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Shoe Zone has released an update revealing challenging trading conditions, with profit before tax for FY25 expected to be £2.5m against the Zeus forecast of £5.0m. Low consumer confidence, precautionary saving from consumers and ongoing impacts from inflation have reduced footfall to Shoe Zone stores, impacting revenue and profitability. We reduce FY25 revenue forecasts by 4.6% to £152.0m and adjusted PBT by 50.1% to £2.5m, implying H2 2025 adjusted PBT of £5.1m. Due to caution on the consumer outlook, we also reduce forecast FY26 revenue by 4.3% to £156.7m and adjusted PBT by 30.5% to £4.5m. Cash forecasts increase slightly in FY25 from £5.5m to £6.0m and are unchanged at £12.0m in FY26, despite lower profitability, due to better management of inventory and slightly lower capex assumptions. The Group retains a strong balance sheet with no debt and remains committed to its store refit and relocation programme, which we expect to drive improved profitability in the medium term. On updated Zeus forecasts, Shoe Zone trades on an undemanding ex-cash P/E of 8.1x FY26.
Shoe Zone PLC
H1 FY25: H1 trading is in line with expectations. Revenue of £71.5m is 6.5% lower YOY (H1 FY24: £76.5m) with performance impacted by a weak Q1, but sales trends improving through the period (Q1 sales £4.9m lower YOY vs. Q2 sales £0.1m lower). Store sales -10.3% YOY to £53.3m (H1 FY24A: £59.4m) driven by 10% fewer stores trading in the period, with revenue per store broadly stable. Digital revenue +6.5% YOY to £18.2m (H1 FY24A: £17.1m), benefitting from a strong performance across all online channels, including growth from shoezone.com following the introduction of a free next day delivery on all shoezone.com orders. Lower sales and a decline in gross margin impacted profitability. Product margin declined 330bps to 59.4% (FY23A: 62.7%) due to higher container prices and sales promotion activity. Adj. EBITDA of £2.0m (after deducting £5.7m in property lease amortisation) is 66% lower YOY (H1 FY24A: £5.7m) translating into an Adj. EBIT loss of £1.9m (H1 FY24A: profit of £3.0m) and Adj. PBT loss of £2.6m (H1 FY24A: profit of £2.5m). Net cash (excluding lease liabilities) of £1.7m is £2.4m lower YOY (H1 FY24A: £4.1m) and is £1.9m lower versus FY24 year- end (FY24A: £3.6m) after £1.5m investment in working capital and £1.0m capex in the period. As previously flagged, no interim dividend has been proposed.
FY24 results (52 weeks ending 28 September) were flagged in a trading update in December. Revenue of £161.3m is 2.6% lower YOY, with strong growth in Digital sales, +13.9% to £35.2m (FY23: £30.9m) now representing 21.8% of revenue mix (FY23A: 18.7% mix), offset by a decline in store revenue, down 6.4% YOY to £126.1m (FY23A: £134.8m). H1 revenue was more stable (+1.4% YOY), with a weaker H2 (down 6.0% YOY) impacted by worsening consumer confidence and unseasonable weather, albeit key back to school trading was more positive with sales increasing YOY. Product margin improved 50bps to 62.8% (FY23A: 62.3%) driven by favourable FX. Product margins are expected to increase further in the second half of FY25E as container prices stabilise and reduce post Chinese New Year. Lower sales and a decline in gross margin impacted profitability YOY; gross margin of 22.0% was 270bps lower YOY (FY23A: 24.7%), due to higher depreciation and digital sales related costs. Adj. EBITDA of £17.1m (after deducting £11.8m in property lease amortisation) is 18.4% lower YOY (FY23A: £21.0m). Adj. EBIT of £11.2m is 34.2% lower YOY (FY23A: £17.1m) with Adj. PBT of £10.0m down 39.2% YOY (FY23A: £16.5m).
Challenging trading conditions over recent months, combined with increased operating costs resulting from the Government’s budget has resulted in plans to close a number of stores that are no longer considered viable. These pressures are expected to materially impact performance, with FY25E Adj. PBT now guided to be not less than £5.0m, a 50% downgrade versus previous guidance of £10.0m. As a result, the Company is not proposing to pay a final dividend for FY24. FY24 results will be published on the 21st January 2025.
Shoe Zone’s FY24 Trading Update confirms performance broadly in line with expectations, with H2 trading impacted by unseasonal weather and ongoing cost headwinds (labour, energy, shipping etc.). The Group continues to invest in its store transformation strategy, whilst digital sales increased YOY, benefitting from the introduction of free delivery. On an ex-cash PE of 9.8x and yielding 4.1% we remain positive on the shares.
