Shoe Zone sales fall but planned closures and Big Box expansion keep it cheerful
Shoe Zone was upbeat on Tuesday, despite reporting falling sales for the year to September 30 with the reason behind the sales fall being its planned store closure programme. This sees it placing a focus on bigger, better stores that are more profitable.
The UK's largest value footwear retailer said it “has traded well in the second half of the year” and expects to report revenues of around £158 million, short of 2016’s £159.8 million.
The shortfall, as mentioned, comes from those store closures with the firm axing lossmaking locations. But it has continued to open new Big Box stores and to expand online, and these two strategies partially filling the gap.
It also said that despite the impact of the foreign exchange headwinds that continued through the second half, the board expects to deliver full-year pre-tax profit “broadly in line with expectations.”
The word “broadly” is hard to interpret as it could mean either a disappointment or a pleasant surprise. But Shoe Zone wasn’t telling on Tuesday.
It did say that it continues to have strong cash conversion and closed the year with an approximate net cash balance of £11.8m, although this was lower than the year-ago £15m.
It ended the year with 496 stores, having opened 21 and closed 35 during the period. Six of the new locations were the continued roll out of the Big Box format with latest format Shoe Zone stores being the remainder. We’ll have to wait until is delivers its full-year results in January for the full picture.
So for now, what do analysts make of the performance? Kate Ormrod, Lead Analyst at GlobalData, said: [The] performance looks typical on the face of it with revenue expected to be in decline yet again. A closer look however shows that H2 revenues were down just £0.1m to £85.1m, indicating that H1 FY2017/18 could potentially mark the first instance of revenue growth since it went public in 2014.
“On the proviso of solid trading in the run up to Christmas, Shoe Zone has an opportunity to protect its 2% share of the UK footwear market in 2017 – an achievement as its share has been in decline for the past four years.”
She said value specialist’s Big Box store rollout, with eight stores now operating, highlights an evolved strategy since it went public – taking advantage of the gap left by Brantano. “[It] therefore should be well aware of the pitfalls of an uncompelling and out of touch offer; and the specialist still has work to do to bring its proposition up to scratch, especially in terms of fashionability and competitive pricing compared to the likes of Primark. Its big box stores do however de-emphasise these shortcomings via the inclusion of branded ranges such as Skechers which enhances its quality credentials.”
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