Sales rise but profit flounders at Shoe Zone

Footwear retailer Shoe Zone reported total first-half revenue of £75.4m on Tuesday, up 7.9% year-on-year, with store revenue ahead 6.8% at £61.1m.

The AIM-traded firm also recorded growth in digital sales in the 16 weeks ended 1 April, with revenue there jumping 12.7% to £14.3m.

It reported a profit before tax of £1.5m, down from the prior-year figure of £3.1m, although adjusted profit before tax amounted to £2.5m, in line with the previous year's figure.

Earnings per share were recorded at 3.1p, down from 5.7p in the first half of 2022.

Shoe Zone said iti maintained a strong financial position, with net cash of £12.9m at the end of the first half, slightly lower than the previous year's figure of £13.9m.

The company proposed an interim dividend of 2.5p per share, which was also in line with the first half of 2022.

Operationally, Shoe Zone had 336 stores as at 1 April, down from the prior year's figure of 360.

The store portfolio comprised 44 ‘big box’ stores, 66 ‘hybrid’ stores, and 226 ‘original’ stores.

During the period, Shoe Zone opened 17 new stores, carried out six refits, and closed 41 locations.

The company invested £5.3m in capital expenditure during the first half, a year-on-year increase from £2.3m.

Shoe Zone said it successfully negotiated annualised lease renewal savings of £0.4m, resulting in an average reduction of 27% in lease costs.

The company’s average lease length increased to 2.1 years, compared to 1.8 years in the prior year.

In terms of digital operations, Shoe Zone reported a 11.9% return rate, which remained relatively stable compared to the first half of 2022.

“Shoe Zone delivered a robust and positive performance in the period, against a backdrop of consumer uncertainty and macroeconomic volatility,” said chief executive officer Anthony Smith.

“The performance further demonstrates the resilience of our business and the success of our ongoing strategy.”

Smith noted that while adjusted profit before tax “slightly above” management expectations, the reduction on the comparable period last year was down to inflationary cost increases, primarily hikes to the National Living Wage.

“We ended the Period trading out of 336 stores, which is a reduction of 52 compared to 12 months ago and 24 from last year end.

“We are actively working to relocate and refit further stores in the second half of the year, together with a number of stores currently in the pipeline, opening before Christmas.”

Shoe Zone’s average lease length was 2.1 years, which Smith said gave the firm the “opportunity and flexibility” to respond to changes in any retail location at short notice.

“Property supply continues to outstrip demand and we continue to take advantage of this and significantly improve our property portfolio over the medium term.”

At 0843 BST, shares in Shoe Zone were down 13.87% at 206.71p.

Reporting by Josh White for Sharecast.com.