Genesco's Schuh has tough time, swings to loss, seeks landlord support
Genesco-owned UK footwear retailer Schuh has released its latest set of results and they were dominated by the tough retail market, with falling sales and profit turning to losses, even though online turnover rose healthily.
The company didn’t waste any time getting down to the unappetising details saying that “after a second consecutive year of extremely challenging conditions for retail, we have just reported our results to January 2019 where turnover fell by over £20 million.”
It means turnover dropped from £308.5 million in FY18 to £288.4 million this time, “despite a decent increase in online sales, masking a considerable drop in store sales”.
It was a candid dive into the figures that also told us pre-tax profits fell from £13.1 million a year earlier to a loss of £6.1 million for the latest year.
David Gillan-Reid, Finance and HR Director at the company, explained further: “We have been faced with an unprecedented number of trading headwinds, including increasing occupancy (rent, rates and service charges) and staff costs (minimum/living wage, apprenticeship levy, pension auto-enrolment costs etc.); Brexit uncertainty/political instability; and consumer spending being lower on footwear and apparel.”
And as if that wasn’t enough, in addition, there were issues such as product availability, plus “margin pressure given the high dominance of sport brands, an extremely promotional environment and a significant footfall decline on the high street, in shopping centres and retail parks [that made] for a tough trading period.”
Meanwhile, although e-sales rose, further problems included “the increased cost of doing business online without a corresponding reduction in what are generally fixed store costs, the necessary investment in marketing to keep existing customers and attract new, and the additional cost of a CRM system to comply with GDPR legislation.”
It was clearly a perfect storm of issues, so is the company feeling battered by it all? Well, it put on a brave face and seems to still think it can prosper further down the line.
“We are navigating our way through these demanding times and remain optimistic of our future,” it said, adding “but only with engagement from our landlords and the business working very hard to keep developing our product offer, driving new initiatives in technology, design, etc.”
The reference to its landlords means that Schuh, like so many others in UK retail at the moment, wants landlords to compromise on rents and help it keep a lid on physical store costs. It said that last month it “engaged retail property consultant, CAPA, with the aim of reducing occupancy costs across the store estate. Genesco has also engaged directly with landlords to seek their support in ‘right-sizing’ rents.”
Other actions it has taken since the year being reported on here include closing down its German operation of three trading stores with the hand-back of two of the store leases being successfully negotiated and it “remains optimistic on the third”. The Schuh German-language website continues to trade as part of the UK company, but “a final decision on the winding up of the German entity will take place shortly”.
It’s also working hard on “delivering initiatives to further enhance profitability and customer experience, including our new transformational 2020 store design, CRM personalisation, driving brand awareness, and continuing to offer our customers their favourite footwear brands and styles”.
It recently appointed Nicola Monachello (formerly of New Look) as its new Buying Director and despite the challenging environment, it said “we believe there are opportunities to navigate our way through this period with support from landlords on store rents, councils with rates help, less focus on a continual heavily promotional environment and, not least, some clarity on the UK’s future relationship with the EU.”
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