Shoe Zone this week said that although its digital sales have grown sharply this year, they have not made up for the effect of the Covid-19 pandemic on its shops. The multichannel footwear retailer, ranked Top50 in RXUK Top500 research, is now warning that it will close up to 90 out of its estate of 460 shops if business rates are reintroduced unchanged, following their suspension during the pandemic.
All of Shoe Zone’s shops closed between March 23 and June 15, following government orders to close non-essential shops over that period. Since reopening, store sales have fallen by 20%, year-on-year, while digital sales have risen by 100%. “While the latter is encouraging,” said Shoe Zone in its full-year trading update this week, “it has not filled the deficit from store sales.” Added to that, it says that new lockdowns in Wales and the Republic of Ireland – including the closure of non-essential retail – have increased uncertainty already brought by the tier system in England.
The retailer said in a pre-close trading update this week that its revenues came to about £122.6m in the year to October 5 – down from £161.9m a year earlier. Lockdown store closures mean that it will report a pre-tax loss of between £10m and £12m for the year.
During its latest year it opened 10 Big Box stores and closed 40 shops but future openings are now on hold until trading conditions improve.
Anthony Smith, chief executive of Shoe Zone, said: “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.”
He said the businesses had benefited significantly from the suspension of business rates in April 2020 but any return to what he terms “the antiquated business rates system” in April 2021 will, he says, mean the closure of up to 45 shops before April 2021 and up to another 45 in the following year. That, in total, would mean closing 20% of its store estate in the next 18 to 24 months.
Smith concluded: “In 2015 the government delayed the rates revaluation by two 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.”