Shoe Zone boss quits following profit warning
The high street retailer admitted that tough trading and property writedowns means profits will miss expectations.
Shares in high street chain Shoe Zone have plunged nearly 30% after the chief executive suddenly quit and the company issued a profit warning.
Nick Davis, who had been with the retailer since 2003, resigned with immediate effect to “pursue other business interests” and has been replaced by executive chairman Anthony Smith on a permanent basis.
The amount of his pay-off is not known, although it is thought to be less than his £212,500 salary due to the board agreeing he can waive his 12-month notice period.
His sudden resignation comes as the company said the challenging high street environment continues to hit the business, with profits expected to be below initial expectations.
Trading conditions since the group’s interim results on May 21 have been challenging and, as a result, the board now expects to deliver a full-year performance below its expectations.
Shoe Zone said its “Big Box” out-of-town formats and online sales are “progressing strongly” it added “their performance has been offset by the tough high street trading environment”.
A review of Shoe Zone’s 17 freehold properties also revealed their values are £3.1 million less than previously thought, meaning the company will take a hit to its profits at the next set of results.
The value of the portfolio has fallen from £8.4 million to £5.3 million – which is more than the 18.5% average rent cut that saved the company £334,000.
Bosses insisted the writedown will have no effect on the company’s dividend.
More details on the problems will be provided in October.
Our freehold assets had to be revalued to represent fair value and give us future flexibility Anthony Smith, Shoe Zone
Mr Smith, who becomes chief executive for the second time since joining in 1993, said: “As has been widely publicised, the UK high street is currently facing a challenging environment in which to operate.
“The pressure on the retail property market has enabled Shoe Zone to achieve an average 23.5% fall in rents on renewal and average outstanding lease length of only two years.
“As a consequence of this and the tough freehold property market, our freehold assets had to be revalued to represent fair value and give us future flexibility.
“While we therefore face a short-term impact on our balance sheet, we do not anticipate any change to our dividend policy, reflecting our confidence and excitement in the long-term growth opportunities through the Big Box roll-out, continued operational improvements and our multi-channel proposition.”
The role of executive chairman goes to Charles Smith, who is currently chief operating officer.
In early trading on Friday, shares were down 53.5p at 138.5p.