Shoe Zone profits slip due to ‘government imposed’ cost increases

Shoe Zone has reported a decrease in profits before tax to £9.6m, down from £11.3m the previous year, attributed to “government imposed increases” in its operating costs, primarily through the impact of increasing business rates.

For the year ended 5 October 2019, the shoe retailer reported a 0.9% increase in revenues to £162.m compared with £160.6m in 2018.

Product gross margin maintained at 62.7% as earning per share decreased to 11.4p compared with 19.0p in the same period the year before.

The retailer also reported digital revenue growth of 9.2% to £10.6m.

During the period, Shoe Zone opened 21 Big Box store openings, leading to a total of 45 Big Box stores by the end of December, contributing revenues of £15.6m.

Anthony Smith, chief executive of Shoe Zone said: “Despite it being a difficult year for Shoe Zone, the business has achieved revenue growth, and delivered underlying profit before tax marginally ahead of our revised expectations following our revaluation of a freehold property.

“Alongside the continued momentum in Big Box expansion and Digital growth, Town Centre renewal is the third key focus for our refreshed strategy. Following a successful trial of four Hybrid stores, in 2020 we plan to convert a further 20 of our traditional stores to this more premium Town Centre Hybrid model.”

He added: “Town centre stores remain an important component of our proposition and we don’t agree with doomsayers referring to the inevitable “death of the high street”. However, it’s stark that over the past 10 years the rates paid as a proportion of our rent has increased from 26.4% in 2009 to 54.3% in 2019.

“Despite rationalising our store estate, the value of rates paid has increased by £700k despite having 38% fewer stores and 30% lower sales.”