Ongoing elevated container freight costs due to a reduced supply of shipping vessels and the rerouting of trade to avoid conflict in the Suez Canal, combined with unseasonably poor weather conditions and weaker than anticipated Spring Summer sales, means Shoe Zone now expects to report adj. PBT of not less than £10m, against our prior forecast for £13.8m.
H1 trading in line with expectations and ZC forecasts: Group revenue of £76.5m is +1.5% YOY (H1 23: £75.4m), which we see as a strong performance in the context of ongoing consumer uncertainty; reflective of the appeal of the Group’s competitively priced product range. Gross margin of 19.3% is +120bps YOY (H1 23: 18.1%), driven by a higher product margin of 62.7%, +260bps YOY (H1 23: 60.1%) benefitting from lower container prices, partly offset by increased wage costs, and higher energy prices. Wage increases also drove higher admin and distribution costs. Adj. PBT of £2.5m is flat YOY (H1 23: £2.5m), with adj. dil. EPS of 4.1p 4.5% lower YOY (H1 23: 4.3p) reflecting a higher effective tax charge of 25% (H1 23: 19%) offset by lower weighted average share count, following the share buyback in the prior year. Net cash of £4.1m at period end is £12.3m lower versus FY23 yearend. Cash from operations of £13.4m is +11.4% YOY (H1 23: £12.0m), offset by £11.7m lease payments, £5.2m investment in capex, and £6.9m dividend distribution. The Group has proposed an interim dividend of 2.5p (H1 23: 2.5p).
Shoe Zone’s AGM statement has said FY24E trading is expected to be marginally below previous expectations due to a higher cost environment, including elevated container prices resulting from the ongoing tensions in the Suez Canal, combined with the larger-than-envisaged 10% increase in the national living wage, effective from April. We take a prudent approach to our outlook for H2, with lower gross margin driving a 9.3% downgrade to FY24E adj. EPS. Despite today’s trim to forecasts, Shoe Zone’s valuation remains undemanding, with an FY24E EV/sales of 0.6x, EV/EBITDAR of 3.5x, ex-cash PE of 9.2x and prospective yield of 3.9%.
FY23 performance is in line with estimates and reflects solid trading and strong cost control. FY23E revenue +6.1% YOY and Adj. PBT +48% to £16.5m, almost double the £8.5m FY23E Adj. PBT we forecast a year ago following 4 consecutive upgrades over 2023. Net cash of £16.4m is after a total of £26.7m in capex, dividends and share buybacks, demonstrating the strongly cash generative nature of the Group. This is reflected in the announcement of a 6.0p special dividend, taking full year DPS to 17.4p, equating to a 7.7% yield. Trading at just 0.5x EV/Sales, 4.3x EV/EBITDA on an ex-cash PE of 7.9x, Shoe Zone remains a compelling buy.
Shoe Zone has announced FY23 adj. PBT will be no less than £16.0m, +43.3% YOY (FY22: £11.2m) and 18.7% ahead of Zeus’ est. despite previous upgrades in both June and July. Performance has benefitted from strong demand through the key ‘Back to School’ period as well an increase in product margin attributed to lower freight container rates and improved stock management. FY23E and FY24E EPS forecasts upgraded >20.0%. FY24E ex-cash PE of 7.1x, remains a compelling buy.
Strong trading momentum has continued through June and early July, driving a second material upgrade to our forecasts in as many months. Zeus forecast adjusted PBT for FY23E increases by 28.6% to £13.5m, in line with Management’s guidance of “not less than £13.5m”. We continue to think that Shoe Zone’s ex-cash PE of 9.0x FY23 is undemanding for a well-run business with a solid strategy, strong control over cost management, and consistent, high, cash generation.
Strong consumer demand through May and early June, combined with lower container rates has driven a material upgrade to FY23 and FY24 earnings. FY23E Adj. PBT of £10.5m is +23.0% with FY23E EPS +25.0% versus our previous forecasts. Margin improvements are expected to be sustained, with FY24E Adj. EPS +30.0%. An ex-cash PE of 11.9x with a prospective dividend of 3.0% remains an undemanding valuation for a well-run business with a solid strategy, strong control over cost management and consistent, high, cash generation.
Shoe Zone has announced H1 FY23 results, delivering solid revenue growth across stores and online despite the challenging consumer backdrop, with H1 adj. PBT ahead of management expectations.
Robust trading and strong cash generation resulting in a further special dividend distribution, equating to a FY22 yield of 8.2%.
