Shoe Zone Posts Lower Profit on Revenue Dip

Shoe Zone, the affordable footwear retailer, has reported a decline in both revenue and profit due to weak demand and high costs, amidst an overhaul of its physical stores. The company's revenue decreased by 2.7 per cent, totalling £161.3m for the year ending on 28 September, a drop from £165.7m in 2023. Profit before tax saw a significant decrease of 42 per cent, amounting to £9.5m, which Shoe Zone attributed to unseasonably wet weather and "year-on-year increases in the cost of energy, depreciation, National Living Wage and container prices in the second half".

Following these reports, the company's share price experienced a drop of over ten per cent in early trades. It has seen a nearly 19 per cent decrease in the last month and more than a third in the year to date. In March, Shoe Zone issued a warning that it was trading below expectations due to higher-than-expected costs related to disruption in the Red Sea and slow trading during the autumn season. High street footfall has yet to return to pre-pandemic levels, with 11 out of the last 12 months showing a monthly decline in the number of shoppers on streets.

Net cash at the end of the financial year stood at £3.7m, down from £16.4m in 2023, due to dividends of £8m, as well as capital expenditure of £12.3m for store refits and the company's employee relocation programme. Currently, the budget footwear provider is undergoing a revamp of its physical estate. The number of Shoe Zone stores in operation fell by 26 during the year, to 297. The company which is headquartered in Leicester, closed 53 stores, opened 27 and refitted 28.

Chair Charles Smith stated: "A year of two halves, with the first half trading in line with expectations and ahead of the previous year, however, the second half trading was below expectations due to unseasonal weather conditions, particularly at peak summer, however, our key Back to School period traded above expectations at the end of the year." "Our Digital business continued to grow, driven by the introduction of free next day delivery for all shoezone.com orders."

Despite the challenging market conditions and high costs, Shoe Zone is implementing strategic initiatives to improve its financial outlook and maintain competitiveness. The company is investing in its digital platform and expanding its online presence, with plans to roll out Google pay, Apple pay, and a new mobile app in the next 12 months. Additionally, Shoe Zone is taking steps to manage its costs more effectively, achieving rent reductions on 35 store renewals with an average reduction of 21% on an annualised basis. The company is also expected to take advantage of the current property supply environment to improve its property portfolio and reduce costs.

In conclusion, Shoe Zone's lower profit and revenue dip reflect the challenging market conditions and high costs faced by the budget footwear retailer. However, the company's strategic initiatives, such as investing in its digital platform and managing costs effectively, position it to improve its financial outlook and maintain competitiveness in the market. Investors should closely monitor Shoe Zone's progress and assess the potential impact of these initiatives on the company's future performance.