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Clarks’ record profits driven by US demand

Pre-tax profits at footwear company Clarks broke the £100m barrier for the first time in its 185-year history, driven by an “unprecedented surge” in demand in North America.

Pre-tax profits soared 28% to £108.7m in the year to January 31, bouncing back after a 2% decrease the year before and in spite of a languid UK market. Group turnover grew 9.2% to £1.28bn, which chief executive Melissa Potter attributed to an increase in volumes coupled with a rise in average selling price as Clarks developed a more premium product mix to counteract input cost rises.

Operating profits at Clarks International – which includes the UK and all markets other than North America – declined 1% to £93m,
due to the challenging domestic market. Like-for-like sales at its stores rose 0.5% and Clarks experienced success with its men’s footwear and its kids’ core back-to-school business, which set new volume records.

Clarks International’s wholesale business was resilient, with turnover up 2.9% and underlying profits increasing 6%. It did not break down the UK wholesale performance.

Spring 11 wholesale sales rose 15% in international markets and 40% in North America. For the first time more than 50% of overall
sales were generated by markets outside of the UK, a trend Potter said would continue.

Speaking exclusively to Drapers, Potter added that Clarks had recorded a “solid” start to 2011,
with pleasing results over Easter weekend. She said sandals and kids’ canvas styles had been strong sellers.

However, she highlighted the uncertainty surrounding the economic situation and said despite an impressive year in North America – where operating profits rose 91% to £54.9m – economic indicators were mixed. She added:
“I would expect trading conditions in our home market to remain decidedly challenging throughout 2011-12.”

Potter said rising labour costs in China and Vietnam would inflate product costs by an average 20% across Clarks International this year but that volume growth and selective price changes would mitigate the effects.

The scrapping of anti-dumping duties on leather products from China and Vietnam will also result in a £15m cost saving.

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