Shoe Zone has confirmed a fifth consecutive earnings upgrade, with FY22E adj. PBT to be at least £11.0m, 4.5% ahead of Zeus estimate. FY22 net cash of £24.4m is +£9.8m YOY, after £10.3m outflow on capex, debt repayment and dividends paid in the year, reflecting the incredibly cash generative nature of SHOE’s model. Our FY22E dividend increases 18.2% to 8.0p equating to a yield of 4.4%. We upgrade FY23E Adj. PBT +20% to £8.5m, building on FY22E positive performance with further shareholder distributions through share buybacks and special dividends likely through FY23. SHOE is the standout performer in UK consumer stocks and remains a highly compelling investment proposition at current levels, with conservative forecasts and on an undemanding rating.
Our recent site visit has reaffirmed our conviction that SHOE is one of the most resilient and attractive consumer stocks on the market.
Strong trading through August, driven by demand for summer products and a promising start to key ‘back to school’ trading, combined with ongoing margin improvement means Shoe Zone now expects adj. PBT to be “not less than £10.5m”, 11.0% ahead of previous guidance of “no less than £9.5m”.
Better than expected demand and further strong margin performance leads to an upgrade in FY22E adjusted PBT from “no less than £8.5m” to “no less than £9.5m”. Zeus revenue forecasts increase by £1.5m (1.0%) to £157.4m and adjusted PBT forecasts (adjusted to exclude profit on the sale of freehold property and foreign exchange revaluations) increase by 12.0% to £9.5m.
Moderating freight costs, rental cost savings and selective price increases have driven a 30% upgrade to our FY22E adjusted PBT forecast.
H1 results confirm a strong recovery in store sales and a bounce back in profitability, benefitting from 26 weeks of uninterrupted trading. The Group is now debt free and has reinstated its dividend, with an interim distribution of 2.5p declared and scope for further special dividends and share buybacks.
FY21A Results were well flagged in November’s trading update. Today’s announcement reveals the Group is now debt free and reiterates its intention to return to the dividend list in the current period. Shoe Zone has a clear and well-defined plan to transform its store portfolio and grow its digital offer through its shoehub platform, which we believe will deliver a well-balanced retail model that can win market share and drive profitable growth.
Shoe Zone is upgrading FY21E Adjusted PBT expectations to £8.0m, a 22.7% upgrade to our previously published forecast of £6.5m, following initial work done as part of the ongoing yearend review process. The benefit of this upgrade also flows through to FY23E where we increase our forecasts by the same quantum. Despite the recent share price rally, we continue to believe Shoe Zone trades at a deep discount to its fair value, with a return to the dividend list anticipated in the current financial year.
Shoe Zone PLC Shoe Zone PLC
Shoe Zone’s accelerated digital strategy and defined store rationalisation programme, alongside decisive action on cost control and cash preservation, means the Group is emerging from the pandemic as a leaner, stronger and more resilient business. Robust cash generation means we expect the Group to be debt free and able to reinstate its dividend in the current year.
The group has reported interim results for the six months to 3 April 2021 which reflect the fact that the estate was closed for a minimum of 16 weeks in the period due to COVID-19. The stores are now open and trading although at this early stage of reopening, our forecasts remain under review.
The group’s final results reflect the impact of COVID-19, which continues to affect the group’s trading profile. As a result, our forecasts remain under review.
Shoe Zone (SHOE): Corp | Trackwise Designs (TWD): Corp
Shoe Zone PLC Trackwise Designs Plc
Shoe Zone (SHOE): Corp A setback but still a winning proposition
Against the backdrop of UK retail sector turmoil and material profit warnings, SHOE stands out as one of the very few retailers continuing to deliver upgrades in highly challenging markets. We upgraded forecasts on trading strength in October and do so again today (FY19 PBT increased by +8% to a conservatively framed £11m) on the back of very strong FY18 results, with positive trading momentum continuing so far into FY19. Alongside better-than-expected FY18 results, management has also delivered a step-change in confidence/clarity around SHOE’s strategic growth ambition. This is a significant moment for the SHOE investment case, with SHOE entering into a distinctive new phase of growth which, in turn, should have important positive long-term implications for sentiment, forecasts and valuation. TP raised to 230p to reflect the opportunity and eye-catching c11% total (incl. special) yield.
Today’s strong FY18 pre-close trading update represents a positive profit surprise. We therefore increase our FY18 PBT forecast by +9% to £11m. The roll out of Big Box and strong progress in online sales underpin the medium-term growth profile, backed by SHOE’s strong balance sheet. Cash conversion remained strong, with net cash at £15.7m at the year-end, with SHOE therefore anticipating to announce an 8.0p special dividend (although we do not explicitly forecast it at this stage), or £4m of excess cash. SHOE’s operational and financial performance in FY18 is even more noteworthy given the raft of profit warnings reported elsewhere in the UK clothing/footwear sector over the past two months. It is difficult for any retailer to stand apart from the turbulence affecting the sector at present, but the combination of SHOE’s strong performance, low valuation and appealing dividend yield (6.9% on the ordinary) make it look a particularly attractive investment, in our view.
