1,000 shoe stores could close as recession bites
The UK footwear sector could be on the brink of the biggest shake-up since the demise of the British Shoe Corporation at the end of the 1990s, according to Verdict Research.
In a new report Verdict predicts as many as 1,000 footwear retailers could go out of business as falling demand, rising costs, a weakening British pound and the imposition of anti-dumping import tariffs combine to put intense pressure on the industry.
The report finds that the footwear sector could be "dramatically restructured" in the next 18 months, with focus shifted towards certain key segments in the middle and premium price brackets.
Verdict Research lead analyst Maureen Hinton said: "As the specialists hit financial difficulties their first response is to downsize and shed unprofitable stores. At the current rate we believe at least 350 footwear stores could disappear as companies downsize – but it could be as many as 1,000. This is going to be yet another headache for property companies and venture capital investment is unlikely to prop up footwear retailers as it has done in the past, with new buyout deals now drying up."
Verdict estimates that over the past five years spending through specialist footwear retailers has declined by £87m, while clothing retailers have added almost £420m to their sales.
The report found that by the end of 2008, four out of 10 major footwear chains were loss making, while none made an operating margin of over 10 per cent, unlike clothing retailers who regularly make double-digit margins.
At fashion chain New Look footwear now accounts for 20 per cent of sales. Verdict said "several hundred million pounds" of consumer footwear spending is up for grabs.
Last year Stead & Simpson and Faith had to be saved from administration, while last week Stylo's shoe chains Barratts and Priceless hit the buffers.
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