Home Somerset business Clarks Seeking Reboot Under New Chinese Management | Manufacturing sector

Clarks Seeking Reboot Under New Chinese Management | Manufacturing sector

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It all started with a sheepskin slipper in 1825, but Clarks stepped out of his comfort zone in a battle for survival under new Chinese leadership.

The British shoe institution, founded by brothers Quaker Cyrus and James Clark, went from comfort to fashion after the desert boot inspired by the time of James Nathan Clark’s great-grandson in Burma in the years 1940, became the shoe of choice for The Beatles, Oasis and generations. reggae artists.

Now the boot is on the other foot as the founding family was forced to cede control this year to Chinese Olympian Li Ning and private equity group LionRock after collapsing into the red and having struggling to refinance debt after years of unease.

Li Ning, the former billionaire gymnast who now runs a sports shoe colossus with sales of RMB 14.4 billion (£ 1.7 billion), teamed up with LionRock shortly before injecting £ 100million in Clarks to take a controlling 51% stake.

Chinese investors want to follow the lead of Dr Martens and Birkenstock, transforming Clarks from a historic brand and the pride of Somerset, into an international powerhouse led by its expansion in Asia.

Industry insiders say they will use Li Ning brand contacts to help secure Clarks’ expansion in China and beyond. ““The UK will not be so important anymore,” said one.

A 1972 advertisement for Clarks boots.
Photograph: Neil Baylis / Alamy

At home, a potential signal for the future comes from a partnership with Marks & Spencer, through which Clarks now sells its children’s shoes.

But Li Ning will need to pull off a flip of incredible proportions to turn around the struggling brand, where sales have steadily declined for at least four years and profits have plummeted since 2014.

Clarks found itself stuck between discount and high-end rivals after being sidelined by more hip trainer vendors.

“You are born in Clarks and you die in Clarks, but from 10 to 70 years old you don’t want that,” says an industry insider.

“The taste moved faster than them and the market quickly vanished at an average to higher price,” a rival said.

As the pandemic worsened years of bad trading, Clarks canceled its dividend to shareholders, including the founding family, in January for the second year in a row. It came after he reported a 43% drop in sales to £ 775million in the year through January 30, with the group plunging £ 172million into the red against a profit of £ 21.5million a year ago. Net debt fell from £ 32million to £ 98million a year ago and the pension surplus fell from almost £ 128million to just £ 9.9million last year.

Clarks’ board of directors warned in May that there was “significant uncertainty” about its ability to meet targets given the ongoing pandemic.

As Clarks negotiated ahead of its budget when it filed its annual report in May, the company said changes in consumer behavior “could cast significant doubt on [the company’s] ability to continue to operate ”and may need to consider“ accountability in actions ”or a debt-for-equity swap to raise more liquidity.

Such questions should be high on the record of the annual general meeting of shareholders, scheduled for December 23, when the Clarks family may need to consider completely losing their grip on the brand.

Also on the agenda, Clarks’ search for a new boss after going through six general managers in as many years. Johnny Chen, the chairman of Clarks, is currently acting chief executive replacing Victor Herrero, a former executive at American fashion brand Guess, who stepped down earlier this month after just nine months in the post.

Amid Clark’s revolving door, the company has spent more than £ 2million on compensation or legal fees related to the departure of its high-profile team, including a very public legal row with Zara’s former boss and Karen Millen, Mike Shearwood.

Clarks is currently in mediation with workers’ representatives at its Street, Somerset warehouse, who say the company is seeking to cut their wages by nearly 15% using controversial fire-and-rehire tactics.

A sign outside the Clarks distribution center, in Street, Somerset, last month.
A sign outside the Clarks distribution center, in Street, Somerset, last month. Photograph: Rebecca Naden / Reuters

A year ago, Clarks left its owners outraged after they passed a controversial restructuring that reduced the rent of 60 stores to zero.

While Clarks was not the only one suffering during the pandemic, his problems date back long before the onset of Covid-19.

The company went from being the UK’s largest shoe retailer six years ago to a poor third behind Sports Direct and JD Sports. Its market share halved to 4% during this period, while JD’s increased by more than a third to almost 11%, according to analysts at GlobalData.

The problems at home have been compounded by Clarks’ disparate image to the world. In the UK eight in ten of her bestsellers are children’s shoes while in Asia she is known for her sneakers and in North America she has a cut-price image.

An industry insider says Clarks has suffered from a series of executives who wanted to sell something different than what their main customer wanted. “Over the past five years, they’ve wanted a different consumer and put the ones they had on the back burner. “

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Clarks employed more than 11,000 people in 2014 and cut 2,500 jobs globally in January after closing more than 250 stores in the UK alone. Significant write-downs on outdated computer systems and millions of pounds of junk inventory also dampened activity.

Patrick O’Brien of GlobalData says Clarks has been too slow to reduce its store count and scale over time, leaving it in a “real tough spot.”

“It’s very difficult for a retailer like this to stay relevant. They are stuck in a place in people’s psyche that is against the direction the market is going. “

One industry insider puts it more bluntly: “It’s still a great brand, but it’s gone completely astray.