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Managing stakeholder relationships
Management proactively addresses the needs, expectations and concerns of stakeholders, recognising that they affect the Group's ability to create value, or minimise the erosion of value, over the short, medium and long term.
The stakeholder relationship programme continues to focus primarily on the five stakeholder groups that are most likely to influence the delivery of the Group's strategy and to impact the material issues within the business, namely:
QUALITY OF RELATIONSHIPS
Management assesses the quality of these relationships on an ongoing basis to ensure the Group understands, considers and responds to the legitimate needs and interests of its stakeholders.
A five-point internal rating scale is applied by management for rating the quality of stakeholder relationships:
Strong relationship of transparency, trust and mutual understanding
Good quality, value-adding relationship
Good relationship but needs to improve to add value
Functional, low-quality relationship
Poor quality to no relationship
SHAREHOLDERS
(Rating unchanged)
Rationale for engaging:
Shareholders are the Group's principal providers of financial capital. Engagement is focused on local and international institutional investors as well as fund managers and analysts. The Chief Executive Officer and Chief Financial Officer are responsible for investor relations, supported by various directors and divisional directors. The Group follows a hybrid investor relations model comprising personal engagement (one-on-one meetings and attendance at investor conferences) and written communication through a dedicated investor relations email channel, followed by one-on-one meetings if necessary. This hybrid approach ensures prompt multi-disciplinary responses to investor questions and enhances the quality and efficiency of engagement, with the investor relations team typically responding to written questions within 24 hours.
KEY ENGAGEMENT ISSUES
Impact of global shipping disruption and SA port congestion on the delivery of imported merchandise and the Group's ability to mitigate the impact of supply chain challenges on retail sales.
Growth opportunities for Truworths in a trading environment of lower discretionary spending due to inflationary pressures and higher-for-longer interest rates in South Africa.
Impact of the constrained credit environment on the health of the Truworths accounts portfolio.
Opportunities for sustained growth in Office.
The impact of global e-commerce competitors on South African retailers.
Aspects of the Group's Remuneration policy and implementation.
Response to engagement issues
Management addresses all key engagement issues directly with investors through a range of forums. These include interim and annual results presentations, post-results investor meetings, one-on-one engagement with shareholders and analysts, participation in investor conferences, written communication via the Group's investor relations email channel, and through formal communications on SENS and in the Integrated Report. Based on the materiality or price sensitivity of certain issues, this information is communicated on SENS before it is discussed with any market participants to ensure simultaneous and equal access to the information.
CUSTOMERS
(Rating unchanged)
Rationale for engaging: As the consumers of our merchandise and users of account facilities, customers are the primary source of revenue for Truworths and are the key source of social and relationship capital of the business. Engagement covers account and cash customers in South Africa and the rest of southern Africa. Store management and employees, call centre agents and customer relations employees are the main contacts with customers. Engagement takes place in stores, through call centres, social media platforms, e-commerce websites and digital communication channels. Customer satisfaction is monitored on an ongoing basis using the net promoter score as a universally comparable benchmark alongside an internally developed customer service rating scale. Truworths also analyses market share information as a measure of customer response to merchandise ranges, and to identify opportunities to enhance the merchandise offering in line with customer needs and preferences.
KEY ENGAGEMENT ISSUES
Latest fashion styles, trends and key looks for the season as well as sales promotion activity.
Response to engagement issue: Truworths communicates with loyalty programme and account customers about the latest fashion available in-store and online, merchandise promotions and sale activity. This is done using personalised emails, SMS, social media and e-commerce websites.
Account payments, including educating customers on the payment channels available and the implications of non-payment of accounts.
Response to engagement issue: An account customer engagement project was undertaken to improve payments through the implementation of additional payment channels to make account payments easier. The project addressed payment options, communication channels and content of communication.
EMPLOYEES
(Rating unchanged)
Rationale for engaging: Employees provide their talent and skills to ensure the business operates in an efficient and sustainable manner. Employees comprise the Group's human capital and are key custodians of our intellectual capital. Engagement includes all full-time and flexi-time employees, with line management being the key point of engagement, supported by the human resources division. Employee engagement takes place through formal communication issued by the business, formal and informal training, personal interaction with line management, the online platform to engage directly with the CEO, through in-house presentations covering topics such as business performance, as well as through the WhatsApp mobile channel.
KEY ENGAGEMENT ISSUES
Fostering a culture of inclusivity.
Response to engagement issue: Leadership training undertaken to promote the Business Philosophy with the refreshed Values and consciously foster a culture of inclusivity within teams. The desired outcome is that employees feel included, heard, can contribute, thrive and have a sense of belonging, irrespective of their gender, race, religion, culture or other personal preferences.
Embracing diversity in the workplace.
Response to engagement issue: Leadership training conducted to create an environment that allows individuals from diverse backgrounds to bring different experiences and viewpoints to the workplace. Harnessing diversity through the practice of inclusive leadership will enable the Group to deliver on the Business Philosophy, optimise teamwork, uncover unconscious bias and create awareness and understanding of a diverse workforce.
Development of black talent for succession.
