Shoe Zone warns 90 shops could shut without Government rethink on business rates
The boss of Shoe Zone has warned he could close up to 90 stores before April 2022 if the Government does not radically rethink the way it calculates business rates.
Shoe Zone has 460 shops but chief executive Alistair Smith said about a fifth of them are at risk within the next couple of years.
Mr Smith, who has warned of closures in the past, said the Government’s decision to suspend business rates during the Covid-19 crisis provided a “significant benefit” to the business and helped save high street stores.
“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,” he said.
“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.”
He said a 2015 decision by the Government to delay a revaluation of rates by two years cost his business £2.5 million.
The latest delay will be even more costly, Mr Smith said, as rents have fallen significantly but rates are unlikely to have followed suit.
He warned: “Never has the rating system been more unfair. 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.
“This is unsustainable for most high street retailers and closures will continue unabated until the Government makes substantial changes.”
The company ended its financial year this month with 460 stores, after closing 40 but opening 10 others over the 12 months. New openings are now on hold until conditions improve.
Soaring online sales were not enough to plug the gap left by a plunge in in-store sales.
The company said revenues dropped by more than £39 million to £122.6 million in the financial year that ended earlier this month.
Its shops were closed between March 23, when lockdown started, and June 15. But even since then sales have only recovered to eight-tenths of their previous levels.
A doubling of online sales have not been enough to make up for that fact, and Shoe Zone now expects to report a pre-tax loss of £10-£12 million for the financial year.
It will not pay a dividend as the company focuses on paying back its debts instead.
Mr Smith added: “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.”