Shoe Zone posts revenue fall and warns of store closures
Shoe Zone has posted a 24% fall in retail revenues to £122.6m for the 52 weeks to 5 October, fuelled by a deficit in store sales as a result of the Coronavirus crisis.
The value footwear retailer now expects to report a loss before tax for the period in the range of £10m to £12m owing to the “challenging” trading conditions in the second half of the financial year.
Store trading since stores were reopened in June has also been broadly 20% down year on year with digital trading broadly 100% up year on year, it said.
The retailer closed the financial year with a net cash balance of £6.3m, down from £11.3m the previous year and warned that it was unlikely to be in a position to start paying dividends until at least the 2024/25 financial year.
Lockdowns in Wales and the Republic of Ireland were also “not helping the situation” and adding to the “uncertainty” created by the new Tier system in England, where stores in Tiers 2 and 3 have already been “greatly impacted,” Shoe Zone said.
The retailer also warned that the return of business rates in April could lead to the loss of up to 20% of its store estate in the next two years.
Shoe Zone chief executive Anthony Smith said: “The suspension of rates in April 2020 was a significant benefit for our business in FY20 and was in line with the government's desire to save the high street.
“However, the government has announced the reintroduction of the antiquated business rates system in April 2021 and to make matters worse has delayed the revaluation.
“The consequence to Shoe Zone will be the closure of up to 45 stores prior to April 2021 and the potential closure of a further 45 stores in the 12 months following the reintroduction.
“In total this would represent the closure of up to 20% of our store estate in the next 18 to 24 months.
“In 2015 the government delayed the rates revaluation by 2 years which cost our business £1.25m per year (£2.5m in total). The latest revaluation delay will be even more costly as rents during the period have fallen significantly further and consequently rateable values should have fallen broadly in line with rents. Never has the rating system been more unfair.
“Our rates as a proportion of rent have increased from 26.4% in 2009 to 54.3% in 2019 and forecast to be close to 60% in 2021. This is unsustainable for most high street retailers and closures will continue unabated until the government makes substantial changes,” Smith added.
Shoe Zone 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.
All future new openings are on hold until trading conditions improve whilst a small number of essential relocations will happen as needed.