C&J Clark, the company behind iconic footwear retailer Clarks, appears down on its uppers after reporting a sudden drop in profits for the first time in more than a decade. Clarks, best know for children’s shoes and comfortable footwear, recently reported that, although revenues grew to £972.7m from £921.4m, group profits had fallen to £69.4m in the year to January 31, from £71.9m the year before. In the UK, profits were down to £49.6m from £51.4m the year before, on sales of £551m.
Rosemary Carr, Clarks global brand director – and the woman who has just replaced St Luke’s, the incumbent advertising agency working on the company’s £12m account for the past ten years, with Abbott Mead Vickers.BBDO (MW May 10) – attributes the slide to the costs of introducing a new supply chain infrastructure and an increase in the European Union anti-dumping duties (ADDs) on footwear imported from China and Vietnam.
The change in ad agency also comes at a time when shoe retailers are facing increasing competition from clothing specialists who are eating into their market share with their own, often cheaper, footwear.
Maureen Hinton, senior retail analyst at Verdict, says: “Clarks does have a dominant position in its sector, but it’s a competitive market and it is up against a lot of clothes specialists that have gone into footwear in the past few years, who are pricing away a lot of its market share. “Clarks is competing against all the clothes retailers, such as New Look, which is doing very well, and there’s really strong competition in the middle market from Marks & Spencer. M&S is beginning to address its offer and those customers are going to be Clarks’ customers.”
Mike Godliman, director and retail consultant at Pragma Consulting, agrees: “The market is increasingly fragmented and a lot of fashion retailers now also sell shoes. But Clarks is a good brand and has improved in the past ten or 15 years, so there’s a lot of opportunity for it. To be a success in retail and to be big, you have to have a range that is appealing to the middle market and that is what M&S seems to have done with its shoe offering.”
Clarks first started reviving its fortunes in the 1990s, when its desert boot – a cornerstone of its Originals range since the 1950s – enjoyed a cult following among the Brit Pop generation. Yet, despite launching new ranges and more fashion-conscious designs, the company has failed to lose its reputation of offering comfortable, staid shoes.
Hinton says: “It’s the same for many UK retailers in the fashion and clothing sector. They have had to adapt to the changing nature of consumers. For Clarks, a contemporary 50-year-old is very different from 50-year-olds of the past. They are now very demanding.”
Cyrus Clark established the company in 1825 in the village of Street, Somerset, where he tanned sheepskin rugs. He was joined five years later by his brother James, who introduced sheepskin slippers. By the 1950s, the company was moving into world markets and, a decade later, saw huge success with its children’s shoes, an offering that has helped it remain a market leader on the British high street. Today the Clarks family still owns 80% of the company.
Carr says more recent changes at the company got under way in 1996 when a new management team was put in place. “We looked at every area of the business. We closed the UK manufacturing business and moved it overseas to give us more flexibility and better pricing.”
Rune Gustafson, chief executive of brand communications agency Interbrand, says that has been one of the problems for the company. “The brand needs to clarify what it is. It needs clarity on how much of a retailer it is or how much of a shoe brand it is. I think it needs to define that position again,” he says.
There are now 400 UK stores and a further 100 operated through a franchise system. In 2004, it launched a new store format that is being rolled out globally, and that puts the focus squarely back on the shoes. The company is also looking to increase its presence abroad. “Internationally it has a good reputation with plenty of opportunity to grow on that,” says Hinton.
Carr says the company appointed AMV.BBDO because of the agency’s global reach. The retailer already has sizeable interests in Spain, Germany, the Benelux countries and Japan, and has aspirations to expand into emerging markets including China, India and Eastern Europe. “In Spain, we run the same press and TV campaigns, with only slight regional differences,” she says.
The retailer is also moving online and is developing a shopping website that will launch within a year, which will offer a “substantial” number of the company’s products, according to Carr.
Despite its recent problems, the company appears to have big plans for the future and has a strong pedigree that could be its saving grace, according to Hinton: “They will continue to find it a competitive market to operate in, but Clarks is a market leader. It’s a strong brand and there’s still value in that name,” she says.
This notion is backed by Gustafson, who agrees that its history is a strong selling point for the company. “The Mini retained its heritage, but moved forward under BMW,” he says. Perhaps Clarks will tread the same path.
Facts and figures
Cyrus Clark starts tanning sheepskins in Street, Somerset
Brother James joins him and introduces sheepskin slippers
The company buys recently invented Singer sewing machines
Clarks expands rapidly with the introduction of new technologies and materials
The company moves into international markets and launches the Desert Boot
Clarks becomes a market leader in the sale of children’s shoes
Clarks introduces polyurethane, a material that improves the comfort of its shoes
The company stops manufacturing shoes and is increasingly known for its retail chain
C&J Clark is the UK’s number one shoe retailer with 9.5% of the market