High Street retailer Shoe Zone said it has shut stores in response to soaring wage costs following the recent Budget measures.
The group – which employs around 2,250 staff across 297 stores in the UK – said the Chancellor’s move to increase employers’ national insurance contributions and increase the minimum wage has led to “significant additional costs”.
“These additional costs have resulted in the planned closure of a number of stores that have now become unviable,” it said.
The firm declined to comment further and did not provide any details on how many stores had shut or the number of workers affected.
It is understood that the extra costs it is facing from the Budget announcements is seeing it accelerate plans already in place to overhaul its store estate.
The group has already been closing loss-making stores over the past year, revealing in October that 26 sites had been shut on a net basis – 53 closed, less 27 opened – in the year to September 28.
As well as shutting less profitable shops, it is also revamping remaining high street stores and increasing its number of new larger sites based in locations such as retail parks.
Shoe Zone said it had also seen “very challenging trading conditions” since the end of September as shoppers have pulled back spending amid unseasonal weather, adding that consumer confidence had weakened further since the Budget in October.
Shares plunged by as much as 49% on Wednesday morning as it cautioned that due to the tough trading and extra wage bill, annual profits would be lower than expected, while it also cancelled its final shareholder dividend payout for 2023-24.
It slashed guidance by up to half, warning that underlying pre-tax profits were now set to be not less than £5 million, down from £10 million previously expected for the year to September 27 next year.
The profit warning marks the second in as many months after it also lowered guidance in October for the year to September 28 2024, blaming poor summer weather for lower sales.
Shoe Zone said annual sales fell 2.7%, which it expected will leave 2023-24 profits at “not less than” £9.6 million against the £16.2 million reported the previous year.
Russ Mould, investment director at AJ Bell, questioned the group’s claims over the Budget hit.
He said: “Putting the blame for a major profit warning on the Budget seems a poor fit.”
He added that the demand for footwear should remain resilient regardless of weather, given that it is not a discretionary product.
He said: “Perhaps Shoe Zone’s offering isn’t resonating with shoppers as much as it used to.
“At the very least, you would hope management is looking at what’s gone wrong rather than attributing everything to external factors.”
