Shares in Shoe Zone dropped by more than 5.7% this morning (21 May) as the UK value footwear retailer reported what one analyst called a set of “uninspiring results” for the first six months of the year.
In its interim results released today, the company said in the 26 weeks to 30 March, statutory profit before tax was flat at GBP1m (US$1.3m), while revenue in the period slipped to GBP73m from GBP73.7m in the prior year period.
Meanwhile, digital revenue increased 4.9% year-on-year to GBP5m, with profit contribution growing 19.9% to GBP1.5m.
Shoe Zone said it has continued to increase its direct sourcing and as a result, footwear orders placed directly with overseas factories rose to 87.6% (2018 FY: 87.1%) of total footwear orders. The company added working closely with manufacturers has helped grow gross product margins as well as improving communication and control across the supply chain. As a result, product gross margin performance improved by 1.4 percentage points in the period to 62%, up from 60.6% last year.
The UK’s largest value footwear retailer ended the first half of the year operating from 495 stores having opened nine, all of which were Big Box format, and closed six during the period.
Its plans to roll out 45 Big Box stores by the end of December 2019 is progressing to plan, with the retailer confident it will be operating from 33 Big Box stores by the end of May.
“The first half of our financial year has been positive for the group, trading in line with management’s expectations and achieving profitable revenue growth in our two key growth areas of digital and Big Box,” said CEO Nick Davis.
“Trading momentum has continued into the second half, in line with market expectations. With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the board continues to look to the future with confidence.”
Pippa Stephens, retail analyst at GlobalData, notes the latest set of results from Shoe Zone are “uninspiring”.
“Digital growth has slowed despite a continued focus on expanding its email database,” she says. “The retailer faces increasing online competition, from retailers such as Boohoo, so must ensure that it’s delivery and return options are made comparable. It already offers a VIP scheme and a next day delivery pass, which will help it to gain loyal customers, but it should also introduce third-party collection and free postal returns to win over shoppers from its rivals. The number of products it sells exclusively online has increased by 185% since October 2018, but in order to fully capitalise on this it must also start including more eye-catching imagery onto its website to obtain shoppers attention.”