Shoe Zone sales, earnings hurt, expects more store closures on return of business rates
Shoe Zone’s “incredibly challenging year” continues, as it delivered a tough set of results for the 52-weeks to October 5 on Wednesday with the prospect of further store closures next year and beyond.
The results showed it was very much a tale of two platforms for the UK footwear retailer. Store trading since reopening in June has been down 20% year-on-year while digital trading was up 100%.
However, Shoe Zone noted that while the latter performance is encouraging, it failed to match the deficit from store sales.
Further bad news is expected with the government’s reintroduction of the “antiquated” business rates system in April 2021, it said. As a consequence, Shoe Zone said it will close up to 45 stores prior to April next year and sees the potential closure of a further 45 stores in the 12 months following the reintroduction. This would represent the closure of up to 20% of its store estate in the next 18-24 months.
All future new openings are "on hold" until trading conditions improve while a small number of essential relocations will happen as needed, it said.
The company said it ended the year with 460 stores, having opened 10 Big Box stores and closed 40 stores during the period. At the year-end, 50 Big Box stores were trading.
The threat of further closures only added the current woes the business is feeling with the recent government lockdown guidance “not helping the situation, particularly with the disappointing announcements in Wales and the Republic of Ireland”. The new Tier system in England has “greatly impacted” sales, especially in Tiers 2 and 3 regions, it noted.
Revenues for the 52-week period fell to £122.6 million from £161.9 million a year ago. As a result of the closure of its retail estate from March 23-June 15 owing to the pandemic, Shoe Zone expects to report a pre-tax loss for the period in the range of £10 million-£12 million.
It said the suspension of business rates in April proved to be a “significant benefit for our business in FY20 and was in line with the government's desire to save the high street".
Shoe Zone also said it closed FY20 with a net cash balance of £6.3 million, down from £11.3 million a year ago.
CEO Anthony Smith said: "Shoe Zone has ended an incredibly challenging year with a robust plan and sufficient funding in place to ensure the future survival of the business. The exceptional growth in digital sales since the start of the Covid-19 pandemic demonstrates the flexibility of our operating model, and follows the decision to create an autonomous Digital department in 2019."
He added: "However, it is very difficult at this stage to provide meaningful guidance on the future outlook, given the material uncertainty in the wider economy."
Shoe Zone operates around 460 stores, including 410 high street stores, and has around 3,000 employees across the UK. It said it sells 16 million pairs of shoes per annum at an average retail price of £11.
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