UK value footwear retailer Shoe Zone remains optimistic for the current year, despite posting a drop in revenue and pre-tax profit in the 52 weeks to the end of September as the closure of loss-making stores took its toll.
In its full-year preliminary results released today (10 January), Shoe Zone said profit before tax fell 7.3% to GBP9.5m (US$12.9m) from GBP10.3m in the year-ago period, primarily due to the impact of foreign exchange resulting from the weaker pound on the cost of imports from the Far East.
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Revenues of GBP157.8m declined by 1.2% from GBP159.8m in the prior year on the closure of loss-making stores, with most of the loss in revenue in the first half of the year.
During the period, the UK’s largest value footwear retailer closed 35 stores, opened 21 and refitted 29, bringing its portfolio to 496. Shoe Zone said loss-making stores now make up “only 6% of the Shoe Zone portfolio,” down from 11% three years ago.
Meanwhile, product gross margin strengthened to 63.2% from 62% during the period, reflecting further increases in direct sourcing, successful negotiations with suppliers and management of write-downs.
“I am pleased with the group’s performance in what continues to be a challenging retail environment,” said CEO Nick Davis. “We are still well positioned in the market given our strong value retail proposition and continue to manage our store portfolio successfully through our ongoing store rationalisation and refit programme.”
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By GlobalDataDavis added the retailer is now targeting ten new Big Box stores per year, which include branded ranges such as Skechers and Clarks, following a successful trial with 12 stores now operating.
Kate Ormrod, senior retail analyst at GlobalData, notes that the first-half of 2017/18 could potentially mark the first revenue growth for Shoe Zone since it went public in 2014.
“Shoe Zone has stated it has made a solid start to its new financial year, and given this, we expect Shoe Zone to have protected its 2% share of the UK footwear market in 2017 – an achievement as its share has been in decline for the past four years,” she adds.
She also suggests the retailer’s portfolio of 500 or so stores across the UK & Ireland will be a hindrance in the long run if Shoe Zone fails to get product and branding back on track and if it fully grasps online opportunities.
“Shoe Zone should be well aware of the pitfalls of an uncompelling and out of touch offer; and it still has work to do to bring its proposition up to scratch, especially in terms of fashionability and competitive pricing compared to the likes of Primark.”
