Full Year Trading Update

RNS Number : 3976D

Shoe Zone PLC

28 October 2020

 

28 October 2020

Shoe Zone PLC

Full Year Trading Update

Shoe Zone PLC ("Shoe Zone") reports on trading for the 52-week period to 5 October 2020 ("FY20"), prior to entering its close period.

As anticipated in the announcement made on 23 June 2020, trading conditions in the second half of the financial year were challenging.

Store trading since reopening in June has been broadly 20% down year on year with digital trading broadly 100% up year on year. While the latter is encouraging, it has not filled the deficit from store sales. Further recent government lockdown guidance has not helped the situation particularly with the disappointing announcements in Wales and the Republic of Ireland.  These lockdowns have added further uncertainty that had already been created by the new Tier system in England, where our stores in Tiers 2 and 3 have been greatly impacted.

Shoe Zone generated revenues for the period of approximately £122.6 million (2019: £161.9m).  As a result of the closure of its retail estate from 23 March 2020 to 15 June 2020 owing to the COVID-19 pandemic, Shoe Zone expects to report a loss before Tax for the period in the range of £10.0 million to £12.0 million.

Notwithstanding the challenging trading conditions, Shoe Zone closed FY20 with a net cash balance of £6.3 million (2019: £11.3m).  No dividend will be paid in relation to FY20 as debt repayment is now being prioritised by the Board.  In addition, while pension funding has been agreed with the pension trustees up until the next triennial valuation in March 2022, it is expected that additional funds will be needed for one of the legacy pension schemes. The Board does not anticipate Shoe Zone will be in a position to restart a dividend policy until at least the 2024/25 financial year.

Shoe Zone ended the year with 460 stores, having opened 10 Big Box stores and closed 40 stores during the period.  At the year-end 50 Big Box stores were trading.  All future new openings are on hold until trading conditions improve whilst a small number of essential relocations will happen as needed.

Shoe Zone will announce its Final Results for the period ended 5 October 2020 on Wednesday 13 January 2021.

Anthony Smith, Chief Executive, commented:

"Shoe Zone has ended an incredibly challenging year with a robust plan and sufficient funding in place to ensure the future survival of the business. The exceptional growth in digital sales since the start of the COVID-19 pandemic demonstrates the flexibility of our operating model, and follows the decision to create an autonomous Digital department in 2019.  However, it is very difficult at this stage to provide meaningful guidance on the future outlook, given the material uncertainty in the wider economy.

The suspension of rates in April 2020 was a significant benefit for our business in FY20 and was in line with the government's desire to save the high street.  However, the government has announced the reintroduction of the antiquated business rates system in April 2021 and to make matters worse has delayed the revaluation.  The consequence to Shoe Zone will be the closure of up to 45 stores prior to April 2021 and the potential closure of a further 45 stores in the 12 months following the reintroduction.  In total this would represent the closure of up to 20% of our store estate in the next 18 to 24 months.

In 2015 the government delayed the rates revaluation by 2 years which cost our business £1.25 million per year (£2.5m in total).  The latest revaluation delay will be even more costly as rents during the period have fallen significantly further and consequently rateable values should have fallen broadly in line with rents.  Never has the rating system been more unfair.  Our rates as a proportion of rent have increased from 26.4% in 2009 to 54.3% in 2019 and forecast to be close to 60% in 2021.  This is unsustainable for most high street retailers and closures will continue unabated until the government makes substantial changes.

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

For further information please call:

Shoe Zone plc

Peter Foot (Finance Director)  Tel: [phone]

FinnCap Limited (Nominated Adviser & Broker)

Matt Goode / Kate Washington (Corporate Finance)  Tel: [phone]

Alice Lane (ECM)

About Shoe Zone

Shoe Zone is a Town Centre, Retail Park and Digital footwear retailer, offering low price and high quality footwear for the whole family.

Shoe Zone operates from a portfolio of around 460 stores and has approximately 3,000 employees across the UK.

The store portfolio consists of over 410 high street stores containing the core Shoe Zone product range and 50 larger Retail Park units which also feature brands such as Skechers, Hush Puppies and Kickers.

The website shoezone.com, combined with the store network, ensures a full multi-channel offering for great customer service.

Shoe Zone sells 16 million pairs of shoes per annum at an average retail price of £11.

 

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