially The Foschini Group (TFG) with its strategy to bring the supply chain closer to home after the horror stories of the pandemic. The 2022 acquisition of Tapestry Home Brands brought Coricraft, Dial-a-Bed and Volpes into the group and was an interesting sidestep from the acquisition of discount retailer Jet at the height of the pandemic. TFG took advantage of the business rescue process at Edcon and acquired a financially sustainable store footprint, leaving behind much of the mess that had hurt Jet.

In further deal activity, TFG’s latest quarterly update announced the acquisition of 114 Street Fever stores, with 90 of them to be rebranded Sneaker Factory. This is a small deal, so shareholders won’t be given full details of the underlying numbers.

While mentioning acquisitions of furniture and curtain businesses, it’s a useful time to recognise that “clothing retail” is a misnomer. These are often clothing and homeware businesses, with a healthy contribution from cellphones as well. For example, clothing accounts for only 74.5% of TFG sales.

Mr Price has also been on the acquisition trail, with Yuppiechef a good example of a nonclothing deal. There have been far more important clothing deals, though, such as Power Fashion and Studio 88. Those formats are growing strongly, unlike Mr Price’s core business, which has been plagued by insufficient power backup and an enterprise resource planning systems change.

The risk of management distraction due to corporate activity can’t be ignored, especially when operating conditions in South Africa are so difficult. Truworths is keeping it simple and doing a decent job of focusing on its core business. Its share price is up 12.5% in the past 12 months, while most of its peer group are down by more than 20%. Much of this was due to a rerating of the multiple, as value investors climbed in.

At the time of writing, TFG and Truworths are trading on nearly identical ebitda multiples (mid-7) vs Mr Price at 8.3 and Pepkor at 9. The multiple rerating story at Truworths has played out, so share price performance from now on is likely to be driven by underlying earnings growth.

The risks in this sector mean it’s probably sensible to leave it alone this year. Rising interest rates, load-shedding and consumer pressures make it difficult to justify the short-term upside vs downside case.   BL

Factories leave trail of faeces, chemically polluted water in two major towns

By Lescij Lescij

This is the third part of a five-part investigation by MNN into how Lesotho’s textile factories operate with a disregard for labour laws and with apparent impunity as tests confirm that factories release toxic wastewater into water courses, including the Mohokare/Caledon River.

Factories in Lesotho making denim jeans to export to the world are essential job creators and income generators for the Mountain Kingdom’s economy. However, an investigation by MNN has found a dark underbelly to what is supposed to be Lesotho’s good news job-creating, jean-making story.

While Lesotho battles to supply sufficient drinkable water to towns and villages, these factories guzzle millions of litres of potable water to make the jeans. The wastewater emerges from the production lines blue and toxic and finds its way into natural streams and open spaces in nearby villages mixed in with human waste.

The law requires factories to pre-treat wastewater and pump it into the sewage system. But this attracts a fee. Evidence suggests that some factories are cutting operating costs by directly pumping wastewater into the sewage systems which then overflow, with effluent and chemicals running into natural streams.

Contaminated water not only makes its way into natural wells and streams that poor communities and their livestock rely on to live, but it also ends up flowing into the vital Orange-Senqu River basin. This basin is a source of water for 15 million people in Lesotho, Botswana, Namibia and South Africa.

A 2021 Orange-Senqu River basin (ORASCOM) baseline study names Lesotho’s Water and Sewage Company (WASCO) as one of the main polluters of the Mohokare River, a major tributary of the basin.

In an emailed response on 20 January, WASCO public relations manager Lineo Moqasa said the water utility company identified wet industries in Maputsoe causing the pollution and advised factories to “construct wastewater pre-treatment plants so as to adopt the industrial waste treatment strategy employed in Maseru.”

She added: “There are some factories which dispose wastewater with a high chemical oxygen demand (COD) load, more than what the WASCO wastewater treatment facility can handle. Such factories are approached and if there is non-compliance, penalties are imposed.”

Moqasa, however, did not respond to questions MNN asked concerning evidence gathered during the investigation showing chemicals and raw sewerage pouring out of the sewerage system and into well providing drinking water and, eventually, into the Mohokare River (called the Caledon River in South Africa).

