High street footwear retailer Shoe Zone has warned that the Middle East conflict is driving up business costs and dampening shopper confidence, as it reported significantly widened losses.
The chain, which operates 259 stores, is currently reducing its physical footprint by shutting shops and cutting its warehouse size. It posted a pre-tax loss of £5.3 million for the six months to 28 March, substantially widening from the £2.3 million loss recorded in the same period last year.
Revenues declined by 12 per cent year-on-year to £62.9 million, partly due to operating with 19 fewer stores following a series of closures. Shoe Zone also attributed slower trading to reduced consumer confidence, citing recent Government budget announcements and, more recently, the war in Iran.
This was resulting in fewer visitors to shops and less spending on nonessential items, according to the firm.
At the same time, it told investors that the conflict had resulted in higher transportation costs and pushed up the price of containers used for shipping, which it expects to weigh on financial performance for the rest of the year.
The retailer said it was now expecting to report an adjusted pre-tax loss of between £1 million and £2 million for the full year, having previously guided towards a £1 million profit.
The conflict and the closure of international shipping waterway the Strait of Hormuz led to a surge in the cost of fuel, which has been impacting a range of businesses who use fuel for manufacturing, transport, or across their supply chains.
Last week, sports fashion retailer JD Sports, which is well known for selling trainers, warned over the potential for higher prices and a weakening of consumer demand if costs continue to rise.
Meanwhile, Shoe Zone highlighted efforts to relocate and revamp its retail chain into newer and bigger formats which it wants to complete by the end of 2027.
At the same time, it said it was in the process of reducing the size of its distribution centre to reflect the fact that it had fewer stores and to “right size” for the future.
Shoe Zone shares were down about 3.5 per cent in early trading.
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