Shoe Zone returns to profit post-pandemic and commits to higher investment in digital and stores

Shoppers are now returning in-store to buy from Shoe Zone. Image: RMC42/Shutterstock.com

Shoppers are now returning in-store to buy from Shoe Zone. Image: RMC42/Shutterstock.com

Shoe Zone has returned to profit in its latest half-year as it recovers from the effects of the pandemic on its stores. Store sales grew faster (+115%) than online sales declined (-33%), although Shoe Zone’s ecommerce revenue was more than double pre-pandemic levels.

The update comes as Shoe Zone today reported revenues £69.9m for the half-year to April 2 2022. That’s 73% up on the same time last year. Pre-tax profits came in at £3.1m – from a loss of £2.6m last time. The retailer has now paid back its Covid-19 lending.

Shoe Zone will now commit to continuing to invest at least 3% of turnover each year on capital projects, from store relocations and refits through to digital and infrastructure. In the first half of the year it spent £2.3m, up from £0.2m last time.

Multichannel strategy

Customers spent £58.1m in Shoe Zone stores in a half-year that was free of pandemic-related lockdowns. A year earlier, when stores had opened for only 10 out of 26 weeks, store revenues came in at £22.8m.

Shoppers also spent £11.8m online. That’s a third less (-32.95%) than the £17.6m they spent online a year before, at a time when stores were often closed, but 114.5% higher than two years earlier – before the pandemic. The retailer says its returns process is part of the reason for its digital success. Some 10.9% of digital orders are returned – mostly to its stores. That, says Shoe Zone, is “why our physical store network is critical to our future success”. Stores contributed £8.9m to profits – from a loss of £0.8m a year earlier, while digital contributed £2.7m, down from £5.3m last time.

Shoe Zone chief executive Anthony Smith says: “Digital growth fell back as expected as we re‐opened all stores, and is now back to the normalised level expected but it is still 114.5% higher on a two-year-basis. We continue to increase drop ship partners, exclusive products and brands and we have introduced additional payment and delivery options to enhance customer experience.”

By the end of the half-year, Shoe Zone had 388 shops, including 45 big box stores, 35 hybrid stores and 308 of its original format stores. It opened eight new hybrid stores and closed 30 low performance stores. Average lease lengths are now 1.8 years – down from 1.9 years last time.

The retailer, ranked Leading in the latest RXUK Top500 research, aims to double its big box stores to about 100 and increase its hybrid stores to about 200. “We anticipate trading from a similar sales square footage, albeit from a reduced number of locations,” says Smith.

Cost of operating

Shoe Zone says that distribution expenses (+£0.8m to £2.4m) and stock costs (+£2.7m to £31.1m) both rose, the former because of higher warehouse wages as staff returned from furlough, and the latter because of supply chain delays affecting boots and wellingtons. Administration costs fell (-£0.4m to £7.5m) as expenses related to digital reduced, as did redundancy payments and charges related to foreign exchange. The cost of its energy, which is all from renewable sources, is fixed until September 2023 and it is looking to reduce its consumption through measures including more efficient lighting and ceiling insulation. It is also adding electric vehicles to its fleet during the current year.

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