Mahasele Matekane, photographed in September 2022 , first noticed human faeces in his rented yard two years ago

Mahasele Matekane is a factory worker in Maputsoe. When Matekane finishes his workday, he goes back to his rented apartment near the Vishan Clothing Industries factory. Just metres from his home, a stream of blue-coloured water containing visible faeces gushes out of a manhole at the factory.

Matekane said he first noticed human faeces in a pool of blue water in his yard two years ago. This has continued ever since.

“When I got home, it was like the whole yard had been turned into a dam filled with the disgusting sewage that you see here right now (22 September 2022),” Matekane said, adding that the flow of effluent used to stop when the factory was closed on weekends and on weekdays between 5pm and 7am. However,  he said that it now flows almost constantly.

The factory manufactures and exports jeans to European markets under the African Growth and Opportunity Act (AGOA). AGOA is a US Trade Act enacted on 18 May 2000 and is set to expire in 2025. The legislation significantly enhances market access to the US for qualifying sub-Saharan African (SSA) countries.

Lesotho benefits from AGOA, with export factories predominately operating in Maputsoe, the Leribe district and Maseru, the capital. The US has attempted to force labour and health and safety legal reforms in Lesotho to protect factory workers and the environment.

Vishan Clothing Industries is one the four manufacturers of jeans in Maputsoe. The others are Humin Jeans, Nininta Fashions and Twilight Clothing. MNN has not been able to independently link the Humin Jeans, Nininta Fashions and Twilight Clothing factories to the leaking manhole.

Vishan Clothing Industries denied polluting water in a 11 January interview with the MNN. “There is no water in Maputsoe, so there cannot be water pollution,” a company director, who only identified himself as Vishan, said in a telephone interview.

While Vishan admitted that the manhole is dysfunctional and needs to be repaired by the Lesotho National Development Cooperation (LNDC), he claimed that the blue water gushing out of the manhole must be from another Maputsoe factory. He said that MNN should talk to this factory. MNN was unable to get in touch with the management of this operation.

Meanwhile, MNN is in possession of scientific evidence that the blue water gushing out of the leaking manhole is contaminated with chemicals used to dye jeans destined for the European market under AGOA.

Although the clothing manufacturing industry is the second-biggest employer after the Lesotho government, its operations continue to poison the environment despite public calls that date from as far back as 2004 to address the resulting pollution.

There was a public outcry in 2021 after Water Witness International published a damning report on factories’ hazardous impact on potable water in Lesotho. 

Polluted well

The blue water leaking from a manhole in front of Matekane’s rented house is destined for Mohokare River. It is first channelled via a paved furrow next to Katleho Tlou’s house in Ha Maputsoe.

Although the initial purpose of the furrow was to control the flow of water in Ha Maputsoe village, it has now become the route for contaminants from the manhole near Vishan Clothing Industries to flow through.

Unlike sewage pipes that run underground, the trench next to Tlou’s house is on the surface and has become a health hazard for Ha Maputsoe residents.

“The trench constructed by a Chinese contractor near my house adversely affects me,” Tlou said during a 27 September 2022 interview.

Lesotho experienced torrential rains from November 2021 up until March 2022. Tlou said her house was flooded with water on 28 January 2022 and blames the paved trench for directing water into her house.

“This textile sewage comes with very foul-smelling wastewater that has visible pieces of faeces. The foul smell never ends,” Tlou said. “We suspect that the blueish colour is as a result of the blue jeans being made in the factories.”

Ha Maputsoe villager Katleho Tlou is unhappy with the aftermath of the trench next to her house

Sometimes, the blue water in the furrow also flows past Tlou’s house at night. She said the flow is sometimes so strong that “you can hear the sound  (of running wastewater)”.

In February 2021, Maputsoe  area was the second-largest community consuming water after Maseru. According to WASCO, the daily demands for potable water in Maputsoe is around eight-million litres, far less than the water utility’s provision of around three-million litres.

“Water production capacity is insufficient to satisfy the growing demand as a result of industrialisation and an influx of people into the urban centre. The unreliable water supply for domestic uses impacts negatively on the health and convenience of the communities relying on the said supply,” read a WASCO statement dated 25 February 2021.

Some Ha Maputsoe villagers collect drinking water from an unprotected well downstream from Tlou’s house. “When this blue, polluted water filled with faeces comes at night, it ends up overflowing into the clean water well. We clean it up and wait for clean water for collection,” Tlou said.