Response to engagement issue: Identify talented and aspiring black employees who are aligned with the Truworths Values and develop these employees for progression and succession, with an emphasis on top and senior management roles in the business.
Empowering women.
Response to engagement issue: Truworths has a majority female workforce and programmes have focused on developing female employees. This includes enabling women to realise their potential and drive career progression, encouraging female contribution irrespective of life stage, raising awareness of issues particular to women and understanding and addressing historical barriers for women.
Advocating against gender-based violence (GBV).
Response to engagement issue: Demonstrate Truworths' zero-tolerance approach to any form of GBV in the workplace and in communities. Ensure that employees feel safe, regardless of their gender and sexual orientation.
Promotion and protection of human rights.
Response to engagement issue: In line with the Group's moral, ethical and legal commitment to the promotion and protection of human rights, a Group human rights policy was introduced. A human rights due diligence and impact assessment was conducted to identify, prevent and reduce human rights risks within the business. A human rights complaints procedure was implemented and management is committed to addressing the outcomes of the impact assessment to mitigate human rights risks within the business.
Cybersecurity awareness training.
Response to engagement issue: To ensure employees remain vigilant to cybersecurity attacks, ongoing and regular self-help training is conducted and participation and engagement is managed by the cybersecurity team to ensure employees remain apprised of the latest developments.
SUPPLIERS
(Rating unchanged)
Rationale for engaging: Suppliers are the providers of merchandise and other goods and services to Truworths. They are therefore the Group's source of manufactured capital, and the breadth and depth of our supply chain is a key measure of the Group's considerable social and relationship capital. Suppliers include local and international product manufacturers, landlords and various service providers. The primary sources of contact are executives, merchandise buyers and planners, and management. Engagement occurs formally and informally through supplier assessments, merchandise design and order negotiations, account management interaction and supplier development discussions.
KEY ENGAGEMENT ISSUES
The sustainability of local cut-make-trim (CMT) suppliers is a strategic priority. The financial viability of several CMTs is under threat and this is being compounded by the impact of load shedding on production output.
Response to engagement issue: Truworths has its own internal design capability, but also works in close collaboration with exclusive external design centres and CMT partners and supports these businesses by providing funding as well as technical and specialist skills to improve their operations and maximise efficiency. Financial support has been provided to certain CMTs to purchase generators to ensure factories remain operational during load shedding. Plant and machinery has also been provided on a loan basis to strategic CMT operators.
Production planning with CMTs, particularly in dealing with peak demand for specialist product.
Response to engagement issue: The design division planning teams have collaborated with key CMTs to develop production plans to manage large volumes of specialised product across the season and leverage low demand production periods to benefit both parties.
Improved planning and forecasting for key suppliers.
Response to engagement issue: Based on all suppliers' performance metrics and capabilities, Truworths has determined improved high-level estimates of production requirements.
Broad-Based Black Economic Empowerment (B-BBEE) scorecards of suppliers are considered by management to ensure that Truworths supports higher-rated B-BBEE suppliers.
Response to engagement issue: The Truworths Tender and Capital Expenditure Committee evaluates potential South African based suppliers on a range of criteria, including their commitment to B-BBEE. Where suppliers have a similar score, the supplier with the higher B-BBEE rating would have an advantage.
REGULATORS
(Rating unchanged)
Rationale for engaging: Regulators are the custodians of legislative and regulatory compliance and providers of licences to trade. These include government departments, regulatory bodies and local authorities, with the engagement being managed by the executive directors and finance, legal and account risk executives. Engagement occurs through regulatory filings and submissions, formal and informal discussions regarding key issues, dispute resolution mechanisms and through the National Clothing Retail Federation (NCRF). The recognition by regulators of the Group as a good corporate citizen with high levels of legislative compliance, that emerges from these engagements, reflects the investment by management in the Group's social and relationship capital.
KEY ENGAGEMENT ISSUES
Combating money laundering
Following amendments to the Financial Intelligence Centre Act in
the 2023 financial period, Truworths, as a registered credit
provider, is now classified as an accountable institution and is
required to comply with numerous obligations in terms of the Act.
Response to engagement issue: Truworths has registered with the Financial Intelligence Centre, appointed a compliance officer, sought legal advice on the applicability and implementation of the legislation, and developed a risk management and compliance programme approved by the Truworths board.
Tax compliance
Truworths is involved in the ongoing resolution of requests for
information, audits and disputes with the South African Revenue
Service (SARS) and tax authorities in other countries.
Response to engagement issue: Truworths has engaged with revenue authorities in various countries of operation in relation to audits and requests for information in a constructive, transparent and compliant manner, and has sought to render tax payments and returns that are correctly determined and completed in a timeous manner.
Employment equity
Following amendments to the Employment Equity Act, the Minister
of Employment and Labour issued revised draft regulations for
public comment proposing employment equity targets for various
industry sectors.
Response to engagement issue: As a member of the NCRF, Truworths has provided comments on the revised draft regulations published on 1 February 2024. There have been no further developments after the regulations were published for public comment, and an effective date in respect of the Employment Equity Amendment Act has not been promulgated. Truworths has consequently implemented a new five-year employment equity plan for 2024 to 2029, in compliance with the provisions of the current Employment Equity Act.
