Shoe Zone back in profit despite sales fall, digital is key
Value-focused footwear retailer Shoe Zone's unaudited full-year results on Wednesday showed lower revenue, but a return to profit and digital turnover soaring.
During the year to October 2 — which took in two major lockdowns — stores traded for around 36 weeks, compared to 42 weeks in the previous year and the full 52 weeks in fiscal year 2019.
That resulted in sales falling to £119.1 million from £122.6 million in 2020 and £162 million in 2019. It now has only 410 stores compared to 460 in 2020.
But as mentioned, digital revenue helped to make up some of the shortfall. At £30.6 million, it was up 58.5% compared to 2020 and up a massive 188.7% compared to 2019 when the firm was clearly lagging behind on digital development. In the latest year it accounted for 25.7% of revenue, compared to 15.7% last year and a very small 6.5% two years ago.
But the gross product margin this time was down to 61.3% from 61.4% in 2020 and 62.7% in 2019.
That said, at £14.2 million, the company has a net cash balance more than double the £6.3 million of a year ago, and profit before tax is expected to be “not less than £6.5 million”, which would be much better than the loss of £14.6 million of the previous year and not far off 2019’s £6.7 million profit.
The company said the figures were impacted by the pandemic in the first half but it was able to trade normally in H2 and trading has been “positive” since the end of lockdowns. And while its stores being open since April was clearly good news, it added that digital investment has been key and “will be the core of our strategy going forward”.
It said: “We will continue to invest in our people and our Shoehub platform. We aim to increase drop ship partners, marketplaces, exclusive products, brands and plan to introduce additional payment and delivery options to enhance customer experience.”
Not that it won’t be continuing its programme of opening Big Box and Hybrid stores. Of the 410 locations it’s left with, 343 are original Shoe Zone stores, 51 are Big Box and 16 are Hybrid stores. It said it would continue its strategy to expand the latter two formats “through relocations or refits of existing Shoe Zone stores. We will also continue to reduce the number of original Shoe Zone stores that are no longer commercially viable”.
But part of the success of its digital operation is its “very efficient returns process, complemented by our extensive network of stores”, it explained. That means the “physical store network is critical to our future success even though digital will be at the core of our strategy”.
Anthony Smith called the results for what was an “intensely challenging” year “solid”, but added that there’s “still uncertainty ahead of us in the next 12 months, not only with the continuing impact of Covid, but also the challenges we face with the global supply chain and inflationary pressures”. It has seen a minimum of a five-fold increase in container prices over the last 12 months and “this will continue to impact us for at least a further six months until the issues being experienced in the whole supply chain return to more sensible levels”.
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