The high street footwear chain Shoe Zone has reported a dramatic collapse in annual profits, pointing the finger squarely at what it calls "highly adverse" government policies. The retailer warned that the challenging conditions are set to continue, with earnings expected to fall even further in the current financial year.
Sharp Profit Drop and Share Price Fall
Pre-tax profits plunged by 67% to £3.3 million for the year ending 27 September, a stark drop from the £10.1 million recorded the previous year. The announcement triggered an immediate sell-off, with the company's shares tumbling by 22% in Tuesday morning trading on 13 January 2026. This decline has pushed the share price to its lowest point in five years.
The Leicester-based business also provided a grim forecast for the year ahead, predicting profits will shrink to around £1 million by October 2026. This would represent a year-on-year decline of approximately 70%.
Government Policies and Consumer Sentiment Blamed
In a strongly-worded statement, Shoe Zone's chairman, Charles Smith, directly linked the company's struggles to government fiscal measures and a broader economic malaise. He highlighted the November 2025 budget's increase to the national living wage as a key factor that raised the company's cost base.
"Trading conditions remained challenging in the first quarter of the new financial year," Smith stated. He attributed this to "ongoing macro-economic pressures" and "the highly adverse Government fiscal policies," which he said continue to suppress consumer confidence and reduce footfall on UK high streets.
The retailer identified a toxic mix of persistent inflation, higher interest rates, and reduced disposable income as the primary drivers of negative economic sentiment. While sales saw temporary boosts during events like the warm summer and the back-to-school period, overall discretionary spending remained "subdued" as cautious consumers tightened their belts.
Store Closures and Shifting Strategy
The financial strain was reflected in the company's physical footprint. Over the 2024-25 financial year, Shoe Zone recorded a 10.3% decline in store sales, which totalled £113.1 million. The company ended the period with a net reduction of 28 outlets, closing 39 shops while opening 11 new locations and converting six to an expanded format. This left the chain with a total of 269 stores.
Despite the severe headwinds, the company continues to adapt its strategy through selective store openings and format conversions. However, the overarching message from the boardroom is one of significant caution, with no expectation of a near-term recovery in the difficult trading environment facing the UK retail sector.
