Shoezone Shares Plummet After Retailer Forecasts Full-Year Loss

Shares in Shoezone (LSE:SHOE) plunged nearly 24% on Tuesday after the British footwear retailer announced it expects to report a full-year loss and warned of weak trading at the start of its new financial year.

The company's downbeat forecast reflects lower sales and rising costs, signaling a challenging environment for the value-focused retailer amid declining consumer confidence.

Profit Warning and Sales Decline

Shoezone said it anticipates an adjusted pre-tax loss of approximately £1 million for the 53 weeks ending October 3, a sharp reversal from the £2.4 million adjusted profit reported in the prior year. On a statutory basis, the company expects a pre-tax loss of about £0.6 million, compared to a profit of £3.3 million a year earlier.

The retailer attributed the negative swing to several factors, including a full year of increased National Insurance contributions and a rise in the National Living Wage. These cost pressures were compounded by a 4.5% drop in revenue to £142.4 million, which the company linked to operating from 18 fewer stores and a continued decline in consumer sentiment.

Margin Headwinds and Outlook

Ad

While product margin improved to 63.1% from 61.0% in the past year, benefiting from lower container prices and a favorable sterling-to-dollar exchange rate, Shoezone warned of future pressures. The company cited a recent rise in container prices due to issues at Chinese ports, higher fuel costs, and a weaker pound as headwinds that are expected to hurt margins going forward.

Underscoring the challenging outlook, Shoezone reported that the start to the autumn/winter season was slower than expected. This trend hurt results in the final weeks of the fiscal year and has continued into the new period. Chairman Charles Smith described it as “a challenging year” in the company's statement.

Balance Sheet and Dividend

Despite the operational challenges, Shoezone reported a stronger cash position. Net cash increased to approximately £15.1 million from £5.9 million a year ago, which the company credited to lower capital expenditures and reduced product costs.

However, in light of the projected loss and uncertain trading environment, the retailer announced it does not expect to declare a dividend for the full year.