Clarks parent revenue rises but it swings to a 2023 loss

The parent company of the Clarks brand, C&J Clark (No1) Limited, has filed its accounts for 2023 with revenue rising, but gross profits dipping as the cost of sales rose and the firm swinging to an operating, pre-tax and net loss after being profitable in 2022.

It was definitely an accounts filing of strong contrasts but one that also suggests hope for the future. Clarks has been unveiling interesting products and marketing initiatives in recent periods and there were signs in the accounts of progress on its strategy.

The numbers

So let’s look at the details. In the 12 months to the end of December, revenue rose to £994.5 million from £980.3 million in the previous year, but the cost of sales this time was £513.4 million compared to £494.4 million previously. Net pairs of shoes sold for the year was 30.7 million compared to 32.3 million in 2022, reflecting the fact that part of the higher revenue was linked to higher prices on the back of inflation and more premium products. 

Revenue by channel divided into £238.9 million for retail, down from £241.2 million. E-commerce was up marginally at £134.9 million. And wholesale rose to £416.2 million from £404.8 million. Outlet revenue rose to £203 million from £199.3 million.

Meanwhile the UK/Republic of Ireland saw revenue rising to £398.3 million from £387.4 million, while the Americas rose to £466.3 million from £457.9 million. EMEA fell to £38.1 million from £43.7 million but APAC rose to £91.8 million from £90.5 million.

So far so good. But gross profit fell to £481.1 million from £485.9 million. And the group operating loss was £20.3 million after a £54.5 million profit a year earlier. The loss before tax was £39.8 million, some £75.7 million lower than the year before’s profit. And the net loss was £32.1 million, a sharp fall from the +£22.4 million in 2022. 

The company was impacted by one-off costs totalling £52.8 million so the profit figures shouldn’t be interpreted quite as badly as they might be on the surface.

Yet there’s no disguising that, as it said in the accounts, the business and trading environment was one of “ongoing uncertainty and relative pessimism especially in the western hemisphere”.

Clarks in 2023 was operating in a market with weak demand after being oversupplied in the global recovery post-pandemic. 

The brand saw sluggish demand in full-price channels with consumers reacting to high inflation and high interest rates. It said they continue to be cautious, to seek lower prices and that store footfall trended down.

And even with consumers being very focused on price, the company’s Western outlet stores performed below expectations, particularly in H2, which must have been disappointing coming after a stronger performance in the early months of the year.

Wholesale demand also reduce as the year progressed with the market and many wholesale customers being overstocked. And of course, those wholesale customers also faced their own demand issues during the year.

That said, the APAC region saw more robust demand with outlet stores in particular trading well across all markets. This was driven by strong average selling prices, tourism and increased footfall during key holidays.

But the overall promotional marketplace globally meant the company saw intense pressure on its margins and cost control was a key focus of the year. 

Its results for the period were also impacted by the impairment of store assets, which had a significant effect.

All of that resulted in the loss after tax that missed the firm’s target.

Highlights

Yet even though 2023 was clearly a difficult year financially, there were some notable achievements. Inventory focus and control was a particular highlight and the company managed to reduce inventory aged over two years by 76.7% year on year.

The business also completed major investments in technology platforms to replace legacy systems, and continued to generate brand heat in multiple important territories. Its borrowing also continue to be controlled and managed well.

Clarks has been continuing its recovery strategy that targets growth in profits, revenue and market share and said that strong progress has been made here.

Established and new markets

One of its key focuses is to recapture and grow establish markets such as the UK and US. And it said that perception of the Clarks brand in the Americas has improved and successful marketing campaigns have made it more visible in new places with more contemporary consumers being attracted to it.

A refreshed leadership team in the UK should also help build future plans in its home market too.

It has been focusing on efficiency and said it has moved forward with this including seeing improved merchandise planning and a reduction of SKUs.

It added that in the UK the brand has halted its long-term market share decline and has seen growth in men’s among UK consumers age between 30 and 44. In the US, the average age of its consumers has reduced from 49 pre-pandemic to 41. Among these shoppers, brand appeal grew in 2023 as Clarks is perceived as a more stylish and premium brand.

But it’s not only about those two key markets and it said that it has also made positive steps in establishing best practices across China and EMEA to support the customer experience and market share. The Japanese market has also seen success in increasing its brand presents through new Clarks Originals stores. Globally a higher proportion of more premium product was also sold.