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Summary
- Shoe Zone share price crashed by around 8 per cent intraday to hit an all-time low of GBX 35
- The shares of the company had lost as much as 67 per cent during the February-March period of 2020
- The footwear retailer may close up to 90 stores, 20 per cent of the stores, in the upcoming 18-to-24-month period
- The board of directors does not anticipate restarting a dividend policy until at least FY 2024-25
Shares of Shoe Zone Plc (LON:SHOE), the Leicester-headquartered footwear retailer, plunged nearly 8 per cent to an all-time low in the early morning deals on Thursday, 29 October 2020, after the company warned of store closures and yearly loss. The stock of Show Zone has been largely falling in the present calendar year despite a few notable upticks after the coronavirus pandemic-led slump in the market prices.
Shoe Zone stock performance (YTD)
(Source: Thomson Reuters)
However, the shares of Shoe Zone recovered some lost ground, and at the present share price of GBX 39.20 a piece, Shoe Zone commands a market capitalisation of £19 million. According to the data available with the London Stock Exchange, Shoe Zone has lost more than 75 per cent of its market capitalisation in the year-to-date (YTD) period with the shares hitting fresh multi-year lows. Shoe Zone shares had tumbled as much as 67 per cent during the February-March period after the first wave of Covid-19 hit the business activity.
Store closures
Shoe Zone provided the trading update for the 52-week period to 5 October 2020, describing the challenging trading conditions in the second half of the current fiscal year. With the government announcing the reintroduction of the antiquated business rates system in April 2021, Shoe Zone is likely to close up to 45 stores before April 2021.
Shoe Zone CEO Anthony Smith further stated that the company stands at potential closure of another 45 stores in the 12 months following the said date. In totality, there is a possibility that the footwear retailer may close up to 90 stores, 20 per cent of the store count, in the 18-to-24-month period from now.
Since the reopening of stores in June this year, the company’s trading has broadly stayed 20 per cent lower as against the trading that happened in the same period of the previous year, whereas the online orders swelled 100 per cent on a year-on-year basis. However, it pointed out that even the 100 per cent increase in the online orders is not sufficient to offset the deficit from the store sales. The recent lockdown guidance furthered by the government has steered back the worries of a muted commerce including the “disappointing announcements” for Wales and Republic of Ireland.
The re-imposition of lockdowns has retraced the uncertainty with the business of stores present in the tiers 2 and 3 greatly impacted following the tier system in England. Shoe Zone has ended the year with 460 stores spread across various locations including the closure of 40 stores and opening of 10 big box stores. As per the footwear retailer, all the upcoming new store openings have been put on hold until the trading conditions improve in the nation. The company will carry out “essential relocations” as required in the near future.
Projected financials
As a consequence of coronavirus pandemic-laden restrictions and the deprived business activity, there is a definitive impact on the business of the footwear retailer. Shoe Zone has informed that the company generated a revenue of £122.6 million in the one-year period to 5 October 2020, down 24.27 per cent as compared to the revenue of £161.9 million in 2019.
Shoe Zone has estimated to report a loss before tax for the given 52-week period in the range of between £10 and £12 million, following the closure of retail stores from 23 March to 15 June 2020 due to the lockdown and restrictions owing to the Covid-19 pandemic.
Further, Shoe Zone has decided to suspend the dividend payment in the financial year 2020, as the company’s board of directors have prioritised to clear the debt repayments. Shoe Zone’s board of directors does not anticipate restarting a dividend policy until at least FY 2024-25 with the present position of the company.
The footwear retailer has closed FY20 with a net cash balance of £6.3 million, down 44.25 per cent from the total cash balance of £11.3 million as at the end of FY 2019. The company has decided to announce the financial results for the 52-week period ended 5 October 2020 on Wednesday, 13 January 2021.
CEO’s take
With a robust plan and sufficient funding in place, Shoe Zone has ensured the survival of the business amidst the challenging business environment due to the coronavirus pandemic, said Anthony Smith, adding, it is quite difficult to provide meaningful guidance with the present business dynamics in place and persisting economic uncertainty. The company is likely to explore creating an autonomous digital department following the sharp uptick in the online orders from the onset of coronavirus pandemic.
