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Shoe Zone struggles under business rates

Profits came in ahead of expectations, but business rates now eat up 6 per cent of sales
Shoe Zone struggles under business rates

Shoe Zone (SHOE) has been working to rebuild investor confidence since late August last year, when the abrupt departure of chief executive Nick Davis led the shares to fall 30 per cent in a day. Unfortunately, the group’s full-year results appear to have left the market unconvinced.

IC TIP: Hold at 157p

In management’s defence, it has managed to deliver sales growth of 0.9 per cent and underlying pre-tax profit marginally ahead of expectations, down 15 per cent to £9.6m due to the timing of opening the group’s new big box stores and increased staff costs.

The group has also become the latest retailer to highlight the challenge posed by business rates, noting its rates have risen to £11.1m from £10.4m in 2009, in spite of a 38 per cent decrease in the number of stores, 30 per cent decrease in profits and 47 per cent drop in rents. Rates now account for 6 per cent of revenues.