Shoe Zone, the U.K.'s biggest discount shoe retailer, saw revenues and profits drop in the six months ended 1 April due to the devaluation of sterling and continued store closures. As a result, it offered a cautious outlook for the remainder of the year.
Sales declined by 2.3 percent over the year-ago period to £72.9 million (€84.0m-$94.5m). The company said that it continued to manage the impact of the devaluation of sterling during the first six months. As it reaches the annualized rebasing of the exchange rate, the impact will be lower.
Sales and profits have also been hit by the continuing rationalization of the stores portfolio as the company continues to close down loss-making units. After their renewal, average rental costs fell by 21.4 per cent from year-ago levels, equivalent to full-year savings of £176,000 (€202,800-$228,000). The company now has 504 stores in the U.K. and Republic of Ireland.
The chief executive of the company, Nick Davis, noted that the group's “Big Box trial” has continued to perform well. These stores tend to be located in retail parks and are on average double the size of many of its urban stores. Davis said that Shoe Zone will accelerate the roll-out of the concept during the second half of 2017 and is aiming to have 10 Big Box stores in operation by the end of 2017.
Meanwhile, revenues from multi-channel retailing grew by 30 percent in the six-month period. The company continues to develop mobile technology as the primary focus of its expanding digital strategy. Mobile visits now account for 76 percent of total visits to its website, up from 70 percent last year. As before, its products are sold in the rest of Europe through Amazon's marketplace.
The group has continued to maintain key price points for its core discounted lines, and the turnover generated by the sale of handbags and other accessories has risen by 24 percent. It has increased its direct sourcing so that footwear orders placed directly with overseas factories increased to 83.4 percent of total footwear orders in the first half, up from 72.2 percent the year before.
As a result of all these measures, the product gross margin of the British retailer improved by 1.7 percentage points to 62.8 per cent. The underlying profit before tax dropped by 23.5 percent to £1.3 million (€1.5m-$1.7m), however.
Shoe Zone is celebrating its 100th anniversary this year. Looking at the remainder of the year, the company said that the British retail market remains uncertain given the political environment in the U.K. and across Europe. It added that sales continue to be broadly in line with expectations, with the cost base benefiting from lower rental costs. However, it noted that this may be partially offset by the potential impact of increases in shipping costs.