Shoe Zone warns on profits, cites higher shipping costs and bad weather

2nd Jul 2024 07:51

(Sharecast News) - Shoe Zone warned on profits on Tuesday as it said it was hit by rising shipping costs and bad weather.

The shoe retailer said that since its last update on 12 March, it has continued to experience cost pressures associated with container prices due to a reduction in the supply of shipping vessels and the continuation of a reroute away from the Suez Canal.

As a result, container prices have risen significantly over the last six months.

"Alongside an increase in shipping costs, the company has experienced weaker than expected Spring Summer sales from April to June, due to unseasonal weather conditions," it said.

The retailer now expects adjusted pre-tax profit for the year to 2 October 2024 to be not less than £10m. In its interim results in June, Shoe Zone had already revised its guidance down from £15.2m to £13.8m.

At 1000 BST, the shares were down 17% at 126.50p.

Russ Mould, investment director at AJ Bell, said: "Budget footwear firm Shoe Zone left investors with cold feet after its latest profit warning. Perhaps the most significant takeaway from the downbeat guidance was the flagged increase in shipping costs, with upward pressure on container prices thanks to the reroute away from the Red Sea and the Suez Canal.

"Shoe Zone's warning also dragged down LED lighting specialist Luceco, another big importer of product from overseas.

"It is a reminder that inflationary pressures remain in the global economic system which may have wider implications than tripping up Shoe Zone. It also means investors will be closely monitoring companies with global supply chains to see if they are experiencing a similar impact.

"Because Shoe Zone's appeal is based almost entirely on value, it has limited scope to pass on costs to consumers. Like lots of retailers, Shoe Zone is also at the mercy of the weather, with the unseasonably soggy conditions for much of 2024 meaning its spring/summer offering hasn't been flying of the shelves like it usually would."