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Shoe Zone targets mid-market with 'big box' format

Shoe Zone is to trial a “big box” out-of-town format, boosting its own-label offer with branded products priced up to £50.

Chief executive Anthony Smith told Drapers that it will open three out-of-town stores in Devon, Kent and inside the M25 in August this year to extend the value footwear chain’s penetration into the middle market.

Shoe Zone’s own label is priced up at o £25 and it sells a broader range of branded items on its website up to a top price of around £50, which Smith said would feature in the out-of-town stores. The stores will be around twice the size of its typical 2,500 sq ft grade 1 stores and are set to open a week after each other in August. The retailer will trade through Christmas and into Easter before taking a decision on whether to roll out the format further.

“There are other out-of-town retailers that are in that space that aren’t doing a very good job at the moment and we think we could do it better,” he said.

Anthony Smith

Anthony Smith

Anthony Smith

“For example we used to have stores in locations like Canterbury and Guildford that we closed because we didn’t have the depth of range and our product wasn’t upmarket enough,” he said.

“With 500+ stores we are pretty much saturated in terms of geography and I’ve always said that our growth will come from closing our [1,000 sq ft] grade 3 stores and opening more grade 1 stores, which we are doing. This is about creating a new avenue for growth outside our traditional portfolio.”

News of the trial comes as ShoeZone reported full-year sales down 3.5% to £166.8m and a drop in pre-tax profit 3.4% to £10.1m for the year to October 3. However, gross margin grew from 61.3% in 2014 to 61.5%.

The company had a cash balance of £14.2m at the year end, up from £9.1m in 2014, and paid a final dividend of 6.5p a share plus a special dividend of 6p a share.

Shoe Zone has been gradually increasing its direct sourcing over the past few years, up from 11% of the total in 2011 to 62% at the end of October. Smith said he expects to reach his target of around two-thirds of the total during this financial year. The rest of the ranges will be licensed or branded products.

Increasing direct sourcing has allowed the footwear chain to “sharpen our prices at retail and increase margins,” said Smith.

He also cited strong growth in non-footwear ranges, such as handbags and accessories which were first introduced in 2013 and extended to all stores during the financial year. Non-footwear sales grew by 33% in the year ending October 3 to account for £5.5m of annual sales.

 

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