Shoe Zone first-half profits flat; current trading in line

In the six months to 30 March, statutory pre-tax profit was steady at £1m as revenue nudged down to £73m from £73.7m in the first half of 2018. Product gross margins increased to 62% from 60.6% and the interim dividend was maintained at 3.5p a share.

Chief executive Nick Davis said trading in the first half had been "positive" and in line with management's expectations, achieving profitable revenue growth in its two key growth areas of digital and Big Box.

Digital sales were up 4.9% during the half to £5m, achieving profit contribution of £1.5m versus £1.2m the year before. Meanwhile, Big Box stores generated revenues of £5.5m.

"Our ongoing strategic focus continues to be on the Big Box roll out with a target of 45 stores by the end of December 2019. This is progressing to plan and we will be operating from 33 Big Box stores by the end of May," said Davis.

"Additionally, our refreshed digital strategy has also generated profitable growth, laying the foundation for a positive outlook for the rest of the year. This good performance also reflects our close management of costs and ability to maintain appealing key price-points and multi-buy offers for our customers."

The group also said that administration costs had reduced thanks to careful control of property costs and beneficial reduction in foreign exchange.

Shoe Zone said trading momentum has continued into the second half, in line with market expectations.

"With our growth strategy in place, we believe we are favourably insulated against many of the structural sector issues and the board continues to look to the future with confidence," said Davis.

At 1120 BST, the shares were down 5.7% at 214p.

Peter Smedley, research director at finnCap, said: "Shoe Zone’s H1 results have delivered on our financial expectations as its growth strategies continue to be successful as the company develops into an omnichannel operator.

"This growth is based largely on Big Box and an increased digital offering. Progress on Big Box is the standout contributor to strategic growth giving investors confidence that Shoe Zone’s diversification into out-of-town retail, combined with a product proposition attractive to a more affluent customer base is a promising move. Digital should continue to gain traction through planned improvements to website development, exclusive online product offering and marketing campaign optimisation.

"Overall, we continue to view Shoe Zone as relatively well-positioned strategically as it evolves to effectively compete and win amidst a backdrop of consumer shopping shifts."