High street retailer Shoe Zone (SHOE:AIM) slipped to a five-year low after the budget footwear retailer downgraded its FY26 outlook after experiencing ‘challenging’ Q1 trading.
In part, the retailer blamed the Middle East conflict for dwindling demand for its cut-price boots, shoes and slippers.
For the year ending 3 October 2026, Shoe Zone is now guiding to an adjusted loss before tax in the £1 million to £2 million range.
That compares to previous expectations of a £1 million adjusted pre-tax profit and represents a whopping £2.5 million downgrade.
Confidence rocked
In a brief trading update, Shoe Zone blamed the tough trading seen in the first quarter of 2026 on a ‘continued weakening in consumer confidence’.
Shoppers were already pulling their horns in following the UK government’s last two budget announcements, but consumer confidence has taken a further knock due to the conflict in the Middle East.
Chaired by Charles Smith and with aptly-named finance director Terry Boot overseeing the numbers, Shoe Zone explained:
‘These macroeconomic factors have increased customer caution, leading to lower footfall, less discretionary spend and additional costs such as container prices and transportation costs, with a resultant reduction in revenue and profit.’
Downgrades are afoot
Zeus Capital is now adopting the mid-point of the guidance range, pencilling in a loss of £1.5 million for FY26. The broker also trimmed its FY26 sales estimate by 3.7% to £140.4 million.
‘The reduction in estimates flows through to FY27 with revenue reducing 3.1% to £144 million and a loss before tax of £1 million against pre-tax profits of £1.9 million previously,’ said the broker.
Shoe Zone sells essential items on the cheap. During an average year the retailer sells 13.3 million pairs of shoes per annum at an average retail price of just £13.
It should be doing well during a cost-of-living crisis, but the company has delivered a surprising number of earnings alerts in recent years.
Given this patchy track record, we would avoid the stock, even at these lowly levels. Weakening consumer confidence and rising costs could result in additional earnings downgrades for a retailer with modest gross margins in the high teens.
However, existing shareholders will be comforted by the debt free balance sheet, which should help Shoe Zone to weather the storm.
Read the press release here: https://www.shoezone.com/Investors
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