Shoe Zone (SHOE) has issued a shock profit warning following weaker than expected sales growth in the first half. Management attributed the sluggish trading to a preference for ladies ankle boots over the higher-priced longer-legged variety, as a result of the warm weather last autumn and into the winter.
"While footwear sales volumes increased, the average price was down due to the different product mix sold," says chief executive Anthony Smith. "We are having to reset expectations for the full year, but the company's proposition is still very strong."
News of the downgrade sparked a 28 per cent fall in the share price to 185p - 6 per cent below our original buy tip. Analysts have slashed full-year pre-tax profit forecasts by more than 20 per cent to £10m. The company aims to maintain its 60 per cent dividend payout ratio, which suggests 9.5p for the current financial year, against previous estimates of 12.3p, equating to a 5.1 per cent yield. Strong inventory controls and no additional discounting mean margins have remained intact.
