Shoe Zone shares plummet as the retailer says it may have to axe 90 shops if the Government resumes ‘antiquated’ business rates next April
By Jane Denton For Thisismoney12:11 28 Oct 2020, updated 12:15 28 Oct 2020
- Suspension of business rates ‘significant benefit’ to Shoe Zone, boss says
- But, standard ‘antiquated’ business rates system set to resume in April 2021
Shoe Zone shares have plummeted over 20 per cent today after the group’s boss admitted he may have to close swathes of stores if crippling business rates are not reduced.
Alistair Smith, the chief executive of Shoe Zone, has warned that 90 of the retailer’s 460 shops look set to be closed before April 2022 if the Government does not alter business rates.
Smith, who has warned of closures in the past, said the Government’s decision to suspend business rates during the Covid-19 crisis had provided a ‘significant benefit’ to the business and helped save high street stores.
He added: ‘However, the Government has announced the reintroduction of the antiquated business rates system in April 2021 and to make matters worse has delayed the revaluation.
‘The consequence to Shoe Zone will be the closure of up to 45 stores prior to April 2021 and the potential closure of a further 45 stores in the 12 months following the reintroduction.’
He said a 2015 decision by the Government to delay a revaluation of rates by two years cost his business £2.5million.
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Smith said: ‘Never has the rating system been more unfair. Our rates as a proportion of rent have increased from 26.4% in 2009 to 54.3% in 2019 and forecast to be close to 60% in 2021.
‘This is unsustainable for most high street retailers and closures will continue unabated until the Government makes substantial changes.’
The company ended its financial year this month with 460 stores, after closing 40 but opening 10 others over the year. New openings are now on hold until conditions improve.
Soaring online sales were not enough to plug the gap left by a plunge in in-store sales.
Overall trading levels were around 20 per cent lower year-on-year since reopening in June, while digital trading had roughly doubled.
Shoe Zone said revenues slumped by over £39million to £122.6million in the financial year which ended earlier this month.ADVERTISEMENT
The group’s shops were closed between 23 March, when lockdown started, to 15 June, but even since then sales remain down on a year ago.
Shoe Zone now expects to report a pre-tax loss of between £10million to £12million for the year.
It will not pay a dividend as the company focuses on paying back its debts instead.
Smith added: ‘Shoe Zone has ended an incredibly challenging year with a robust plan and sufficient funding in place to ensure the future survival of the business.
‘The exceptional growth in digital sales since the start of the Covid-19 pandemic demonstrates the flexibility of our operating model, and follows the decision to create an autonomous digital department in 2019.’
Shares in AIM-listed Shoe Zone have fallen sharply today and are currently down 20.41 per cent or 9.28 points to 36.22p. A year ago the company’s share price stood at 132.50p.
The retail sector has been hit hard by the pandemic, with huge numbers of workers losing their jobs and shoppers shunning high-streets and moving to online browsing. ADVERTISEMENT
Today, fashion chain Next warned that it could lose up to £60million in lost sales if England, Northern Ireland and Scotland follow Wales and impose a two-week circuit breaker lockdown.
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Shoe Zone poised to shut 90 stores amid ‘antiquated’ business rates
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