Shoe Zone cites Budget changes as it warns on profits, shares tank
By Michele Maatouk
Date: Wednesday 18 Dec 2024
(Sharecast News) - Shoe Zone warned on profits on Wednesday and said it had been forced to close some stores due to changes announced in the Budget, sending shares in the retailer tumbling.
The discount shoe retailer highlighted "very challenging" trading conditions for the first two months of its financial year and the first half of December. It noted a weakening of consumer confidence and unseasonal weather, both of which have dented revenue and profit.
Consumer confidence weakened further following the Budget in October, it said, which will lead to the company incurring "significant" additional costs due to the increases in National Insurance and the National Living Wage.
"These additional costs have resulted in the planned closure of a number of stores that have now become unviable," it said. "The combination of the above will have a significant impact on our full year figures."
As a result, the company now expects adjusted pre-tax profit for the financial year ending 27 September 2025 to be not less than £5m, down from previous a previous forecast of £10m.
In addition, Shoe Zone said it was not proposing to pay a final dividend for the year ended 28 September 2024.
At 1000 GMT, the shares were down 40% at 82.50p.
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.
"The company cannot be accused of putting its feet up - it is shuttering stores and suspending the dividend in response to the downturn in trading. This isn't the first shock the company has delivered in 2024, with a cybersecurity incident and higher shipping costs among the bad news shareholders have had to absorb.
"The company's reliance on its Chinese supply chain is a potential source of volatility and management, including executive chair Charles Smith and finance director Terry Boot, will be under pressure to turn things around if they are not to get the boot themselves."
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