Shoe Zone has warned that it is set to slump to an annual loss, attributing the downturn to the Iran war and recent UK budget announcements that have weakened consumer confidence. The high street chain, which operates 259 stores and employs over 2,000 staff across the United Kingdom, stated that the Middle East conflict is also driving up costs such as shipping and transportation, further impacting its financial performance.
Financial Outlook
The retailer expects to swing to an underlying pre-tax loss of between £1 million and £2 million for the financial year ending October 3, a sharp reversal from its previous guidance of £1 million in profits. Shares in the group plunged by more than a fifth, dropping 22% in morning trading on Wednesday, as investors reacted to the bleak forecast.
Challenging Trading Conditions
Leicester-headquartered Shoe Zone reported that its first quarter experienced “challenging trading conditions, principally due to a continued weakening in consumer confidence, following on from the Government’s last two budget announcements, and the geo-political issues in the Middle East.” The company added that “these macroeconomic factors have increased customer caution, leading to lower footfall, less discretionary spend and additional costs such as container prices and transportation costs, with a resultant reduction in revenue and profit.”
This warning follows a similar announcement from budget clothing chain Primark, which revealed weaker trading in April as pressure from the Middle East conflict weighed on consumer sentiment. Shoe Zone has previously criticized “highly adverse” Government policies amid deepening trading woes that have sent its shares to the lowest level in more than five years.
Previous Performance
In the previous financial year, Shoe Zone saw profits fall by more than two-thirds to £3.3 million, with store sales dropping 10.3%. The company ended that year with 28 fewer shops on a net basis. The group has consistently argued that Government policies have hurt consumer confidence and sent business costs surging.
Store Portfolio and Sales
Shoe Zone currently operates 53 smaller format high street stores and 206 larger stores. The retailer sells approximately 13.3 million pairs of shoes annually at an average price of about £13.00. Despite the challenging environment, the company plans to continue refitting and relocating stores over the coming year to adapt to changing market conditions.
