Footwear retailer Clarks has cited that fierce high street discounting and problems in its American business have hit recent sales and profits.
Accounts at C&J Clark Limited show that annual sales fell by 3.2% to £1.49bn in the last year, while lower pension and interest costs helped pre-tax profits rise 1.4% to £121.5m.
Clarks’s CEO Melissa Potter said that it had been a “very challenging year” for the footwear brand, which currently operates over 1,000 stores around the world, as Black Friday straining UK sales.
Potter blamed the company’s difficult year on falling sales in the UK and America as well as the fault of damage to a supplier’s factory in Vietnam which resulted in a shortage of Clarks Originals shoes and men’s’ Gore-Tex.
Potter states that the company’s “number one priority” is to restore the Americas business this year (in the previous year to the end of January, sales in the US fell 10.6% and profits by 22.9%). The British retailer is suffering in the US due to declining footfall in its stores, strong competition and a shift in consumer spending towards ecommerce.
Similar difficulties have been faced in UK and Irish branches where like-for-like store sales fell by an average of 3.6% and total sales from £645m to £637m.
Potter said: “Our core trading strategy of building a more premium mix of full-price adult sales whilst protecting our dominant share of the children’s shoe market has proved consistently successful”.
“It did not however prevent us from coming under sever pressure through the second half of the year as consumers intensified their search for value, shifted more of their purchases online and challenged brands and retailers more than ever to come up with compelling product and marketing propositions to give them a reason to buy” the CEO added.
Thomas O’Neill, the Chairman of Clarks, warned that macroeconomic factors could hurt the retailer further. Said O’Neill, “The world continues to be a volatile place with Russian tensions persisting in Europe, the renewed concern over Greece and the impact not only on the euro but the greater European Union. Economic conditions in the UK and Ireland and American have certainly improved recently. However, a discernible by-product of the improvement had been an aggressive and persistent consumer attitude in pricing”.
“Consumers have been conditioned over the past few years to buy only when product is reduced, discounted or “on sale”. This has altered the retail landscape for Clarks and represents perhaps one of the most significant risks for 2015, i.e. Clarks ability to command and realise a premium price for its products, particularly in the Americas and the UK and Ireland” O’Neill added.