Shoe Zone, the budget footwear retailer, has faced significant financial challenges over the past year.
- The company reported a decrease in revenue and profit for the year ending 28 September.
- Market conditions and high operational costs have impacted the retailer’s performance.
- The share price of Shoe Zone dropped significantly following these revelations.
- Efforts to revamp the company’s physical estate are ongoing despite financial hurdles.
Shoe Zone, an affordable footwear retailer, has reported a notable decline in its financial performance for the year ending 28 September. The company’s revenue decreased by 2.7%, amounting to £161.3 million, compared to £165.7 million in the previous year. This downturn was detailed in a recent report by City AM, which highlighted the adverse effects of weak demand and rising costs on the company’s profits.
The retailer’s profit before tax saw a dramatic 42% drop, falling to £9.5 million. Shoe Zone attributed this significant decrease to a combination of unseasonably wet weather and increased operational costs, including the cost of energy, depreciation, the National Living Wage, and container prices in the latter half of the year.
Following these financial disclosures, the company’s share price experienced a drop of over ten per cent during early trading sessions. The decline has been progressive, with a 19% decrease observed over the past month and a cumulative loss exceeding one-third since the start of the year.
In March, Shoe Zone had already issued a warning about its trading positions falling below expectations primarily due to higher-than-anticipated operational costs. This was further compounded by disruptions in the Red Sea and sluggish trading during the autumn period. Meanwhile, the retail industry as a whole continues to grapple with footfall levels that have yet to return to pre-pandemic numbers.
Despite these financial difficulties, Shoe Zone remains focused on overhauling its physical store network. The company’s net cash at the close of the financial year was down to £3.7 million from £16.4 million in 2023, largely due to dividend payouts and significant capital expenditure on store refurbishments and employee relocation programmes. The retailer decreased its number of operating stores by 26 within the year, closing 53 outlets, opening 27 new ones, and refurbishing 28 existing locations.
Charles Smith, the company’s Chair, reflected on the year’s challenges, characterising it as “a year of two halves.” Smith noted that while the first half saw trading inline with expectations, the second half fell short, particularly due to adverse weather conditions. However, he highlighted that the “Back to School” period saw performance exceed expectations.
Shoe Zone’s digital business has shown resilience and growth, aided by initiatives such as the introduction of free next-day delivery for online orders. This move reflects the company’s strategic pivot towards enhancing its online presence amid the current retail climate.
The financial pressures faced by Shoe Zone underscore the challenging landscape for retailers amidst rising costs and shifting consumer behaviours.
