Shoe Zone to face 90 store closures with reintroduction of "antiquated" rates system

A national footwear retailer has announced that it expects to close up to 90 stores if the government delays its rates revaluation.

Shoe Zone said that the government’s plan to reintroduce an “antiquated” business rates system and the postponement of revaluation could represent the closure of up to 20 per cent of its stores.

The business rates system is set to come into play in April 2021, and Shoe Zone could see 45 stores close in the period up until then as it waits for revaluation - with a further 45 stores to be cut in the 12 months following the reintroduction.

Shoe Zone also reported today that its revenues for the year dropped to £122.6m from 2019’s £161.9m, and finished the financial year with a net cash balance of £6.3m, compared to last year’s £11.3m.

In response to the drop, the company is anticipating that it will not be restarting a dividend policy until “at least” 2024/25.

Anthony Smith, chief executive, commented: “Shoe Zone has ended an incredibly challenging year with a robust plan and sufficient funding in place to ensure the future survival of the business.

“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.

“However, it is very difficult at this stage to provide meaningful guidance on the future outlook, given the material uncertainty in the wider economy.

“The suspension of rates in April 2020 was a significant benefit for our business in FY20 and was in line with the government’s desire to save the high street.

“However, the government has announced the reintroduction of the antiquated business rates system in April 2021 and to make matters worse has delayed the revaluation.

“The consequence to Shoe Zone will be the closure of up to 45 stores prior to April 2021 and the potential closure of a further 45 stores in the 12 months following the reintroduction.

“In total this would represent the closure of up to 20 per cent of our store estate in the next 18 to 24 months.

“In 2015 the government delayed the rates revaluation by 2 years which cost our business £1.25m per year (£2.5m in total).

“The latest revaluation delay will be even more costly as rents during the period have fallen significantly further and consequently rateable values should have fallen broadly in line with rents. Never has the rating system been more unfair.

“Our rates as a proportion of rent have increased from 26.4 per cent in 2009 to 54.3 per cent in 2019 and forecast to be close to 60 per cent in 2021.

“This is unsustainable for most high street retailers and closures will continue unabated until the government makes substantial changes.”