Shoe Zone Shares Tumble Amid Profit Warning
Retailer Shoe Zone has issued a warning that it anticipates a drop of over 40% in its annual profits, attributing the decline to the impact of adverse weather conditions during the summer on sales. The chain stated that pre-tax profits for the year ending on September 28 are projected to be “not less than” £9.6 million, marking a 41% decrease from the £16.2 million reported the previous year. The company highlighted challenging trading conditions throughout the crucial summer period, where unseasonal weather negatively affected sales, resulting in a 2.7% decrease in full-year revenues to £161.3 million.
Moreover, Shoe Zone’s efforts to streamline its store portfolio by closing 26 sites on a net basis, reducing its total to 297 by the end of the year, also impacted trading performance. The company cited factors such as the higher wage bill following the national minimum wage increase in April, as well as increased shipping and energy costs, contributing to the profit decline. Despite a stronger performance during the Back to School period towards the end of the year, second-half trading fell below expectations due to abnormal weather conditions, particularly during peak summer months, according to Shoe Zone Chairman Charles Smith.
Following the profit warning, shares in the group experienced a temporary 13% decline on Tuesday before recovering slightly to stand 2% lower during afternoon trading. Smith acknowledged the challenging year, describing it as “a year of two halves” and emphasising the strategic focus on expanding the number of new format stores through relocations and refurbishments of existing High Street stores. With approximately 2,250 employees, Shoe Zone has been actively restructuring its estate by closing 53 sites, opening 27 new ones, and renovating 28 locations as part of its continuous efforts to enhance its footprint with new larger stores.
The company remains committed to its growth strategy amidst the challenging retail landscape, aiming to navigate through the pressures on profitability brought about by external factors and internal initiatives. As Shoe Zone continues to adapt and evolve its operations, the market will closely watch for further developments and the company’s resilience in the face of ongoing challenges.