TIDMSHOE

RNS Number : 8634O

Shoe Zone PLC

13 October 2021

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Shoe Zone plc

("Shoe Zone" or the "Company")

Full Year Trading Update

Shoe Zone is pleased to announce its unaudited full year trading update for the 52 weeks to 2 October 2021 ("FY 2021").

Financial Highlights:

   --    Total group revenue of GBP119.1m (FY 2020: GBP122.6m, FY 2019: GBP162.0m) 

-- Stores traded for approximately 36 weeks due to mandatory Government closures (FY 2020: 41 weeks, FY 2019: 52 weeks)

o Digital revenue of GBP30.6m (FY 2020: GBP19.3m, FY 2019: GBP10.6m) increase of 58.5% on FY 2020 and 188.7% increase on FY 2019 and now representing 25.7% of revenue (FY 2020: 15.7%, FY 2019: 6.5%)

   --    Gross product margin of c.61.3% (FY 2020: 61.4%, FY 2019: 62.7%) 
   --    Net cash balance of GBP14.2m (FY 2020: GBP6.3m) 
   --    Profit before tax expected to be not less than GBP6.5m 
   --    Store numbers: 410 (FY 2020: 460) 

Financial Summary

Revenue

In the 52 weeks to 2 October 2021 total revenue was GBP119.1m (FY 2020: GBP122.6m, FY 2019: GBP162.0m) This was impacted by the COVID pandemic mainly in the first half of the year as stores were closed for 16 weeks. All stores were open and fully trading as at the end of April 2021 which enabled us to trade over our key 'Back to School' period.

Digital revenue stood at GBP30.6m (FY 2020: GBP19.3, FY 2019: GBP10.6m) an increase of 58.5% on FY 2020 and a 188.7% increase on FY 2019. The FY 2021 total represents 25.7% of overall revenue (FY 2020: 15.7% FY 2019: 6.5%). This is as a result of our digital investment and will be the core of our strategy going forward.

Margins

Gross product margin slightly decreased to 61.3% (FY 2020: 61.4%, FY 2019: 62.7%). Underlying Shoe Zone product margins were ahead of last year but the overall blended margin is lower than expected due to the proportion of branded product being sold through our Big Box / Hybrid formats and digital channels. This is despite increasing container prices and raw material costs and has been helped by the streamlining of the number of styles we sell which enables better cost prices and improved markdown control.

PBT

Profit before tax is expected to be not less than GBP6.5m. Shoe Zone has traded positively during the period the UK was not subject to Government mandated lockdowns and particularly over our key Back to School period. This positive trading, alongside the significant cost reduction action taken in 2020 and the Government support schemes Shoe Zone has utilised, has enabled the business to move quickly back into profitability.

Cash

The Company ended the period with a balance sheet cash balance of GBP19.0m (FY 2020: GBP13.3m). We intend to pay off the outstanding balance of GBP4.8m of the Coronavirus Large Business Interruption Loan ("CLBIL") by the end of the next financial year, enabling us to have the ability to restart dividend payments earlier than previously anticipated. The net cash balance excluding the CLBIL is GBP14.2m at the period end (FY 2020: GBP6.3m). The increased cash balance is due to the cash preservation actions taken throughout FY 2021 and FY 2020 which included no capital expenditure, significant overhead reduction, strict stock management and no dividend payments. The year-end cash position is overstated mainly due to the delay of new season stock arrivals caused by container and shipping issues. These would normally have been paid for in September and will now be paid later. We estimate this is approximately GBP2.5m at cost.

Store numbers

We ended the year trading out of 410 stores (FY 2020: 460). This is made up of 343 original Shoe Zone stores, 51 Big Box and 16 Hybrid stores. We will continue our strategy to expand the number of Big Box and Hybrid formats through relocations or refits of existing Shoe Zone stores. We will also continue to reduce the number of original Shoe Zone stores that are no longer commercially viable.

Chief Executive Update, Anthony Smith

Shoe Zone has weathered an intensely challenging year due to the COVID-19 pandemic. The negative impact of this has been largely mitigated due to quick action taken in areas we could control, by reducing costs, continuing and accelerating investment in our digital business and improving operations. As a result, we have emerged as a leaner, stronger and more resilient business.

These are a solid set of preliminary results but there is still uncertainty ahead of us in the next 12 months, not only with the continuing impact of COVID, but also the challenges we face with the global supply chain and inflationary pressures. We have seen a minimum of a five-fold increase in container prices over the last 12 months and this will continue to impact us for at least a further six months until the issues being experienced in the whole supply chain return to more sensible levels.

Strategy

The decision to invest in our digital infrastructure and operations has led to significant growth in online sales over the last 12 months, giving us the confidence to make this the core of our business strategy going forward. We will continue to invest in our people and our shoehub(R) platform. We aim to increase drop ship partners, market places, exclusive products, brands and plan to introduce additional payment and delivery options to enhance customer experience.

Part of the success of our digital operation is our very efficient returns process, complemented by our extensive network of stores. Our physical store network is critical to our future success even though digital will be at the core of our strategy going forward. We have seen over the last 18 months a reduction in store numbers as we have exited poor performing locations. We will continue to rollout our successful 'Big Box' and 'Hybrid' formats by targeting key towns for conversion or relocation. Our ultimate goal is a doubling of Big Box locations to approximately 100 and an increase in Hybrid stores from 15 to approximately 150. Overall, we anticipate trading from a similar sales square footage, albeit from a reduced number of locations.

As part of the changes we have made during the pandemic, planned capital expenditure was reduced to conserve cash. However, we have already restarted store relocations, refits, infrastructure changes at our head office and further investment in digital. All of these areas are key to our strategy going forward and we will commit to spending c.3% of turnover annually on capital projects.

Finally, I would like to thank all of our Shoe Zone team for their amazing support and commitment over the last 18 months. People form a key part of our business success, even more so as we look forward to the next generation of our strategy. We will continue to invest in our team by increasing training and career development plans, offering more qualification sponsorship and enhancing our graduate programme.

For further information please call:

Shoe Zone PLC Tel: +44 (0) 116 222 3000

Anthony Smith (Chief Executive)

Terry Boot (Finance Director)

Zeus Capital (Nominated Advisor and Broker) Tel: +44 (0) 203 829 5000

Daniel Harris, James Hornigold (Corporate Finance)

Dominic King (Corporate Broking)

About Shoe Zone

Shoe Zone is a Town Centre, Retail Park and Digital footwear retailer, offering low price and high quality footwear for the whole family.

Shoe Zone operates from a portfolio of 410 stores and has approximately 2,850 employees across the UK.

The store portfolio consists of 343 high street stores containing the core Shoe Zone product range and 16 hybrid high street stores and 51 larger Retail Park stores which also have additional brands such as Skechers, Hush Puppies and Kickers.

Shoezone.com, combined with the store network, ensures a full multi-channel offering for great customer service.

During an average year Shoe Zone sells 17 million pairs of shoes per annum at an average retail price of GBP10.47.

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October 13, 2021 02:00 ET (06:00 GMT)

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