Shoe Zone has strong year as budget offer stores and digital hit the mark

Value-focused footwear retailer Shoe Zone published its audited annual results on Tuesday and they showed a business that seems to have got its formula just right, with both higher revenue and profit.

The company said revenue rose to £165.7 million in the 52 weeks up to 30 September, from £156.2 million a year earlier. Store revenue was £134.8 million up from £129.8 million. And digital revenue rose as well, reaching £30.9 million from £26.4 million.

Pre-tax profit jumped to £16.2 million from £13.6 million and adjusted pre-tax profit reached £16.5 million after £11.2 million in the previous year.

The year was one in which it continued it rationalisation and reshaping as it had 323 stores open at the end of the period compared to 360 the year before. That included 42 ‘big box’ stores (down from 45), plus 93 hybrid stores (up from 44), and 188 ‘original’ stores (down from 271). The company also said it made savings of £0.7 million on lease renewals which was an average reduction of 31%.

Overall, it was a very positive year “with strong and consistent results throughout the key trading periods, particularly in the second half, with strong peak summer and Back to School trading”. That was encouraging given how many retailers reported a very tough second-half.

Store revenue rising by 3.9% despite it trading out of 37 fewer stores was also impressive, with the company hailing “strong performance from our relocated and refitted stores”.

The company should expect more of the same as it continues to open new stores and refit others to new formats. And it said as this happens, “the branded mix will continue to form a higher proportion of our overall sales”.

Looking ahead, it will spend a minimum of 3-4% of sales per annum to cover 50 store projects and Head Office infrastructure changes including IT projects and new vehicles.

On the digital front, a 17% rise in revenues was driven by an increase in conversion and strong Amazon sales.

It continues to invest in its digital infrastructure and the addition of two automated bagging machines last year “significantly improved throughput and productivity”. Investment in the Digital Shoehub platform is key and in the next 12 months, it will implement a new returns portal, introduce Google pay, Apple pay and a mobile app.

Highlighting the importance of efficient and shopper-friendly returns, it said that “part of the success of our digital operation is our efficient returns process which is complemented by our extensive network of stores. We have a returns rate of [around] 11.8% with the vast majority of these being returned to store and our physical store network is critical to our continued success”.

The company expects product margin levels to increase in the next financial year as it’s forecasting a full 12 months of lower container prices compared to six months realised last year. It said its buying and shipping teams “are doing an exceptional job of managing the direct-from-factory supply chain, which is still volatile, and we are confident we are performing better than the market average”.