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Clarks still cautious despite profits hike

Footwear giant Clarks delivered a record first half under new chief executive Melissa Potter, but UK retail sales remain challenging and the group said it was cautious about future trading.

In documents seen by Drapers, Clarks posted a 5.7% increase in sales to £577.2m in the six months to July 31. Operating profits jumped 53% to £48.6m while pre-tax profit soared 111.2% to £45.2m, largely driven by its US business.

While it did not split out UK first-half performance figures, Clarks conceded that its UK retail arm - comprising about 500 stores - had “battled to hold its own” in the face of continued soft market conditions, fragile consumer confidence, weaker footfall and discounting at its rivals. Comparable store sales averaged -0.9% over the period against the British Retail Consortium sector index of +4.1%.

Within ecommerce, Clarks, which launched its website in 2008, saw sales grow 70% to £13.1m. It sold 468,000 pairs of shoes via its multichannel operation over the period, generating £6.9m in profits.

Clarks’ wholesale operation in the UK and Republic of Ireland also recorded growth, with sales up 4.7% over the period, helping profits at the division to increase 14.3%.

However, the UK’s biggest footwear firm warned that it faced significant challenges to growth, including its ability to react to rising wholesale orders and an “unusually strong” forward order book. It said it had already found manufacturing capacity in its source factories in China and Vietnam had been placed under “severe strain” by the recovery in global footwear markets and that careful management of its supply chain would be “essential”.

It added that product costs continued to rise and that the impact on margins would be felt for the spring 11 season.

Chief executive Melissa Potter, who took over from Peter Bolliger in May, said in a statement to shareholders that there was likely to be a more moderate growth in turnover and operating profit during the second half and that the business would need to focus on differentiating its product and service proposition to offset challenges in the UK retail market.

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