She took the MNN crew to the well, where approximately 20 people gathered. A blue, sticky water runs past the well into the Mohokare River as some people collected drinking water in bucket, while others did their laundry. Pulane Tseka was there to fetch water.

“We do not have a water tap at our home. Even the nearest tap to us does not have water. The sewage really affects us as it flows into our well with faeces and jeans’ dye and chemicals,” Tseka said. The well is the only source of “clean drinking water” in that area. It takes approximately an hour to fill after cleaning.

Children with runny noses 

It is scorching hot and Tlou has no option but to open windows for ventilation. Inside the house is a nine-month-old baby breastfeeding. Thick, yellow mucus runs from her nose, which her mother quickly removes with a handkerchief. Three children under five playing outside also have thick, yellow mucus on their faces.

“We suspect that our children are always coughing and have never-ending mucus as a result of the foul smell in the air,” Tlou said.

“We never had a problem of so many of the children at such young ages having mucus all the time. But since this blue sewage started flowing here, we see children constantly having mucus. We believe it is an effect of this blue water,” Tlou said.

She brushes off the possibility that the children might have Covid-19, saying “we have all been tested for Covid-19”.

Down at the well, Tseka suggested that pollution caused by the blue water in the stream has negative health implications for children. Drinking water from this unprotected well exposes villagers to serious water-related ailments, such as diarrhoea and vomiting.

According to the most recent World Health Organisation’s data on Lesotho, in 2017, almost eight in 1,000 children under the age of five in Lesotho died from severe diarrhoea, a dehydrating ailment often caused by drinking dirty water.

The Lesotho Health Statistics report paints a gloomy picture of how diarrhoea and gastroenteritis are wreaking havoc among Lesotho’s youngest children. In 2018, water-borne diseases were the second leading cause of hospital admissions for children under five, comprising approximately 25% of the 3,154 cases.

WASCO gives up on leaking manhole, pollute Mohokare River 

As contaminated water continues to overflow into Matekane’s yard, residents are forced to abandon domestic farming on small plots, especially those closest to the leaking manhole.

Makhotso Moletsane also rents a flat next to the Vishan Clothing Industries’ leaking manhole. She says that faeces covered in blue water is the order of the day in their yard.

“Sometimes the overflow skips the trenches we have dug to guide the water away from the houses. The contaminated water comes right to our doorsteps. I am now unable to plant pumpkin because it stretches and ends up in this sewage stream,” Moletsane said.

The leaking manhole leaves a trail of contaminants in front of Ha Nyenye rented flats, forcing tenants to abandon farming

Moletsane and other villagers said that WASCO employees stationed in Maputsoe repeatedly admitted their failure to put a lid on the overflowing manhole over almost two years.

“We have seen, on countless occasions, the WASCO people repairing there where the overflow happens but without any lasting solution to this blue sewage overflow you see. Just after they leave where the overflow takes place, it starts again,” Moletsane said.

She added: “This pollution badly affects us all. It has changed the way we used to live. We breath foul-smelling air as a result of the sewage. Maybe there are diseases that we have now contracted as a result of the overflowing sewage.”

Maputsoe home-owner Mxeso Gerald Lekarapa says the constantly overflowing manhole has adversely affected his woodwork business.  “We have told WASCO (about this problem). It has been overflowing for around two years. There was a time when I had funeral and had a lot of guests. This sewage was flowing right into my yard.

“I went to WASCO to seek intervention. They told me that they have tried all they can to try to stop the overflowing sewage, and they have failed. If it cannot be resolved by WASCO people, I wonder what we can do as mere community members without knowledge about these systems,” Lekarapa said.

Growing up, Lekarapa said that the pollution was not as bad as it is today, adding that as more factories started operating in the area, the pollution increased.

“The pollution is worse than what we used to see when we were growing up. Now we have sewage running in the streets. Visitors are even disgusted just to park their vehicles in my yard due to sewage flowing into my yard. You can smell sewage, even in my house.

“The sewage flows through our streets until it gets to the culverts near the Standard Lesotho Bank building (Maputsoe), from there flows through the village once again from the culverts until it reaches the Mohokare River,” Lekarapa said.

WASCO’s response did not include any references to MNN’s questions regarding this specific overflowing manhole.

The 2021 Orange-Senqu basin study, which was financed by UN Development Programme (UNDP) and Global Environment Facility (GEF), states there are several discharge outlets flowing directly into the Mohokare River.

