Shares in Shoe Zone PLC (AIM:SHOE) fell 20% to 54.33p after the footwear retailer warned that profits are set to fall sharply again in the year ahead, citing tough trading conditions and rising wage costs.
Alongside its full-year results, the group said it expects profit before tax of about £1 million for the year to October 2026, well below the £3.3 million reported for the latest financial year and a fraction of the £10.1 million made in 2024.
The warning overshadowed otherwise resilient cash generation and ongoing efforts to reshape its store estate.
For the 52 weeks to 27 September 2025, revenues fell to £149.1 million from £161.3 million a year earlier.
Store sales dropped to £113.1 million as the company continued to close underperforming locations, while digital revenue edged higher to £36.0 million, reflecting the group’s growing emphasis on online sales.
Profitability, however, took a hit. Profit before tax fell to £3.3 million from £10.1 million the year before, while adjusted profit before tax came in at £2.4 million, in line with management expectations.
Earnings per share dropped sharply to 4.08p from 16.04p, and no dividend was declared, compared with a 2.5p payout last year.
Despite the profit decline, Shoe Zone ended the year with a stronger balance sheet. Net cash rose 64% to £5.9 million, up from £3.6 million, giving the company some financial flexibility as it navigates a difficult retail backdrop.
Operationally, the group continued to slim down and modernise its estate. Store numbers fell to 269 from 297 a year earlier, following 39 closures, partly offset by new openings and relocations.
The mix continues to shift towards larger-format stores, which now account for the majority of the estate. Shoe Zone also secured modest savings on lease renewals, cutting rents by an average of 8%, and kept average lease lengths short at 2.6 years.
Online operations remained broadly stable, although the digital returns rate edged up slightly to 11.9%. The company continues to offer free next-day delivery on all online orders as it tries to remain competitive.
Looking ahead, management struck a cautious tone. It said trading conditions remain challenging due to ongoing economic pressures and higher wages, factors that are expected to weigh heavily on profits in the coming year.