President Energy (PPC): Corp Activity ramping into 2019 | Shoe Zone (SHOE): Corp Pre-close = Profit surprise, strong cash generation + special
Shoe Zone PLC Molecular Energies PLC
The well-attended finnCap-organised investor site visit, hosted by CEO Nick Davis and CFO Jonathan Fearn, to SHOE’s head office in Leicester yesterday provided useful insights into SHOE’s unrelenting focus on operational excellence as a defining feature of its corporate culture and one of its key drivers of profit growth. We came away with the sense that SHOE has (1) successfully navigated the key-for-profits summer and Back-to-School period and is therefore well-placed to meet FY18 (y/e September 2018) consensus expectations, and (2) operationally, the proven business infrastructure is well-prepared to support many years of solid revenue growth (likely low- to mid- single digit percentage) as the measured acceleration in SHOE’s two medium-term strategic growth initiatives (i.e. the roll-out of the Big Box store format and profitable expansion of its online business) becomes increasingly meaningful in the overall revenue mix. We therefore reiterate our TP of 210p.
Against a turbulent retail sector backdrop, SHOE has delivered very encouraging H1FY18 results, demonstrating that management continues to make strong strategic, financial and operational progress. This reinforces the equity story, the key underappreciated elements of which we revisit here. TP increased to 210p.
Shoe Zone is well supported by a running dividend yield of over 5.5%, which, as a result of strong cash conversion, should be topped up by frequent special dividends. The early success of the new Big Box format hints at a new source of growth to accompany the early-stage online business, the international potential of which will be explored this year.
Lower-than-expected FY16 numbers have reset the base and we remain cautious on the outlook. We downgrade our FY17E and FY18E profit forecasts by 11% and 16% respectively and our price target from 223p to 190p.
Shoe Zone (SHOE.L) | Beximco Pharmaceuticals (BXP.L) | Valirx (VAL.L) | Galileo Resources (GLR.L) | Alba Mineral Resources (ALBA.L) | Tekcapital (TEK.L) | Swallowfield (SWL.L) | Clinigen Group (CLIN.L) | 88 Energy (88E.L) | Share (SHRE.L)
SHOE BXP GLR TEK CLIN 88E ALBA VAL 300857 H0F
H1’16 numbers were a tale of two quarters. H2 is trading in line with expectations and has a soft base. We retain our FY16 earnings forecasts and 223p price target but move from a BUY to a HOLD rating given the share price appreciation.
While FY 2015 results were exactly in line with our expectations, weak Q1 2016 trading leads us to trim our FY 2016 EPS forecast by 5% from 18.2p to 17.4p (+7% growth YoY). Our price target moves from 236p to 223p (+16% upside to current price) and values the equity on 12.8x FY 2016 earnings. We retain our Buy recommendation given the potential for higher capital return on a sustained basis, a key pillar of our investment case.
Connect: Investment in growth delivering (BUY) | Shoe Zone: Yielding results (BUY) | Wentworth Resources: Operational update (BUY) | Xaar: Positive trading update (HOLD) | Independent Oil & Gas*: Skipper and funding update (CORP)
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Keywords Studios: The stars align – initiation of coverage (BUY) | Shoe Zone: Analyst interview (BUY) | Castleton Technology*: Comfortably in line (CORP) | Servoca*: Year-end trading update (CORP) | Elecosoft*: Sale of legacy architects practice (CORP) | Europa Oil & Gas*: Wressle development (CORP)| Photo-Me*: AGM statement (CORP) |Sound Energy: Sidi Moktar acquisition update (BUY)
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We initiate coverage with a target price of 236p (+32% upside, 12.9x our 2016E EPS) and a Buy recommendation. We think the sell-off post profit warning was overdone, although we appreciate that the valuation was frothy and trust needs to be regained. However, we think forward PE multiples (9.8x and 9.0x) undervalue the achievable 7% EPS CAGR, 6% prospective yield and potential for further capital return to shareholders. Management lock-ins expire shortly, potentially increasing liquidity in the stock.
Shoe Zone: Initiation of coverage (BUY) | Independent Oil & Gas*: Fundraising (CORP) | Transense Technologies*: Sale of intelliSAW (CORP) | Sound Oil: MoU signed with Schlumberger (BUY) | 4imprint: Strong organic growth continues (BUY)
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