WASCO Maputsoe Branch discharges contaminants into Mohokare River. ORASCOM says WASCO is one of the Mohokare polluters

“From the above map (Figure 2), point sources of pollution. There are discharge outlets that can be linked directly linked to their source and or activity. These have been referred to as point sources directly linked to processes. These were mostly municipal wastewater treatment plants.

“Their discharge outlets were constructed to discharge directly into Mohokare. These are Nyenye, Maputsoe wastewater treatment plant outlet (Point 1) as shown in map above (Figure 2), has discharge outlet is located along the Mohokare river. And Ratjomose wastewater treatment plant outlet (Point 8) in Figure 2 above,” read ORASCOM baseline study.

Thetsane’s livelihoods also under threat 

The Mohokare River extends from the districts of Botha-Bothe, Leribe, Berea and Maseru to Mafeteng. It passes through villages and towns, such as Maputsoe and Teyateyaneng. In Maseru, the Mohokare River flows downstream from factories manufacturing jeans in the Thetsane industrial area.

The Thetsane community also battle with similar pollution by nearby jean-manufacturing factories. Livestock farmers in the area accuse Nien Hsing Textiles’ factories of polluting water in the stream their animals drink from. According to the Nien Hsing Textiles website, the company owns two factories in Lesotho, a factory in Vietnam as well as a mill in Taiwan and Mexico

In Lesotho, Formosa Textile mills, which is owned by Nien Hsing, spins yarn used to make jean materials while Nien Hsing International manufactures jeans for first-world markets. The factories are located upstream from Mabolou, a Mohokare River tributary.

Factories leave trail of faeces in Ha Thetsane, Maseru.

Ha Thetsane villager and livestock farmer, Keketso Mosala, said the stream water is very dirty and “may be contaminated with chemicals that could be very dangerous”.

“There is also some weird smell coming from this river. My family and I plant some organic vegetables, and there is a huge difference between these vegetables and the ones not growing around here,” Mosala said.

The MNN approached Nien Hsing Textile of Taiwan and its Lesotho-based subsidiary, Nien Hsing International Lesotho, to comment on water pollution linked to their factories at Ha Thetsane on 3 January.

On 19 January, Nien Hsing requested the MNN to avail its scientific report to “enable the relevant authorities to learn the report so that they provide proper guidance”, which MNN did. The factory has to date given no interview or response to MNN’s questions.

On 5 January, LNDC, which is a parastatal responsible for attracting investors, invited the MNN for a meeting with the Lesotho subsidiary, saying Nien Hsing had asked the corporation for assistance in responding to MNN’s emailed questions. Nien Hsing declined to have any interview recorded because it did not have permission from Taiwan, and went quiet until 17 January when MNN sent a follow-up email.

On 18 January, LNDC interim chief executive officer Molise Ramaili, General Manager Investments Puseletso Makhakhe, Manager Investments Aftercare Manager Moeketsi Khoele and Industrial Officer Mamphaphathi Molapo called the MNN team for a meeting, that turned into an attempt to stop this five-part exposé.

The LNDC claimed that publishing this five-part investigation would destroy the textile industry and tarnish Lesotho’s name and that it needed until 23 January to liaise with the departments of water, environment, and health for verification of MNN’s findings.

On January 25, shortly after MNN published its first story in this series, LNDC invited journalists to another meeting with a technical committee that the parastatal said had been set up to “urgently deal with this environmental issue”.

MNN requested the LNDC to provide important information such as a legal document convening the technical committee, its terms of reference and to whom the committee is going to report to ahead of the 26 January meeting between MNN and the technical committee. The LNDC is yet to communicate the decision of the technical committee on this request.   

Woolies interim results December 2022

Revenue for the interim period grew by 12.1% to R35.9 billion (2021: R32 billion) and gross profit grew 18.4% to R13.2 billion (2021: R11.2 billion). Operating profit from core trading activities went up 24.9% to R3.4 billion (2021: R2.7 billion). Profit attributable to shareholders of the parent grew to R2.7 billion (2021: R1.6 billion). Furthermore, headline earnings per share from continuing operations jumped to 44.9% to 219.9 cents per share (2021: 151.8cents per share).

The Board of Directors of WHL (‘Board’) has taken a decision to declare an interim gross cash dividend per ordinary share (‘dividend’), based on a payout ratio of 70% of headline earnings of the combined Woolworths South Africa business segments (FBH, Food and WFS) as well as Country Road Group.

