Clarks is experiencing a long term profit decline.
Trouble at the mill
There are many reasons why Clarks is suffering.
Traditional leather shoes (a Clarks’ staple) are going increasingly out of fashion whilst casual trainers and alternative fabric footwear are in.
Meanwhile, popular retailers like Topshop, River Island and Primark have well developed shoe offerings at competitive prices. This means that Clarks, a one item shop, must instead develop a popular brand to draw in customers.
Added to this are changing consumer habits: even the stalwart Marks & Spencer is losing customers to the likes of online retailers Asos and Boohoo. Clarks needs to do more with its digital sales channel.
Back to Brexit
Whilst many companies use Brexit as a weak reason to justify poor results, Clarks is legitimate in raising it.
The company imports a lot of its shoes. This means that a weak pound, caused by the uncertainty of Britain’s future relationship with the EU, is making the firm’s costs go up significantly. The CEO believes Brexit will continue to have a “profound impact..on cashflow and profitability for the foreseeable future.”
Shut up shop
The firm has a large footprint across the UK, with 550 stores. But this could soon be reduced significantly.
The company has launched a review into its store portfolio, to see if some can be closed or if rents can be renegotiated. This comes at a time when business rates are set to go up.