Footwear giants Stylo and Clarks expect to have lost a combined £35 million by this time next year due to EU tariffs imposed on shoes imported from Vietnam and China in 2006.
Profits at the two family-run retailers have been hit by the anti-dumping tariffs and 2007 is set to follow in last year’s footsteps, with Clarks losing close to £20m by the end of 2007 and stylo“>Stylo expected to lose between £15m and £18m.
Clarks posted a 2% drop in pre-tax profits in the past year, while Stylo, the parent of Shellys and Barratts, said pre-tax losses increased by £4.6m to £7m. Both blamed the EU’s duty of 16.5% on imports from China and 10% for Vietnam.
Clarks chief executive Peter Bolliger spoke out against the tariff, saying he was disappointed that the group’s progress and shareholders’ interests were being undermined by the tariffs. He said they had cost the group £4.8m in the year to January 31 and would hit profits again this year, with an estimated loss of £13m.
“The impact of the new duties has been punishing enough in the current year, but their delayed introduction and the length of our supply chain have at least served to cushion the first-time effect,” said Bolliger. “Next year, we anticipate that the added burden to our product costs will rise to more than £13m, equivalent to 15% of operating earnings. It’s a major setback.”
Stylo chairman Michael Ziff said in a stock market statement that the introduction of anti-dumping duties increased costs by between 5% and 16% over the period. However, it also had a significant knock-on effect on the group’s stock levels.
He said: “The staggered nature of its introduction encouraged us to distort our buying patterns to minimise its effect. The early arrival of related stock impaired our ability to react to other potential opportunities.”
PricewaterhouseCoopers trade consultant Emma Ormond said the financial impact of the tariff showed how difficult it had become for pure-play footwear retailers. “It is not as easy for them to shift sourcing quickly. This also demonstrates that they haven’t been able to pass the cost onto consumers, taking the hit on margins themselves,” she said.
A mild autumn and winter, along with a rise in rents, business rates and the minimum wage, had also dragged down Stylo’s numbers.