Shoe Zone comeback continues, online sales soar

By

Sandra Halliday

Published
Jan 9, 2019

Value-focused footwear retailer Shoe Zone continued its comeback in the latest financial year (the 52 weeks to September 29) and while its sales rise was a small 1.8%, given that the first half saw total revenue up only 1.1%, there was clearly an acceleration in the second half.

That acceleration added up to 2.4% for H2, it said in its preliminary results report, and it all meant that revenue rose to £160.6m for the year, helped by digital revenue that increased 19.9% to £9.8 million.

But it wasn’t 100% good news as the product gross margin dipped to 62.9% from 63.2%. Not that this held overall earnings back as statutory pre-tax profit soared 18.4% to £11.3 million. Its cash balance at year-end rose too and the money it paid its shareholders in the form of dividends nearly doubled.

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And Shoe Zone also said it has made a "solid start to the year and is trading ahead of previous market expectations."

STORE ESTATE

Its full-year growth came as the company opened 19 Big Box stores by period-end, contributing £7.1 million in sales, and it said it has more planned for this year.

But while it’s expanding and upsizing its store estate, it also managed to drive the rent on its renewals down by an average of 23.1%.

CEO Nick Davis said it was a record year for profits, despite the challenging consumer environment, which is partly due to “the effective focus on growing the Big Box and Digital channels.”

Analysts were impressed. Sofie Willmott, Senior Retail Analyst at GlobalData, said: “While weaker footfall plagued many retailers over the summer, the second half of its financial year proved rewarding for the value footwear specialist, and growth in H2 was more than double that achieved in H1. Its proposition [is] clearly resonating with cash-strapped shoppers.”

But while the company is closing traditional stores and opening Big Box spaces, she questioned its commitment to retaining a store estate of almost 500 locations. 

“A determination to retain a portfolio of this size may come back to haunt Shoe Zone as it seizes online sales opportunities,” she said, but admitted that the Big Box format has proved a winner for the firm, as has its drive to “premiumise” its offer and expand the choices available.

“Maintaining its 2% share of the UK footwear market in 2018 and a positive start to FY2018/19, should give Shoe Zone renewed confidence,” she added. “It must however build on these positive results by further honing its product proposition and value for money credentials, while driving loyalty from its customer base, as competition will remain formidable, especially from value clothing leader Primark.”