Shoe Zone, the popular British footwear retailer, has announced significant store closures across the UK, citing adverse effects from Chancellor Rachel Reeves’s recent budget measures. Following the announcement of the government budget just over six weeks ago, Shoe Zone revealed it is shuttering several locations due to the rising costs associated with increased national insurance contributions and the national minimum wage. These adjustments have rendered many of its shops unviable.
The Labour government's budget, implemented after Reeves's fiscal statement on October 30, included plans to hike employers' national insurance rates from 13.8% to 15% and raised the national living wage. These changes, viewed unfavorably by numerous businesses, have sparked widespread discontent within the retail sector. Shoe Zone, which operates 297 stores across the country, has quickly become the first major retailer to announce closures directly tied to these budgetary changes.
A spokesperson for Shoe Zone expressed the severity of the situation, stating, "These additional costs have resulted in the planned closure of a number of stores which have now become unviable. The combination of the above will have a significant impact on our full-year figures." The company has already felt the pinch of what they described as "very challenging trading conditions," influenced by cooling consumer confidence and fluctuations in weather impacting foot traffic to stores.
Consumer shopping habits have shifted dramatically since the summer, leading to decreased sales by 2.7% year-on-year. This slump prompted Shoe Zone to cancel its planned shareholder dividend for the financial year 2023-24 and convey profit warnings indicating they expect to generate no less than £5 million, down from the previously anticipated £10 million. These warnings have raised concerns among investors, leading to shares plummeting by as much as 49% on news of the closures and cuts.
Among the specific locations affected by the closures are stores situated within key retail centers such as Manchester's Arndale Centre, Birmingham, Cardiff, and multiple neighborhoods across east and north London. Recently shuttered stores include branches in Burgess Hill, West Sussex, Portsmouth, and Watford, with community reactions reflecting dissatisfaction over the loss of local retail options. One disappointed shopper from Burgess Hill lamented the closure, stating, "What a bad blow to our little town. Shoe Zone is the only place I can get my size 9 sandals and I don’t travel to other towns."
Shoe Zone is not the only retailer feeling the impact of these budget measures. The British high street has already witnessed over 6,000 retail outlets close since 2018, highlighting persistent struggles due to various economic pressures. Helen Dickinson OBE, chief executive of the British Retail Consortium, has attributed this decline to oppressive business rates and the lasting effects of COVID-19.
Analysts have weighed in on the situation, expressing mixed interpretations of Shoe Zone’s predicament. Russ Mould, investment director at AJ Bell, pointed out some inconsistencies, stating, "Putting the blame for a major profit warning on the Budget seems a poor fit. We expect consumers to keep buying footwear no matter the weather since it’s not exactly discretionary spending." This sentiment raises the question of whether Shoe Zone’s offerings have stayed relevant enough to captivate shoppers.
The company has been making strategic operational shifts, indicating plans to transition to bigger box formats instead of traditional high street stores. Last year, Shoe Zone revealed it had closed 26 locations on a net basis, but this year, it seems the pace of closures will increase significantly before heading fully toward the new retail format to remain viable.
With the high street effectively undergoing transformation post-COVID-19, and additional financial strains introduced by the recent budget, businesses like Shoe Zone will need to adapt swiftly to survive. The looming question remains around how many more retailers might feel the burden of similar pressures should conditions continue to fluctuate.
Looking forward, as the retail climate shifts alongside consumer purchasing behaviors, Shoe Zone’s future and the broader health of the UK high street may well depend on how quickly they can drop their losses and entice shoppers to return.
