Shoe Zone, the budget footwear retailer, recently released its financial results for the first half of the year, revealing a mix of positive and negative news. Despite only a few weeks of lockdown being included in this period, the company experienced a decline in sales. Revenue dropped from £73 million to £68.9 million compared to the same period last year. However, it’s worth noting that Shoe Zone had seen a 2.6% revenue growth in the 12 months leading up to February, indicating that sales were heading in the right direction before the pandemic hit.
On a brighter note, the company saw a significant boost in its digital sales during the first half of the year, with a 31.9% increase to £6.5 million. This contributed to a higher profit of £1.9 million. Additionally, Shoe Zone managed to increase its net cash at the end of March to £3.6 million, compared to the previous year, by implementing cash conservation measures in response to the coronavirus crisis.
Despite these positive aspects, Shoe Zone reported a pre-tax loss of £2.5 million, contrasting with the £1 million profit during the same period last year. The closure of all its stores on March 24 had a profound impact on the company’s results, even though they were only closed for 11 days during the first half of the year. Looking forward, the second half is expected to be even more challenging, as it will include over two months of lockdown.
Nevertheless, Shoe Zone remains dedicated to its growth strategy, which encompasses expanding its big box stores, improving its digital operations, and revitalizing its town center stores. The company ended the first half of the year with 47 big box stores, compared to 26 the previous year, and these stores generated a total turnover of £9.4 million. Additionally, one store was converted from a “high street” to a “hybrid” format during the period.
Digital sales played a crucial role for Shoe Zone during the first half of the year, making up 17.7% of overall sales. However, it’s important to consider that this figure was influenced by the lockdown. Digital sales were particularly significant in the final weeks of the half-year as consumers stayed at home even before the lockdown began.
During the lockdown, Shoe Zone took advantage of its webstore by offering a “Buy One Get One Free” promotion on all stock to quickly generate cash. Although this promotion has been adjusted to apply only to selected lines since, it continues to impact the company’s ongoing digital gross margin levels significantly.
Overall, Shoe Zone’s first-half results reflect the challenging retail environment caused by the coronavirus crisis. While there were positive aspects, such as growth in digital sales and an increase in net cash, the company still experienced a loss. With most of its stores reopening in June and a focus on its growth strategy, Shoe Zone remains determined to navigate these difficult times and emerge stronger in the future.