Shoe Zone Faces Tough Trading Conditions, Reduces Profit Expectations

Highlights

• Company experiences weakened consumer confidence and unseasonal weather in early fiscal year.
• Increased National Insurance and National Living Wage costs lead to store closures.
• Adjusted profit before tax forecast for 2024-2025 revised down to £5.0m.

Shoe Zone (LSE:SHOE), a UK-based footwear retailer, has announced that its trading performance has been severely impacted by challenging conditions during the first two months of its financial year, coupled with difficult circumstances throughout the first half of December. The company cited a decline in consumer confidence and unseasonably poor weather as the principal factors that have led to reduced revenue and profit.

Further exacerbating the situation, the impact of the UK Government’s October 2024 budget has contributed to a further weakening of consumer confidence. The budget's provisions, particularly the increases in National Insurance and the National Living Wage, are set to add significant costs for businesses across the country. Shoe Zone will feel the effects of these hikes directly, and the company has already identified several stores that have become financially unsustainable due to these additional expenses.

As a result, Shoe Zone has made the difficult decision to close a number of its stores, which were previously considered part of its future growth plans. This decision, alongside the other challenges, has led to a revision of the company’s full-year profit expectations.

The company now projects that its adjusted profit before tax for the financial year ending 27 September 2025 will not be less than £5.0 million. This is a significant downward revision from the previous forecast of £10.0 million. Given the financial strain caused by these circumstances, Shoe Zone has also stated that it will not be paying a final dividend for the financial year that ended on 28 September 2024, as part of a strategy to preserve resources in light of the ongoing challenges.

The retailer acknowledged that the combination of weak consumer sentiment, the impact of weather patterns, and the additional financial burdens resulting from government policy changes have created a perfect storm that will negatively affect its performance. Shoe Zone emphasized that the full effects of these difficulties will be reflected in its upcoming results.

The company is scheduled to release a further trading update on 21 January 2025, alongside the announcement of its full-year results for FY2024.