Fashion footwear retailer Schuh is predicting another year of flat profits in the face of price deflation and acute competition from expanding rivals such as Office and Cube, Sir Tom Hunter’s footwear chains.

The company continues to grow, however, having added two stores recently.

Livingston-based Schuh, which was the subject of a 2004 management buyout funded by Lloyds TSB, has also introduced design changes to boost its sales appeal.

Schuh posted a pre-tax profit of £7.7m in the year to March 26, 2006, down from £8.3m in the previous 12 months. Sales climbed 4% to £101.3m.

Writing in the annual report, chairman Terry Racionzer said: “Difficult trading conditions (in 2004/05) continued in 2005/06. There were fewer shoppers in our high streets and in our malls, fashion trends remained rooted in lower priced footwear and producing little to reignite consumer interest and many of our direct competitors continued to discount heavily in the race for market share.

“While we managed to reverse the previous year’s decline in gross margin, costs could not realistically be held at their 2004 level for two years running.”

Besides Racionzer, the main shareholders before the buyout were Sandy Alexander, who founded the Schuh concept, and Ashleybank Investments, which is owned by David Stevenson, the man who built up Edinburgh Woollen Mill.

Alexander founded Schuh in 1981 and grew the business for some six years before its acquisition by Goldberg, of which Racionzer was a director. The two men teamed up to negotiate the buy-out of the restructured Schuh in 1990.

During 2002-03, Alexander stepped down as managing director in favour of Colin Temple, formerly merchandise director.

Last year, Schuh grew its network of more than 40 stores by opening three standalone outlets in Leeds, Maidstone and Norwich. New shops in Plymouth and Cork, Ireland, have been added since the year end. The company also has a growing internet operation.

Racionzer added: “While we have continued to take every available and profitable opportunity for growth, the prevailing lack of buoyancy in fashion retailing has caused us to take a cautious approach to investment. We have concentrated on the consolidation of our infrastructure … and the preservation of critical resources so that when conditions improve we will be in the best possible position to embark on the next significant phase of growth.”

Industry observers are predicting a wave of consolidation in the footwear industry over the next few years and a reduction in the number of retailers.

Racionzer concluded: “Conditions remain extremely challenging, with market and fashion trends continuing much as they have been for the last 18 months. There is nothing to suggest the outcome of the current year’s trading will show any improvement on the 2006 results.”

This entry was posted on Thursday, February 1st, 2007 at 9:54 am and is filed under Fashion. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.