Shoe Zone saw revenues slip to £73.00 million pounds (€83.27m-$92.94m) in the first half ended on March 30 from £73.67 million a year earlier, but the British low-cost shoe retailer's pre-tax profit rose marginally to £1.02 million (€1.16m-$1.30m) from £0.96 million thanks to lower rental costs.
The gross product margin increased to 62.0 percent from 60.6 percent. Operating earnings remained flat at £1,047 million (€1,194.3m-$1,332.9m), but net earnings fell to £823,000 (€938,895.1-$1,047,840.3) from £851,000, due to higher taxation.
The growing number of vacancies in the U.K. apparently allowed Shoe Zone to negotiate more favorable terms with its landlords. Rental costs on renewed leases fell by 18.5 percent, the equivalent of a full-year saving of £334,000 pounds (€381,008.1-$425,205.5). Total rental costs as a percentage of revenues slipped to 11.9 percent in the first half from 12.0 percent in the year-ago period, and the average outstanding length of the leases in the existing store portfolio has reduced to 2.0 years from 2.1 years.
The company had 495 stores at the end of March, having opened nine in the first half, all of which were in the new Big Box format. It closed six smaller units. It spent £3.2 million (€3.7m-$4.1m) on its store network including one relocation, 12 full refits and the continued rebranding of the remaining fleet.
Shoe Zone said that its 26 Big Box locations generated £5.5 million (€6.3m-$7.0m) in revenue in the first half and contributed £0.4 million in cash, representing 7.6 percent of the total turnover and 3.5 percent of the total cash contribution. This compares to 4.4 percent of revenues and 2.3 percent of cash for the whole 2017/18 fiscal year.
The retailer plans to have 33 Big Box stores in operation by the end of May and to reach 45 such stores by the end of 2019. The company has also initiated trials for a new “Hybrid” store format destined to be rolled out in more affluent areas. The stores will sell the whole Shoe Zone range and Big Box brands, where they do not conflict with other retailers. The trial is still in its infancy but initial results are encouraging.
The company pursued the development of its own premium private labels, Lilley & Skinner and Comfy Steps. They form part of the spring/summer collection with 23 lines and 19,000 pairs available in store and online. The initial performance of these lines at the start of the season has proved positive, said the company.
Shoe Zone's digital sales increased by 4.9 percent to £5.0 million (€5.7m-$6.4m) in the first half, contributing 19.9 percent higher profits of £1.5 million (€1.7m-$1.9m).
The company indicated that its e-mail database grew by over 250,000 in the first half with 92 percent of new sign-ups as a result of contacts made in-store. The total number of active users on the database is now 501,000. The growth in the database and a 42.3 percent increase in targeted e-mail promotions delivered a 13.8 percent increase in revenues from them.
The range of products Shoe Zone sells exclusively online has grown by 185 percent since October 2018. It has introduced the Ruby Shoo and Rocket Dog labels to its digital offering, and anticipates the broadening of the range will accelerate.
The company said it believes to be “insulated against many of the structural issues faced by other retailers” through the growth of its operations and its cost containment strategy, especially regarding real estate.