A huge shoe shop chain has announced it will have to close ‘unviable’ stores, blaming the Labour government’s budget.
Shoe Zone – which employs about 2,250 staff across 297 stores in the UK – said the Chancellor Rachel Reeves’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,’ the firm said in a financial update this morning.
It did not say how many stores had shut or the number of workers affected.
But 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.
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 per cent this morning as the company cautioned that due to the tough trading and extra wage bill, annual profits would be lower than expected.
The firm 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 £5million – 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 per cent, which it expected to leave 2023-24 profits at ‘not less than’ £9.6million against £16.2million reported the previous year.
Independent retail analyst Nick Bubb today said Shoe Zone’s profit alert ‘could rattle a few nerves in the sector’.
has approached Shoe Zone for further comment and details.
The company’s warning about consumer confidence weakening further following the Budget on October 30 echoes comments from Sports Direct owner Frasers earlier this month.
Analysts expect Britain’s listed food retailers – including Tesco, Sainsbury’s, Marks & Spencer and online player Ocado – to continue strong performances through 2024 and perform well at Christmas.
However, concerns have been raised that consumer mood around non-food retail has darkened after the budget, despite survey data suggesting it improved this month.
Shoe Zone’s update came on the same day it was revealed UK inflation has risen to its highest level since March, driven by an increase in petrol prices last month, according to official figures.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation hit 2.6 per cent in November, up from 2.3 per cent the previous month.
This is the highest rate since March and the second rise in two months.
Ms Reeves said in response: ‘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.
‘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.’