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Brexit hits Clarks’ profits

Clarks chief executive Mike Shearwood has said the fall in the value of sterling as a result of Brexit will have a “profound impact” on profits and cashflow at the footwear business.

Clarks storefront

Clarks storefront

Clarks storefront

In its annual report Clarks said the dip in the value of the pound had already affected the firm, and greater risk and uncertainty were to come in relation to shoppers’ spending habits.

Group operating profit dropped 15% to £39.1m for the year to 31 January as the business restructures and clears excess stock.

Global turnover was up 8% to £1.7bn, boosted by favourable exchange rates, but turnover in the UK and Ireland dropped 5% to £632.3m as a result of “difficult trading conditions”.

“Brexit will have a profound impact on our profitability and cashflow for the foreseeable future,” said Shearwood. “We believe the retail trading environment in the UK and Ireland will be more difficult than we have seen in recent periods. There will be cost pressures – as a result of the weakened sterling – but also national living wage and business rates increases.”

Shearwood said trading in the UK and Ireland continued to be driven by discounting.

“In our retail business we have been heavily dependent on discounting and markdowns. Much of this has been in response to the promotional environment in the marketplace. However, our objective is to shift the balance away from excessive discounting over time as conditions allow.

”We planned to reduce the number of weeks we were on promotion this year compared to the prior year. However, the reality was clear that without reasons to buy, footfall was exceptionally low.”

 

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