CUSTOMERS
(Rating unchanged)
Rationale for engaging: Customers are the buyers of merchandise and the primary source of revenue for Office and are a key source of social and relationship capital. Engagement focuses on customers in the UK and Republic of Ireland, and both national and international online customers. Engagement occurs in stores and via the e-commerce sites as well as through social media platforms.
KEY ENGAGEMENT ISSUES
Customers who frequently visit stores want access to the latest in-fashion footwear and to be served by lively and committed staff members.
Response to engagement issue: Office continued its store modernisation programme which elevates the shopping environment, while a store incentive programme aims to enhance customer service.
Customers requesting more immediate notification of new product offers and being advised when product is back in stock.
Response to engagement issue: The new customer relationship management (CRM) application launched in June 2023 enables personalised customer communication, including earlier communications on new customer offers. Notifications of back-in-stock product or sizes went live in April 2024.
Office mobile app has outdated technology and limited functionality.
Response to engagement issue: An upgraded Office app with additional functionality will be developed and is planned to be launched in the 2025 financial period. The app will be integrated into the CRM system to enable personalised communications with targeted customers. A new app for Offspring will be developed in the second half of the 2025 financial period.
Customers would like to be rewarded for their loyalty to the brand.
Response to engagement issue: The upgraded mobile app will include functionality to provide loyal customers with instant notifications of app-only products, product restock alerts as well as offer previews for sales and promotions such as Black Friday.
Customers expect a consistent service experience across all service channels.
Response to engagement issue: A new customer service system has been implemented which enables a single view of customer contact, whether the customer has made contact via email, live chat or social media channels.
EMPLOYEES
(Rating unchanged)
Rationale for engaging: Employees provide their talent and skills to ensure the business operates in an efficient and sustainable manner and are the key source of human capital and intellectual capital. Engagement includes all full-time and flexi-time employees, with line management being the key point of engagement, supported by the human resources department. Employee engagement occurs through formal communication and surveys, formal and informal training, personal interaction with line management and through direct communications with the Managing Director.
KEY ENGAGEMENT ISSUES
Inclusive, meaningful, positive working environment.
Response to engagement issue: Following on from the introduction of the refreshed Values as part of our Business Philosophy in August 2023, an employee engagement survey was conducted in February 2024. The outcomes of this survey have been incorporated into a strategic people project covering recruitment, induction, learning and development, retention, career progression and succession.
Developmental culture supported by management.
Response to engagement issue: A key focus of the strategic people project is on investing in upskilling and developing leadership teams to drive a supportive developmental culture using 360-degree feedback and coaching.
Recognition, reward and benefit.
Response to engagement issue: Office continues to focus on introducing new recognition and reward initiatives, with the successful Truworths ACE and annual Citations programme introduced into Office in 2023.
National minimum wage increase.
Response to engagement issue: The national minimum wage in the UK for 2024 increased between 9.8% and 21.2% depending on age grouping. Office salaries were reviewed in April 2024 and adjusted where applicable, resulting in an effective increase of 12.6%.
SUPPLIERS
(Rating unchanged)
Rationale for engaging: Suppliers are the providers of merchandise and other goods and services, including international suppliers of branded and own-brand merchandise, and landlords. They are a key source of social and relationship capital for the business. The primary sources of contact are executives, merchandise buyers and management. Engagement occurs formally and informally through various channels, including merchandise range selection and development, order negotiations and account management interaction. Additionally, we collaborate with key brands on mutually beneficial alignment to launch and showcase product lines. Engagement with landlords is ongoing.
KEY ENGAGEMENT ISSUES
Merchandise suppliers:
Securing stock allocations of the 'must-have' seasonal styles.
Response to engagement issue: Long-standing relationships with key suppliers have enabled Office to secure larger stock allocations of the latest seasonal styles due to the strategic importance of Office to branded product partners.
Property landlords:
Lease negotiations in the challenging retail trading environment.
Response to engagement issue: Negotiations continued with landlords to renew leases, with some resulting in favourable rental reversions. Office's favourable business performance has also created opportunities to secure new store sites as many landlords seek to secure Office as a tenant.
REGULATORS
(Rating unchanged)
Rationale for engaging: Regulators are the custodians of legislative and regulatory compliance and providers of licences to trade. They include government departments, regulatory bodies and local authorities, with the engagement being managed by the executive directors as well as finance and legal executives. Engagement occurs through regulatory filings and submissions, and formal and informal discussions regarding key issues.
KEY ENGAGEMENT ISSUE
Revenue office audits and requests for information.
Response to engagement issue: Office has engaged with revenue authorities, principally in the UK, in relation to audits conducted and requests for information in a constructive, transparent and compliant manner.
Office seeks to maintain co-operative and proactive relationships with the in-country tax revenue authorities by rendering accurate and timeous returns and payments in respect of all tax obligations. The business further promotes tax compliance by collaborating with suppliers to confirm tax details and verify their compliance prior to initial engagement.
