Shoe Zone has warned that profits are unlikely to return to pre-Covid pandemic levels for the “foreseeable future,” after it swung to a full-year loss, citing the impact of store closures during lockdowns.

The company said revenues for the year to Oct. 3, 2020 slumped by 24 percent to £122.6 million (€143m-$169.7m), while pre-tax losses came in at £14.6 million (€17m-$20.2m), compared to a profit of £6.7 million (€7.8m-$9.3m) a year earlier. 

Revenues were hit after Covid-19-related lockdowns resulted in the closure of all stores, although digital revenues rose by 82 percent to £19.3 million (€22.5m-$26.7m). Shoe Zone is also expecting a “winter stock overhang” of £7.0 million (€8.1m-$9.7m) that it cannot address until autumn 2021 as the goods are locked away in shops.

It noted that returns continue to be ”extremely low” at 8.4 percent, compared with 11.0 percent in 2019. It expects the returns rate to rise to about 10 percent as trading patterns stabilize.

There was also a swipe at the troubled British shoe maker Clarks, which during the year gave notice to end its relationship with Shoe Zone “due to their ongoing difficulties”. Shoe Zone added that the ”brand was performing poorly for us, so will not be missed.”

Chief executive Anthony Smith warned that dividends were unlikely to be paid until at least 2025 given the company now had £12 million (€14m-$16.6m) in debt, the first time in 15 years. He said the company’s pension schemes had a £10.6 million (€12.36m-$14.7m) deficit and will need greater support, adding that the firm will also have to repair the balance sheet and restore capital expenditure. “Lockdown in November and January to mid-April so far in this financial year makes a return to profit extremely unlikely until the financial period ending on Oct 2, 2022 at the earliest,” he added.

Shoe Zone ended the fiscal full year with 460 stores, having opened 10 shops, including nine Big Box and one hybrid, and closed 50 units. It also completed eight refits, resulting in a total capital expenditure of £2.8 million (€3.3m-$3.9m), down from £7.3 million (€8.5m-$10.1m) in the previous year.

Rents at lease renewal fell by 30.9 percent and the company expects the trend will continue as property supply continues to outstrip demand. The company’s average lease length is two years, giving it the opportunity to respond to changes in retail locations at short notice.

When all the retailer’s stores reopen after lockdowns are lifted it will have 427 stores, of which 52 Big Box and nine hybrids, having closed 33 stores faster than expected since early October, mainly due to the impact of the pandemic and “certain towns becoming unviable due to the closures of complementary retailers.” England is scheduled to end the lockdown for non-essential stores from April 12.

In the current financial year, Shoe Zone expects closures and openings to be at a similar level to 2020 and foresees the pace continuing for the next two to three years. This will have a negative cash impact due to the closure costs of redundancies and dilapidations.

The rollout of Big Box stores has been suspended for the foreseeable future due to the financial pressure caused by the pandemic. It pointed out that hybrid stores have performed well and it now plans to relocate 10 stores to this format in 2021.

The company noted a “significant” rise in freight costs post-Christmas to £6,500 (€7,581-$9,000) per container from £1,900 (€2,215-$2,631) in 2019. “We can’t forecast how long this will last but it is significant as we import on average 100 containers per month,” it said.

It also announced the appointment of Terry Boot as its new finance director, replacing Peter Foot who left unexpectedly last month after only a few months in the role. Boot was formerly chief executive of The Company of Master Jewellers. He also has extensive experience in footwear retailing having been finance director and management services director at Brantano U.K. and Jones Bootmaker from 2008 to 2016. Prior to that, he was finance director of Brantano U.K. from 1998.