In another set of “poor” financial results, Clarks has reported a loss after tax of £82.9m for the 52 weeks to 2 February 2019 – more than double its £31.3m loss in 2017/18 – while underlying operating profit plummeted 36%.
It closed the 2019 financial year with an adjusted underlying operating profit of £22m – down from £34.4m the previous year.
Group sales fell 4.5% to £1.47bn, which the struggling footwear retailer blamed on lower footfall in the UK and Ireland, as a result of “specific weather events and poor product execution”.
This led to a 7% drop in European net turnover – from £722.8m last year to £667.3m this year – and a 9% fall in the number of shoes sold. Other issues it listed were: post-Brexit vote exchange rates, “challenging” retail conditions in the UK and US, changing consumer shopping habits, and discounting.
Its covenant EBITDA for the 12 months was £76m, while net borrowings reduced “significantly” to £17.7m – from £27.3m in 2018.
Despite admitting to an “incredibly difficult” year and that it continues to lag behind competitors, chairman Thomas O’Neill insisted “the board remains confident that Clarks will weather the headwinds and stay the course to a stronger business”.
Clarks last year embarked on a five-year transformation plan, which aims to “return the business to competitive and sustainable levels of growth and profitability by 2023”.
Under the plan the footwear company will continue to focus on driving growth across Asia, digital growth in all regions and reducing exposure to retail in the UK, European Union and the US.
It added: “[The plan] will require us to make significant shifts in organisations structure, channel balance, digital capabilities, processes, ways of working and brand focus – all against the backdrop of a very turbulent global trading environment in our key markets, and with a relatively new executive committee.”
It has also vowed to take “rapid actions” to close its worst-performing stores “in as short a timescale as is practical” – on top of the 56 shops that it closed in 2018/19.
Looking ahead, Presca said Clarks’ management team will have to “work hard” to maintain profitability during its “turnaround” period, but that he “firmly believes that the group can be put on a sustainable basis”.
In a statement, Clarks’s chief financial officer Paul Kenyon said the business’ non-cash loss after tax was due to a “significant charge” in relation to store asset impairment and onerous lease commitments, and “other one-time charges”.
He added: “Looking at the (2019/20 financial year), Clarks is on track to grow underlying profitability. The business continues to perform strongly in Europe and America, despite a challenging retail market.
“Digital sales continue to perform strongly and are up versus prior year, with double-digit growth [up 18.1% in the first half] recorded in Europe, America and Asia.
“Meanwhile, we have a strong grip on our cost base and working capital, and are working hard to reduce overheads and keep borrowings around the low levels achieved in recent years.”