The billionaire backing the Clarks deal
LionRock’s interest in Clarks could result in major changes in the way the footwear group functions, not least because of the interest a major figure in brand-building and business expansion in China has taken in the deal.
Hong Kong-based private equity firm LionRock Capital has confirmed the completion of its “partnership” with footwear group Clarks. It announced its intention to acquire a majority stake in the group towards the end of 2020, saying it would invest around £100 million. LionRock managing director, Daniel Tseung, has described Clarks as “one of the world’s most recognised consumer names”. He says LionRock is looking forward to working with the Clark family and Clarks’ leadership team “to build on its tradition of providing customers around the world with top-quality products and exceptional service”.
It has wasted little time in putting its own imprint on the leadership team, with Víctor Herrero taking over as chief executive of Clarks, replacing Giorgio Presca, in February. Mr Herrero was formerly chief executive of Guess and, before that, held several senior roles at Inditex, including the position of head of Asia Pacific and managing director for China.
Clarks’s business year runs from February to January. For the 12 months to January 31, 2016, it reported revenues of just over £1.5 billion, an increase of more than 25% compared to the previous year. The top-line figure stayed close to that figure for most of the next four years, reaching £1.65 billion in 2017 and dipping below £1.4 billion in the most recent results, for the year ending February 1, 2020. But profits have fallen. Also in the most recent 12-month period, Clarks sold 42.9 million pairs of shoes and boots, a fall in volume of 7.1% year on year. Then covid-19 hit.
One of the first tasks the new Clarks chief executive faces, therefore, will be to present a set of results that have been “challenging”, to use the group’s own word, for years but are now made vastly more challenging by the pandemic. Another has been to answer questions from UK media about store closures and job losses, especially in its home markets; sales in the UK and Ireland have typically accounted for around 70% of group sales.
Perhaps with LionRock taking a majority stake, Clarks will be one of the first UK-based businesses to effect what the government in London has spoken of as a post-Brexit “tilt” towards Asia. When the investment company declared its intentions, Clarks non-executive chair, Stella David, said: “We are entering a new era for Clarks. Our partners share our long-term vision for a successful and sustainable future for Clarks and the strategy for growth on a global scale.”
Víctor Herrero’s Asia experience could help. During his time as chief executive of Guess, he told Spanish business media: “If you have the right brand proposition, the right concept and a good product, the sky is the limit in Asia.”
Since LionRock’s initial announcement in November, an even more experienced figure in brand-building and business expansion in Asia has joined the fray. Former Olympic gymnast and entrepreneur Li Ning decided he wanted to be involved in helping Clarks build its business back up. Mr Li has acquired a 51% stake in LionRock and is now its non-executive chairman. On completion of the venture capital company’s purchase of a controlling stake in Clarks, he said: “I am thrilled that LionRock Capital is partnering with one of the UK’s most iconic brands during this momentous new phase for the business. We look forward to leveraging our network and experience to support Clarks through the next phase of development.”
Anyone wondering what a former gymnast would know about it should reflect on what Mr Li has achieved since hanging up his singlet. In 1989, he launched his own-name brand. He has built it into one of China’s most successful brands. It spite of covid-19, it recently reported revenues of $2.25 billion for 2020, an increase of 4.2% compared to the previous year.
In 2020, 43.8% of Li Ning’s revenue came from footwear, with most of the rest coming from apparel. However, its attempts to expand beyond China have been largely unsuccessful so far. Mr Li’s status earned him the privilege of being the final torch bearer for the opening ceremony of the Beijing Olympics in 2008. He didn’t just run into the Bird’s Nest stadium, though, but, attached by wires, engaged in a routine in which he appeared to fly around the roof.
In the wake of the global publicity this earned him, he first attempted to enter the US market in 2011. Ten years later, sales outside China still contribute only 1.5% of the Li Ning brand’s revenues. It is possible that his involvement with Clarks can help change this. Perhaps he can help Clarks become strong again, especially in Asia, while Clarks helps his brand achieve the ambition of making an impression on the global stage.
A Clarks store in the UK. Its home market is the source of around 70% of group revenues.
Credit: Clarks
