Anthony Smith, chief executive of footwear chain Shoe Zone, has said the introduction of a compulsary living wage in April next year will have a positive effect on value retailers as their core shopper will have “more money in their pockets”.
New legislation announced in the budget requires companies paying the national minimum wage of £6.50 an hour to increase it to £7.20 an hour in April 2016 for people aged over 25. It will rise to £9 an hour by 2020.
Smith said despite the costs to retailers when the wage increase comes into play it will be more than offset by an increase in sales.
“We’re less concerned about it than others. If anything it will have a positive effect as it will make our customers wealthier. Our shoppers are focused in the bottom income bracket and if it helps them it will undoubtedly help us and other value retailers.”
Shoe Zone employs 4,000 people across the UK and Ireland.
Smith told Drapers that value retailers, including Shoe Zone, will be encouraged to employ younger workers as a result of the new legislation.
“The big headline is going to be is what it has done for youth unemployment. I don’t know if that’s what Mr Osborne wants but people like us are going to target bringing people in as teenagers and in their early 20s. There isn’t a value retailer that isn’t going to look at that.”
The high street chain, which has 540 stores, has benefitted from falling rents during the recession; rents for Shoe Zone dropped an average of 28% for the six months to April 4. However Smith said the rates system is in need of revaluation.
“We have shops where we are paying £80,000 in rent and our rateable value is still valued at £160,000 so we’re paying £80,000 in rates. Our rates bill as a percentage of our turnover has gone up 5% or 6 %, equivalent to £3m, over the last five years and that’s when our rent is dropping by 28%, something needs to be done, its madness.”
Read a full interview with Smith next week on Drapers.