Notice is hereby given that the Board has declared an interim dividend of 158.5 cents (126.8 cents net of dividend withholding tax) for the 26 weeks ended 25 December 2022, being a 96.9% increase on the prior period’s 80.5 cents.

Company outlook

The trading environment over the second half of the financial year is expected to prove more challenging as we continue to face numerous headwinds through higher inflation and interest rates, which are placing pressure on both consumer demand and costs. In South Africa, an imminent resolution to the debilitating power crisis and stimulus for economic growth appears remote. These factors, coupled with a higher comparative base effect, are likely to result in slower profit growth (from continued operations) in the current half, relative to the first half.

Looking beyond the 2023 financial year, we remain confident in our self-driven opportunities, and the traction we are seeing in the execution of our strategies. With a much strengthened and simplified WHL Group post the David Jones disposal, we are well positioned to invest even greater management time and financial resources in our remaining businesses, to the benefit of all stakeholders.

Truworths interim results 1 January 2023

Revenue for the interim period grew 14% to R11.7 billion (2021: R10.3 billion) whilst trading profit was reported at R2.2 billion (2021: R2.2 billion). Profit for the period attributable to equity holders of the company came to R1.9 billion (2021: R1.8 billion). Furthermore, headline earnings per share went up 10% to 494.6 cents per share (2021: 448.6 cents per share).

Interim dividend declaration
The directors of the company have resolved to declare an interim gross cash dividend from retained earnings in respect of the 26-week period ended 1 January 2023 in the amount of 320 South African cents (Dec-2021: 300 South African cents) per ordinary share to shareholders reflected in the company’s register on the record date, being Friday, 17 March 2023.

Company outlook
The Group’s retail sales for the first seven weeks of the second half of the 2023 financial period increased by 13.9% relative to the corresponding seven weeks of the second half of the 2022 financial period.

Truworths Africa
South Africa’s energy crisis is evident in the sustained level of daily load shedding. Truworths is adopting a pro-active approach to load shedding on the assumption that varied levels of disruption will continue in the short to medium term.

In the months ahead the Group aims to extend back-up power solutions to protect turnover in stores not yet covered by alternate sources of power, creating further cost pressure in the current tight economic environment. Consumer disposable income is expected to remain constrained in the medium-term as inflationary pressures from higher food, fuel, electricity and cost-of-living expenses are compounded by rising borrowing costs. New retail concepts and brands developed over the last two years have exceeded management’s expectations and the Group will continue to refine and invest in them, while the growing, integrated in-house design capability will bolster the supply chain and further enhance speed to market.

Truworths’ retail sales for the first seven weeks of the second half of the 2023 financial period increased by 5.7% relative to the corresponding seven weeks of the second half of the 2022 financial period. Trading space is expected to increase by approximately 2% for the 2023 reporting period.

The UK retail sector is expected to continue to face headwinds from mounting pressure on household income due to persistently high inflation, rising energy costs and interest rates, which have increased three-fold in the past year.

Notwithstanding these challenges, the Office business has proven resilient on the strength of its relationships with the world’s leading footwear brands and its loyal customer following. In the current environment, Office will capitalise on new store opportunities, the renovation of stores in strategically important locations, further strengthening its brand positioning, and introducing and growing new brands.

Office’s retail sales for the first seven weeks of the second half of the 2023 financial period increased by 39.2% in Sterling relative to the corresponding seven weeks of the second half of the 2022 financial period.

Sales growth in Office is expected to slow down from April 2023 as the base started normalising in April 2022 when lockdown restrictions were lifted in the UK and tourism increased.

Office’s trading space is expected to decrease by approximately 9% for the 2023 financial year as the business continues to exit marginal and loss-making stores as leases expire or lease breaks are negotiated with landlords.

Fast Fashion Facts You Might Not Know

59% of All Sustainability Claims by European Fashion Brands Are Inaccurate and Misleading

More often than not, environmental claims from fast fashion companies are nothing more than a marketing strategy, as a 2021 investigation by the Changing Market Foundation found. Having a sustainable clothing line does not automatically mean that the brand is eco-friendly. Greenwashing occurs when companies spend much more time and resources marketing their sustainability plans than actually executing them. Fashion giants promote misleading information to make consumers believe they are ethical or appear to value transparency by sharing information regarding their emissions only to forget to set clear targets to lower them.


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