Shoe Zone profit ahead as it makes bank on rent renewals

Budget footwear retailer Shoe Zone issued its interim results for the six months ended 31 March on Thursday, reporting revenue growth of 1.1% to £73.7m.

The AIM-traded firm said its product margins remained “strong” at 60.6%, down slightly from 62.8% at the same time last year.

Its statutory profit before tax rose to £1.0m from £0.3m, with cash at period end increasing to £5.9m from £4.6m year-on-year.

Statutory earnings per share were 1.70p - a sizeable improvement on the 0.50p reported at the end of the first half 12 months ago.

The board raised the interim dividend to 3.5p per share, from 3.4p per share.

On the operational front, Shoe Zone said rent on renewals for its retail spaces fell by 22% on average, equivalent to a full year saving of £0.1m.

Rent as a percentage of turnover remained static at 12%.

Footwear orders placed directly with overseas factories increased to 87.1% from 84.7%, with the firm now operating from 12 big box locations at period end, which contributing £3.1m to first half sales.

Multi-channel sales increased by 21% to £4.9m, achieving a contribution of £1.2m - up from £1.0m.

“This has been a good first half for the group, trading in line with management's expectations and achieving profitable revenue growth,” said chief executive Nick Davis.

“Our ongoing strategic focus on the property portfolio has continued to benefit the group, with careful management of leases and measured opening of core and big box stores, taking advantage of the favourable retail rental environment.”

Davis said the good performance also reflected the board’s close management of costs and ability to maintain appealing key price-points and multi-buy offers for customers.

He was also “delighted” that multi-channel revenue continued to grow profitably, especially via mobile, which remained an “ongoing area of development” for the business.

“Trading momentum has continued into the second half, in line with expectations for the full year.

“With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the board remains confident of the outlook for Shoe Zone.”