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Clarks CEO reveals turnaround plan as retailer goes into the red

Clarks chief executive Mike Shearwood said today he was bullish about future growth at the footwear retailer, even though it has plunged into the red.

Clarks reported a loss after tax of £31.3m for the year to 31 January – down from a £26.5m profit after tax the previous year.

Clarks group sales fell 7% year on year to £1.5bn. Underlying group operating profit fell 29% to £45.2m but EBITDA rose 5% to £97.5m.

Net borrowings were reduced to £27.3m, compared with £133.7m the year before.

Mike headshot2014

Shearwood told Drapers: “We achieved what we said we would. EBITDA is up year on year and the standout piece is reducing net borrowings by £106m for the year. We’ve worked really hard to generate cash and we are in a more comfortable position than many of our fellow retailers. We have an ambition to transform the business into a relevant and agile brand.”

Shearwood said the loss was a result of US tax reforms, in addition to a £33m delayed currency impact from Brexit.

Clarks’ biggest market by sales is the US and Asia-Pacific is also key for the retailer, making it “much more of a global retailer”, said Shearwood, which offers some buffer against the tough UK retail environment.

Part of the turnaround plan includes a new segmented brand strategy, which the retailer said will allow it to target its products at a specific customer segment.

The seven sub‐brands are: Clarks; Kids; School; Originals; Bostonian for men; and Cloudsteppers and Unstructured for men and women.

Shearwood said the perception of the Clarks brand is different in every market around the world. This new strategy will allow it to place product in a strategic way in different markets, so it can “target different consumer groups and broaden its customer base across global markets”.

“The strategy is about selling less and more at full price, to reduce discounting within the business,” he added.

Shearwood said the Clarks sub‐brands are supporting a segmented distribution strategy that aims to ensure each has the optimal channels for its target consumer.

Shearwood inherited a large excess inventory when he joined Clarks as chief executive two years ago. He said this stock has now been sold through, and the business would now be managing inventory on a real‐time basis using sophisticated merchandising and planning systems.

“We came at it in 2016 with the need to recover and stabilise the business,” said Shearwood. “As we went through 2017, we were developing a strategy for growth, enabling that and seeing improvements from product, environment and investment.”

Shearwood added: “We’re really excited about the business. There is a huge amount of opportunity for Clarks to grow on a global sale. We’re the second highest-performing footwear brand on Alibaba and we are viewing our business from a global perspective.”

Clarks has 533 stores in the UK and Shearwood said the UK retail portfolio remained an important part of the business: “As leases are coming up for renewal, we are having conversations with landlords. We don’t want to be disadvantaged against competitors. Landlords are keen to retain us and, while it is possible to do so, we will continue.”

Following successful trials of its new, pared‐back “Pure” store concept in Glasgow’s Buchanan Street and Manchester’s Market Street, both of which opened in May 2017, Shearwood said he would be rolling it out to 25 stores in the UK over the course of 2018. The Pure shopfit features a neutral palette, and uses natural materials and light.

Clarks’ new manufacturing facility in Somerset, Morelight, will go into production within the next month. The plant represents a multimillion-pound investment at an existing building within the Clarks headquarters site in Street, Somerset, which has been extended. The brand said the facility will allow greater flexibility and innovation by bringing design and manufacture together at the same site.

A refit will enable “volume production through robot-assisted technology”, allowing shorter lead times for global delivery, and a faster response to changing trends and consumer demand. 

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