Clarks began with a sheepskin slipper in 1825, but Clarks is moving out of its comfort zone in a battle for survival under new Chinese leadership.
The British footwear institution, founded by Quaker brothers Cyrus and James Clark, shifted from comfort to fashion after the desert boot inspired by James’ great grandson Nathan Clark’s time in Burma in the 1940s became the footwear of choice for the Beatles, Oasis and generations of reggae artists.
The Clarks founding family were forced to cede control to Chinese Olympian Li Ning and private equity group LionRock after slumping into the red and struggling to refinance debts after years of malaise.
Li Ning, the billionaire former gymnast who now heads a sports footwear colossus with sales of 14.4bn RMB (£1.7bn), teamed up with LionRock shortly before it pumped £100m into Clarks to take a 51% controlling stake.
The Chinese investors want to follow the lead of Dr Martens and Birkenstock, turning Clarks from a historic brand and the pride of Somerset, into an international powerhouse led by expansion in Asia.
Industry insiders say they will use the Li Ning brand’s contacts to help secure expansion for Clarks in China and beyond. “The UK will now not be that important,” one said.
“You get born in Clarks and you die in Clarks, but from 10 to 70 you don’t want them,” said one industry insider.
“Taste moved quicker than they did and the market disappeared rapidly at the mid- to more expensive price point,” a rival said.
As the pandemic compounded years of poor trading, Clarks cancelled its dividend to shareholders including the founding family in January for the second consecutive year. That came after it reported a 43% slump in sales to £775m in the year to 30 January as the group sank £172m into the red from a £21.5m profit a year before. Net debt rose to £98m from £32m a year before and the pension surplus dived from nearly £128m to just £9.9m last year.
Clarks’ board warned in May that there was “material uncertainty” about its ability to meet targets given the on-going pandemic.
While Clarks was trading ahead of budget when it filed its annual report in May, the company said changes in consumer behaviour “may cast significant doubt on [the company’s] ability to continue as a going concern” and it may have to consider an “equity cure” or debt-for-equity swap to raise more cash.
Clarks said that its most recently filed accounts reflected the “significant impact” of the pandemic on its business globally.
A Clarks spokesperson said: “We are pleased that the company is currently on track to meet its forecast revenue and profit goals, and our debt and cash positions have been considerably improved in the last few months. We still face many challenges, but the loosening of pandemic restrictions in our key markets and the strong management of costs in the past six months have resulted in the delivery of an improved financial position in rapid time.”
It said that since LionRock had acquired a majority stake in the business, it had implemented a “focused turnaround strategy designed to protect the future of the business, and to build a foundation for sustainable growth in the years ahead”.
Its future strategy may yet take another turn as Clarks is searching for a new boss after going through six chief executives in as many years. Johnny Chen, Clarks’ chair, is currently acting as interim chief executive after taking over from Victor Herrero, a former executive at US fashion label Guess, who stepped down earlier this month after just nine months in the role.