No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Shoe Zone slumped on Tuesday as the budget shoe retailer downgraded its full-year profit expectations, reporting a drop in sales and pinning the blame partly on the weather.
In an update for the year to 28 September, the company said it now expects adjusted pre-tax profit of not less than £9.5m. This is down from guidance of not less than £10m given in July, and from the previous year's £16.5m.
"The reduction, compared to FY2023, is due to the weather impacted second half sales performance in conjunction with year-on-year increases in the cost of energy, depreciation, National Living Wage and containers prices in the second half," it said.
Shoe Zone said group revenue fell 2.7% to £161.3m. This was due to the unseasonal weather in the second half of the year, particularly peak summer, as well as trading out of 26 fewer stores.
However, the retailer also said the key three weeks of Back to School trade in August and September were positive and ahead of the same period last year.
Chairman Charles Smith said: "A year of two halves, with the first half trading in line with expectations and ahead of the previous year, however, the second half trading was below expectations due to unseasonal weather conditions, particularly at peak summer, however, our key Back to School period traded above expectations at the end of the year.
"Our digital business continued to grow, driven by the introduction of free next day delivery for all shoezone.com orders."
At 1000 BST, the shares were down 8.2% at 146.90p.
Russ Mould, investment director at AJ Bell, said: "Budget footwear chain Shoe Zone's affordability credentials came to the fore during the cost-of-living crisis but the business has tripped up in 2024 thanks to higher shipping, energy and labour costs and, more recently, unseasonal weather.
"When you a produce a product where value is the key selling point you need to keep prices as low as possible. This means profitability and profit are vulnerable to any move higher in overheads and that's been borne out by Shoe Zone's recent experience.
"Blaming the weather is never a move which will get you in the market's good books but at least trading ahead of the return to school, right at the end of its financial year, was strong.
"The company has been streamlining its estate, with an obvious impact on revenue, but a potential longer-term benefit if it is left with a higher quality portfolio of stores."
