Clarks suppliers will be paid, interim CFO promises
In statements about its bid to secure a new agreement with property companies over the cost of renting its retail spaces, footwear group Clarks placed much of the blame on covid-19.
Several members of its leadership team mentioned covid-19 in comments at the time of an offer of new investment from Hong Kong-based private equity firm LionRock. LionRock’s proposed investment of £100 million is dependent on Clarks persuading landlords to help it manage existing debt and move its “rental cost base” to a new model.
Clarks has 320 own-brand stores in the UK and Ireland. Commenting on the LionRock announcement, the footwear group’s interim chief financial officer, Philip de Klerk, said it hoped to move the way it pays the property companies that own the land its shops are on to a new turnover-based model. He said this would include making 60 of the shops “nil rent”.
These proposals are part of the Company Voluntary Arrangement (CVA) that Clarks needs to secure to bring in the new investment. Mr de Klerk said: “It is important to stress that we are not announcing the closure of any stores today, and employees and suppliers will continue to be paid [but] the CVA is being launched out of absolute necessity.” He pointed out that the impact of the covid-19 pandemic and current economic uncertainty had created “a tough retail environment”.
Expanding on this, the group’s non-executive chair, Stella David, said: “The ongoing covid-19 crisis that has engulfed the world this year has affected Clarks, in common with many other brands. We owe it to our consumers, our employees, all our partners and everyone that loves the Clarks brand to ensure that this company is protected and that its future is secured.” For her part, chair of the Clark Family Shareholder Council, Irene Pedder, said: “The impact of the ongoing covid-19 crisis has resulted in necessary steps being taken to safeguard the future of the Clarks brand, business and its people.”
However, Gavin Maher, a partner at consultancy Deloitte, with whom Clarks has been working on a business transformation plan, said that what covid-19 had done was exacerbate challenges that the footwear group had been facing for some time. Mr Maher said: “The retail trading environment in the UK has been under pressure for some time. The Clarks UK business has been faced with weaker consumer confidence and reduced footfall.”
