View from City Road: Sears finds shoe trade a hard slog
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Your support makes all the difference.THE SHOE shops business is on its uppers. Tandem Shoes went into receivership in January. Stead & Simpson, owned by Clayform Properties, announced more losses last week. The privately-owned Clark Shoes is riven by internal strife and declining sales. Now the biggest footwear retailer, the 1,800-outlet British Shoe Corporation, is setting aside pounds 32m in another attempt to turn itself around.
Shoe retailing is big business. It was worth pounds 3.7bn last year. It should be fairly recession-proof - everyone needs shoes. Yet no one seems to be able to make much money out of it. BSC's owner, Sears, believes the problem is overcapacity, hence the store closures. But anyone who has encountered the indifferent service and dull product range of a Freeman Hardy Willis or a Curtess would say the problems go deeper.
BSC, under new management, is testing new ideas. Up to 130 shops could be converted to a self-service format if a guinea-pig store opening next month succeeds. It is experimenting with Hush Puppies, for which it has exclusive UK rights, as a new facia. It is sourcing less from Britain and Western Europe and more from cheaper Eastern Europe, China and Indonesia. It is also saving on distribution: unpopular lines are now 'knocked out' at any price rather than sent from shop to shop in the vain hope of finding a customer.
At the trading level the reforms are starting to work: footwear swung into pounds 1.9m of profit in the six months to 31 July, from losses of pounds 3.3m. The City, which seems unable to resist any company biting the bullet, marked Sears shares 8p higher to 80p, despite the dividend cut.
But there is a very long way to go. BSC used to make pounds 60m in happier years. There must be a question mark over whether the pounds 32m provision will be enough. Sears' chief executive, Liam Strong, insists it is 'full and final'. Shareholders would do well to remember that the equally 'final' pounds 41.1m hit against the disastrous menswear division a year ago was followed by another pounds 82m of red ink announced last week.
Elsewhere in the Sears empire there are worrying signs. The profits contribution from Freemans mail order fell 22 per cent to pounds 11.9m. Adams, the very successful children's wear chain, may finally be running out of steam: like-for-like sales are flat, though profits are up. And there may well be write-downs when the group does its five-yearly property valuation in 1993. The shares are best avoided.
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