Shoe Zone, one of the UK’s largest footwear retailers, has announced plans to close several “unviable” stores, citing the Labour government’s recent budget as a key factor behind the decision. The company, which operates 297 stores across the country and employs around 2,250 staff, has attributed the closures to rising costs from increased employers’ National Insurance contributions and the higher minimum wage introduced by Chancellor Rachel Reeves.
In a financial update released this morning, Shoe Zone stated: “These additional costs have resulted in the planned closure of a number of stores that have now become unviable.”
This announcement follows a challenging year for the retailer, which had already been closing loss-making sites. Between October 2022 and September 2023, the chain shut 53 stores, offset by the opening of 27 new ones, resulting in a net closure of 26 locations.
Tough trading conditions
Shoe Zone revealed it has faced “very challenging trading conditions” since the end of September, as consumer spending slowed amid unseasonal weather. The company noted that customer confidence has weakened further since the government’s Budget announcement in October.
The bleak outlook sent Shoe Zone’s shares tumbling by as much as 49 per cent this morning. The firm also warned that its annual profits would be significantly lower than expected, slashing its profit guidance by half. It now anticipates underlying pre-tax profits of no less than £5 million for the year to September 27, 2024, a sharp decline from the previously forecast £10 million.
Adding to the financial strain, Shoe Zone has cancelled its final dividend payout for the 2023-24 financial year, further unsettling investors.
Profit warning follows earlier downgrade
This marks Shoe Zone’s second profit warning in as many months. In October, the company had already lowered its profit expectations for 2023-24, blaming poor summer weather for declining sales. Annual sales fell by 2.7 per cent, leaving profits for the year ending September 28, 2024, at “not less than” £9.6 million—down significantly from £16.2 million reported the previous year.
Independent retail analyst Nick Bubb commented on the update, saying the profit alert “could rattle a few nerves in the sector,” as concerns grow over the impact of government policies on struggling high street retailers.
Sector-wide concerns
Shoe Zone is not the only retailer warning of a difficult trading environment. Earlier this month, Frasers Group, owner of Sports Direct, echoed similar concerns about weakening consumer confidence following the Budget.
While analysts predict strong performances from Britain’s major food retailers such as Tesco, Sainsbury’s, and Marks & Spencer, the outlook for non-food retail appears less optimistic. Despite some survey data indicating improved consumer sentiment, the mood around discretionary spending remains cautious.
More Read
Inflation adds to challenges
On the same day as Shoe Zone’s announcement, new figures from the Office for National Statistics (ONS) revealed that UK inflation rose to its highest level since March. The Consumer Prices Index (CPI) inflation rate hit 2.6 per cent in November, up from 2.3 per cent the previous month, driven largely by rising petrol prices.
This marks the second consecutive month of inflation increases, adding further pressure to household budgets and limiting disposable income.
Government response
Chancellor Rachel Reeves addressed the economic challenges in a statement, acknowledging the strain on families. “I know families are still struggling with the cost of living, and today’s figures are a reminder that for too long the economy has not worked for working people,” she said.
Ms Reeves pointed to recent wage growth as evidence of progress under Labour’s leadership. “Since we arrived, real wages have grown at their fastest in three years. That’s an extra £20 a week after inflation. But I know there is more to do. I want working people to be better off, which is what our Plan for Change will deliver.”
A challenging road ahead
As Shoe Zone grapples with rising costs, tough trading conditions, and reduced profits, the closures represent another blow to the UK’s embattled high streets. For now, the retailer will focus on navigating these headwinds while adapting to an increasingly challenging retail landscape.
