Cost inflation has compounded the problems facing the UK’s footwear specialists, according to a report from Verdict Research.

Of the UK’s top ten footwear specialists, eight either experienced falling profit margins or made a loss during 2006. And, last year, this trend is expected to have continued. The report points out that, despite rising costs, footwear specialists are unable to raise prices because of the high level of competition in the market, especially from clothing retailers.

Dolcis became this year’s first high-profile casualty in the sector and others may follow. Clothing retailers and other non-specialists also face higher costs but, because they are typically larger organisations, they are in a better position to withstand these pressures.

Verdict points out that footwear specialists accounted for more than half of all UK footwear sales in 2001 – a figure that fell to an estimated 41.8 per cent in 2007 as consumers increasingly turned to clothing retailers, supermarkets and sporting goods retailers to pick up footwear.

“Specialists have fought against the growing competition by opening new stores to fuel sales growth but, with sector profitability sliding, this is compounding their problems,” said Verdict Research retail analyst Carol Ratcliffe.

“Footwear retailers need to focus on improving sales densities in their existing stores before adding new outlets. While many have already invested in developing new store formats, they need to accelerate these efforts to catch up with the rising standards set by clothing specialists.”

Despite this, the footwear market is growing. Verdict estimates the footwear market in the UK grew by 4.6 per cent in 2007 reaching£5.48 billion, demonstrating a major hike on 2006’s weak 0.7 per cent growth.

The top ten footwear retailers in terms of value by market share are: Clarks (9.7 per cent), Marks & Spencer (7.2 per cent), Sports Direct (6.2 per cent), JD Group (5.9 per cent), Next (4.8 per cent), Stylo (4.1 per cent), JJB (3.9 per cent), New Look (3.4 per cent), Shoe Zone (3.4 per cent) and George (3.2 per cent).