Just over a month ago, budget footwear and accessories retailer Shoe Zone issued a profit warning as trading was challenging towards the end of 2024. But on Tuesday, its results for the 12 months to the end of September showed a more nuanced picture for the business.

The company said that revenue fell to £161.3 million from £165.7 million with store revenue down to £126.1 million from £134.8 million. But digital revenue increased to £35.2 million from £30.9 million. The company had 297 stores at the period end, compared to 323 a year earlier. Of those, 185 were in its newer format which are much larger, up from 135 at the end of the previous year.

None of that helped its profit before tax figure as that fell to £10.1 million from £16.2 million. The year-on-year reduction was “primarily due to the challenging second-half trading environment, as a result of unseasonal weather conditions, particularly in peak summer, higher container prices, higher energy costs, higher depreciation charges due to increased capital expenditure, and higher wage costs due to the National Living Wage increase”.

But product margins increased to 62.8% from 62.3%, due to a favourable sterling to dollar exchange rate, partially offset by the container price increases and a higher mix of lower-margin branded product.

Statutory gross profit fell by £5.7 million to £35.2 million, with a gross profit margin of 21.8%, down from 24.7%. The reduction “reflects the sales decrease and increases in the depreciation charged and higher digital sales-related costs, offset by a reduction in store occupancy costs, due to lower store numbers, and lower stock purchases”.

However, the company said it had “a good year”, although it was “essentially split into two halves”. 

What that means is that the first six months saw “strong and consistent trading, followed by disappointing store sales, due to the weakening of consumer confidence” and the less-than-impressive summer weather.

Yet the key back-to-school trading period in the second half “was positive, and ahead of the previous year, as were digital sales, which had strong growth for the full period”.

Total revenue dropped 2.7% but given that it was trading out of 26 fewer stores that’s not surprising. Digital revenues increased by 13.9%, “driven by an increase in conversion, due to the introduction of free next-day delivery on all shoezone.com orders and strong Amazon sales. We continue to invest in our digital infrastructure and the addition of two automated bagging machines has significantly improved throughput and productivity”.

The company has also been continuing to invest heavily in its store refit and relocation programme, which should complete by the end of 2026, at which point its capital expenditure “will reduce significantly, and we will continue to drive our digital strategy on the back of these solid digital results”.

Shoe Zone also expects product margin levels to start to increase in the second half of the current financial year as container prices start to stabilise and reduce post-Chinese New Year. It said its buying and shipping teams “are doing an exceptional job of managing the direct-from-factory supply chain, which is still volatile, and we are confident we are performing better than the market average”.

That’s despite the aforementioned profit warning in December when it said the first two months of the new financial year and the first half of December saw “very challenging trading conditions, principally a weakening of consumer confidence and unseasonal weather, both of which have decreased revenue and profit”.