Shoe Zone edges forward with transformation plan, sales and profits are higher
Value footwear retailer Shoe Zone may not have reported soaring sales for the six months to March 31 but the company kept its head above water and made progress as sales edged up by 1.1% to £73.7 million.
It said product margins were “strong” but they still fell to 60.6% from the 62.8% of a year ago. The slight fall was due to higher writedowns early in the year and the Q2 sales mix.
Meanwhile statutory pre-tax profit managed to rise from £0.3 million to £1 million - not a huge figure but a profit nonetheless.
However, the company is keeping its costs under control and said that rent on renewals fell on average by 22%, equivalent to a full-year saving of £100,000, and footwear orders placed directly with overseas factories increased to 87.1% from 84.7%.
Working closely with manufacturers “has helped support gross product margins as well as improving communication and control across the supply chain.”
And Shoe Zone said non-footwear ranges including handbags, school bags, lunchboxes, purses and accessories continue to grow with sales from non-footwear reaching £3.6 million, a 12% increase on the prior year.
The company has been transforming its business, opening more ‘big box’ stores with 12 open by period-end, contributing £3.1 million in sales. And its multichannel sales increased by 21% to £4.9 million.
CEO Nick Davis described all that as “a good first half for the group, trading in line with management's expectations and achieving profitable revenue growth.”
He said the ongoing strategic focus on the property portfolio has continued to benefit the business, “with careful management of leases and measured opening of core and big box stores, taking advantage of the favourable retail rental environment.”
And that’s something many retailers are aiming to do at present as they see struggling rivals entering CVA deals that allow them to negotiate lower rents or being able to exit lossmaking properties. Retail giant Next has also been affected by this and according to reports is pushing landlords to offer it a lower rent option on new sites if neighbouring retailers file for a CVA.
Meanwhile Davis also said that the performance “reflects our close management of costs and ability to maintain appealing key price-points and multi-buy offers for our customers. We are delighted that multichannel revenue has continued to grow profitably, especially via mobile, which remains an ongoing area of development for the business.”
Importantly too, he said “trading momentum has continued into the second half, in line with expectations for the full year.” With the growth strategy in place, “we believe we are favourably insulated against many of the structural sector issues and the board remains confident of the outlook,” he added.
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