Wednesday, 02 September 2020 16:15

Can Back To School Save Clarks?

can back to school shoes save Clarks chic geek expert commentThis week sees the start of the new academic year and the return of the majority of schools in the UK. Vast numbers of the nation’s school children have not seen a classroom since March and thus the need for new school uniform became negligible. But, after almost six months away, retailers will have seen a huge spike for new school uniform and all the accoutrements that go with the ‘Back To School’ marketing push.

Left - Mendip Craft Youth Black Leather - £46

According to research by Mintel the back to school market was worth £1.16 billion in 2018. This was an increase of 36% on the previous year, when it was worth £855 million, making back to school spending the third biggest retail spending event after Christmas and Black Friday. Parents told Mintel they spent an average of £134 on school uniforms and shoes in 2018, a 6% increase compared to the average of £127 spent in 2017. Collectively, Brits spent a total of £510 million on school uniforms in 2018, up from £395 million in 2017. GlobalData, a leading data and analytics company, estimated UK shoppers were set to spend £1.7bn on back to school items in 2019, with the market forecast to grow by 1.5%. This is only slightly outperforming the annual rise in the number of pupils due to population growth.

One of the biggest back to school beneficiary brands was Clarks, who for many years was the go-to source for children’s school shoes.

But, it’s been a tough few years at this still family-owned, British high-street institution, which has seen revenues and profits falling. The latest accounts show turnover to February 2019 was £790million, down 4% from 2018 at £820.4 million. The breakdown of this was UK and ROI contributing £561.1million, Asia Pacific £135.2million, Europe £96.5million and the Americas just £0.5million.

An operating loss of £48.7million was reported, up from £3.7million the previous year.

can back to school shoes save Clarks chic geek expert comment

The brand reported a ‘poor’ performance and cited it was struggling in part due to the weakness in sterling which made its goods sourced from the far east more expensive when paid in US dollars. All of this was all pre-COVID.

Right - Clarks was founded in 1825 by brothers Cyrus and James Clark in Street, Somerset

Founded in 1825 by brothers Cyrus and James Clark in Street, Somerset, where it still has its headquarters, the company has over 1,000 branded stores and franchises around the world and also sells through third-party distribution in 35 countries. The Clarks family still retains 80% of the company spread amongst more than 400 family members. The world number one in ‘everyday footwear’, Clarks sells more than 50 million pairs of shoes every year.

In February 2018, Lance Clark, the head of the Clarks shoe family, largest shareholder and inventor of the firm's iconic Wallabee shoe died aged 81. He was managing director of the family shoe company until 1994. The Clarks CEO at the time, Mike Shearwood, described Mr Clark as 'an immense character' who played 'a very significant role' in the company. He said, “We have lost an immense character who will be forever prominent in our company's history.”

Lance Clark was a leader and his extensive experience gave the company direction and many credit him for the amazing growth of Clarks in the late 20th and early 21st century.

The same year, June, Shearwood was dismissed under a cloud after being accused of  ‘inappropriate behaviour’ including sexist, racist and homophobic comments.

In October 2019, he lost his case for unfair dismissal after taking Clarks to an employment tribunal. Clarks said Mr Shearwood's conduct was the reason he was made to resign, and an employment panel agreed. Allegations were made by the 56-year-old against chairman Tom O'Neil, whom he claimed adjusted the minutes of board meetings.

After much fanfare, in January 2019, Clarks announced a it was closing its new manufacturing facility in Street after failing to meet manufacturing and cost targets. The state-of-the-art factory was originally scheduled to open in 2017 with Clarks hoping to make 300,000 pairs of made-in-England desert boots a year at the facility, and create up to 80 jobs. However, the opening was delayed and the factory only started production in summer 2018.

can back to school shoes save Clarks chic geek expert comment

In recent news, Clarks made the decision not to reopen a ”meaningful" number of its 347 UK store estate once the government-mandated lockdown ended. As part of the “normal review” the retailer decided not to renew the leases on a small number of stores as they expired in May 2020. An exact number and locations weren’t announced. It had already closed 56 stores in 2018/19. In May 2020, Clarks announced 900 roles were going globally with 108 of those redundancies at its HQ in Street, Somerset.

Left - Scooter Speed Kid Black Leather - £48

Clarks is now under the leadership of Chief Executive Giorgio Presca, who joined in March 2019, six months after Mike Shearwood stepped down. Presca has more than 20 years' of experience in managing and developing global premium brands, previously leading Golden Goose Deluxe Brand, and was chief executive at Italian footwear brand Geox between 2012-2016, which is more relevant to Clarks’ market. Presca has also worked at Diesel, VF Corp, Citizens of Humanity, Levi Strauss & Co. and Lotto.

The vast majority of parents wouldn’t have bought any school shoes between March and August this year. That would mean a huge demand in one go for new school shoes. Currently, online, Clarks’ children’s shoes - boys and girls - range in price from £36-£58. This is often more than what parents would spend on shoes for themselves. They are willing to pay more for a pair they feel with last.

When you consider young children’s clothing and shoes don’t include any VAT - everything under the maximum size an average child will be on their 14th birthday - then the margins are big.

Clarks has had a difficult few years and has become somewhat rudderless with a lack of direction and leadership. The expensive factory debacle and the distraction of Shearwood’s tribunal would have had an effect. Clarks doesn’t include a breakdown of its children’s shoes within its figures, but it is no doubt considerable. Over 70% of Clarks’ turnover is from the UK and ROI and much of this will be the school market. With not much recent innovation in its adult ranges, the children’s shoe sector will be incredibly important to them and this will be make or break time. Without this back to school boost Clarks could be in serious trouble and they’ll be praying they all stay there wearing out those new shoes.

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