Shoe Zone blames shipping costs and bad weather for profit warning

Shoe Zone sold fewer shoes than expected between April and June and has issued a profit warning, blaming bad weather and high shipping costs, it said in a trading update.

The high street chain said it expects adjusted profit before tax for the financial year ending October 2 to be £10 million or above, coming in below previous guidance.

Its original profit forecast for the year was £15.2 million. That was revised down to £13.8 million at its interim results in June.

Shoe Zone said shipping costs had risen because of “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”.

The company has “experienced weaker than expected spring summer sales from April to June, due to unseasonal weather conditions”, it added.

In its interim results, the retailer said an increase in the National Living Wage to £11.44, which came in higher than analysts had expected, added at least £400,000 to projected costs between April and October.

Meanwhile, disruption to shipping lanes in the Middle East have dogged the import-heavy retailer for months.

The vital Suez Canal shipping artery in Egypt saw cargo traffic plunge by 66% earlier this year because of attacks on vessels in the region.

Companies that rely on the channel, which links the Mediterranean Sea to the Red Sea, have struggled since Iran-backed Houthi fighters started firing on ships late last year.

It has led to soaring costs for insurance, fuel and wages, making it much more expensive to import goods – like shoes – through the region.

Shoe Zone also said earlier this year that it had reduced the number of stores it is trading out of to 27, leaving it with 309 stores as of May.

That, combined with the cost-of-living crisis in the UK and poorer-than-expected weather between April and June, has hit footfall and sales.

It comes after the Office for National Statistics said a cold and wet start to the summer risked hampering UK businesses reliant on heavy footfall.

April alone brought 55% more rainfall than normal, which contributed to overall retail sales across all shops in the UK falling 2% for the month, the statistics body said.