Shoe Zone still a good fit

The footwear specialist enjoyed the best August in its history, helped by strong 'back to school' shoe sales. Men's footwear did particularly well, while sales of handbags rose 73 per cent. Online revenue rose by a quarter to account for 3.1 per cent of total sales - up from 2.2 per cent.

But the real progress came from cost cutting, which boosted margins. The gross margin widened from 59.4 to 61.3 per cent, driven by cost control, more direct sourcing from China and changes to the store portfolio. This last point is a central plank in the group's growth strategy: it regularly renegotiates leases and adjusts the store estate to squeeze out every last drop of profit. Chief executive Anthony Smith told us lease negotiations and store relocations last year turned out better than forecast, reducing the length of lease liabilities and the rental bill. He will continue to focus on making savings through these kinds of self-help initiative in 2015. Meanwhile, capital spending will remain low, at £2.5m.

As over half of Shoe Zone's stock now comes from China, it is also benefiting from the fall in the oil price, which has already substantially lowered its shipping costs. Over the medium term, the lower level of crude could also feed through into raw material costs: 90 per cent of Shoe Zone's products are oil-based. Yet the recent oil-price weakness is not factored into the group's forecasts.

Numis Securities expects adjusted pre-tax profit of £13m in the current financial year, up from £11.4m last year, giving EPS of 20.5p.