Shoe Zone blames tax rises in budget for decision to close some stores | Retail industry

The low-cost footwear retailer Shoe Zone has blamed further prices ensuing from modifications to wages and nationwide insurance coverage contributions (NICs) in October’s price range and weakening client confidence for its resolution to shut shops.

Shoe Zone mentioned it had skilled “very difficult buying and selling circumstances” between the beginning of October and the center of December due to decrease client confidence and unseasonal climate, which had led to falling gross sales and reducing revenue.

The group, which has 297 shops and about 2,250 workers within the UK, added that client confidence had weakened additional after the price range on 30 October and had made quite a lot of its retailers “unviable”.

The corporate didn’t state what number of shops would shut. The retailer had 309 shops on the finish of March. The Guardian has approached Shoe Zone to make clear the variety of deliberate closures.

It mentioned that deliberate will increase to employers’ NICs and the nationwide residing wage would trigger it to “incur important extra prices”.

In her price range, the chancellor, Rachel Reeves, introduced a rise within the price of employer nationwide insurance coverage from 13.8% to fifteen% from April subsequent yr. As well as, the edge at which employers begin paying the tax on every worker’s wage was lowered to £5,000 from £9,100.

The measures, anticipated to finally elevate £25bn a yr, have drawn criticism from a string of enormous companies, significantly retailers and hospitality firms, who say they are going to be pressured to chop jobs and lift costs.

The governor of the Financial institution of England, Andrew Bailey, has described companies’ response to the NICs improve because the “greatest challenge” going through the UK’s economic system after the price range, at a time of rising financial uncertainty within the UK and globally.

Shoe Zone – which sells virtually 14m pairs of sneakers a yr, at a mean retail value of £13.30 – mentioned the mixture of upper prices and falling gross sales would have a “important affect on our full-year figures”.

This prompted the corporate to challenge its second revenue warning of the yr, because it halved its revenue forecast for the present yr.

Shoe Zone now expects to make an adjusted pre-tax revenue of about £5m within the yr to 27 September, down from earlier estimates of £10m. It’s going to additionally droop its dividend for the monetary yr that resulted in late September.

In response, the corporate’s shares tumbled by as a lot as 44%, taking them to 75p, that means the shares are buying and selling 66% decrease than in the beginning of the yr.

Shoe Zone’s resolution in charge its revenue warning and retailer closures on the price range was a “poor match”, based on Russ Mould, the funding director on the dealer AJ Bell, even when the affect of elevated prices on the corporate and far of the retail sector was “plain”.

Mould mentioned: “Nonetheless, attributing weak buying and selling to a decline in client confidence because the price range is at odds with UK-wide figures suggesting confidence has ticked larger because the occasion.

“Maybe Shoe Zone’s providing isn’t resonating with buyers as a lot because it used to. On the very least, you’ll hope administration is what’s gone unsuitable reasonably than attributing every thing to exterior elements.”