Shoe Zone rebuilds trust

It is a positive announcement to finish a difficult calendar year for Shoe Zone. Generally mild weather, especially in the run up to Christmas, dampened boot sales after the period end. But the recent cold snap leaves the group trading "extremely well", says chief executive Anthony Smith. Despite the unexpected weather, Shoe Zone resisted the temptation to cut prices until its annual sale after Christmas, which Mr Smith argues will stand the company in good stead compared with its competitors. Better sourcing initiatives also helped margins, which crept from 61.3 per cent in the 2014 financial year to 61.5 per cent in the reported period.

The top and bottom lines are still under pressure as Shoe Zone culls loss-making and underperforming stores from its estate, although pre-tax profit of £10.1m actually hit market expectations. There will be more store closures to come, but 12 new stores were opened last year and the group completed a number of store conversions to the 'Grade 1' format, which sells a larger number of lines to a broader customer base. The group also plans to trial what it calls 'Project Big Box' across three stores in August. This will involve doubling the floor space of a typical 'Grade 1' store, and significantly extending the product range to include higher priced items. If successful, the concept will expand in FY2017.

Broker Numis Securities is still taking a cautious view on the 2016 financial year, and expects pre-tax profit of £11m to generate EPS of 17.6p. That compares with £10.1m and 16.2p for FY2015.