In an update following its Annual General Meeting statement from 12 March 2024, Shoe Zone reported weaker-than-anticipated sales for its spring-summer collection from April to June, which it attributed to “unseasonal weather conditions.”
The British retailer revealed that it had continued to face significant cost pressures related to container prices, over the past six months.
This surge in expenses, directly impacting Shoe Zone's operational costs, was attributed to a reduction in the supply of shipping vessels and the ongoing rerouting of shipments away from the Suez Canal.
As a result of these combined factors, Shoe Zone now projects its adjusted profit before tax for the financial year ending 2 October 2024, to be not less than £10m from its previous guidance of 13.8m during its H1 sales for the 26 weeks to 30 March 2024.
Ongoing tensions in the Middle East have led to disruption in the Red Sea. Since December 2023, several shipping companies have chosen to reroute ships around the Cape of Good Hope to avoid the Suez Canal.
In June, Freight benchmarking company Xeneta’s chief analyst Peter Sand said the continued disruption and high demand were causing freight carriers to prioritise those paying the highest rates.
“That means cargo belonging to shippers paying lower rates on long-term contracts is at risk of being left at the port. It happened during the Covid-19 pandemic, and it is happening again now.
“We are also seeing freight forwarders being hit with new surcharges and being pushed onto premium services to have space guaranteed onboard ships. In such cases, they have no other option than to pass these costs on directly to their shipper customers.”
Sand also cautioned that the situation may get worse for shippers before it improves.
Dr Sheng Lu, professor at the Department of Fashion and Apparel Studies at the University of Delaware echoed Sand’s comments and believed fashion brands need to start thinking of longer-term solutions to the shipping issue.
He added: “As the Red Sea crisis and other geopolitical tensions show little hope of being resolved anytime soon, fashion companies may consider, beyond placing Christmas orders early, further diversifying their sourcing base and building a more resilient supply chain to mitigate the long-term impact.”
At the beginning of the year, Shoe Zone reported a 19.1% increase in profit before tax for FY23 despite trading out of 37 fewer stores.
