Retailer’s share price drops 40% after it warns on profits and more store closures
Shares in Shoe Zone have dropped to a three-year low after the high street retailer released a miserable update on its prospects this morning.
Shareholders reacted badly to a second profit warning of the year, with Shoe Zone’s shares losing 40% in early trading. Its shares have lost more than £100m since March, as the share price has fallen by 70% .
After the share price dropped by 70% in early trading, it fell further to 77.86% the following morning (December 19).
The Leicester-based retailer halved its profit forecast for the current year, to £5m, and said it would not be paying a final dividend for the financial year that finished in September.
Shoe Zone is to close more “unviable” stores in the wake of its struggling performance. It has been reducing its shop numbers in the last two years, with its strategy shifting from high street shops to larger format stores. It has shrunk its portfolio by around 20% and now has 297 stores.
It blamed “a weakening of consumer confidence and unseasonal weather” for a fall in revenue and profit in the first 11 weeks of the financial year.
The retailer, which employs 2,250 people, also pointed to “significant additional costs” due to the increases in National Insurance and the National Living Wage announced in the Budget in October.
Russ Mould, investment director at AJ Bell, said: “Shoe Zone putting the blame for a major profit warning on the Budget seems a poor fit.
“The impact of increased costs from National Insurance contributions and the National Living Wage is undeniable and one shared by much of the retail sector. However, attributing weak trading to a decline in consumer confidence since the Budget is at odds with UK-wide figures suggesting confidence has ticked higher since the event.
“Poor autumn weather won’t have helped but Shoe Zone does not sell a discretionary product – it sells affordable footwear, for which demand should be relatively resilient.
“Perhaps Shoe Zone’s offering isn’t resonating with shoppers as much as it used to. At the very least, you would hope management is looking at what’s gone wrong rather than attributing everything to external factors.”
