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Shoe Zone warns of store closures unless business rates are overhauled

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Shoe Zone PLC (LON:SHOE) has ruled out dividends for five years and warned the reintroduction of business rates might see 20% of its stores close.

Business rates were suspended in April due to COVID-19 but will be applied again next year something that Shoe Zone said might see close it 45 stores prior to April 2021 and up to a further 45 stores in the 12 months following. 

In total, this would represent the closure of up to 20% of its 460-strong store estate in the next 18 to 24 months, said Anthony Smith, chief executive.

“Never has the rating system been more unfair,” he added in a trading update ahead of its full-year results.

“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.”  

In the update for the 52 weeks to 5 October, the retailer reported sales had risen 20% since stores reopened in June while online trading had doubled, but this had not been enough to offset the shortfall caused by the lockdown.

Recent additional restrictions have added to the uncertainty, it added.

As a consequence, revenues for the year will be 24% lower at £122.6mln (2019: £161.9mln) with losses between £10-£12mln.

Cash at the year-end was £6.3mln, but with a pension review coming up Shoe Zone said it will focus on that and debt reduction going forward.

Due to that, Shoe Zone ‘will not be in a position to restart a dividend policy until at least the 2024/25 financial year,’ said the statement.

Smith added: “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.” 

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