// Clarks has entered a CVA process which will keep all 320 stores open with no rent on 60 sites
// It has been rescued in a £100m deal by private equity firm LionRock Capital
Clarks has been rescued in a £100 million deal by Hong Kong-based private equity firm LionRock Capital, following a lengthy sales process.
The deal will see the 195-year-old shoe retailer take out a CVA, allowing its business to keep all 320 stores open with no rent on 60 sites.
The company has reportedly told 3969 of its shopfloor workers in the UK that their roles are at risk of redundancy on Wednesday morning, Retail Week reported.
However, Clarks has maintained that there will be no jobs lost and staff will continue to be paid despite the reports.
The remaining outlets will be switched to a turnover-based model, where rent is calculated on the amount of cash that goes through the tills, but the process must be voted through by landlords at a meeting next month.
Last month, Clarks said that as part of the proposed CVA, it could potentially shutter up to 50 stores – affecting hundreds of jobs.
“In order to address the permanent shift in structural shopping behaviour as a result of the Covid-19 pandemic, the CVA is being launched out of absolute necessity,” Clarks interim finance chief Philip de Klerk said.
“The proposal to creditors outlines a combination of a reduction of rent and a move to rebase Clarks’ rental cost base through a turnover-based model that aligns to future performance and reflects the wider retail market.
“As part of the CVA, we will move 60 of our 320 stores to nil rent.
“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.”
If successful in a vote next month, LionRock Capital will buy a majority stake in Clarks, with the Clark family to remain invested in the business.
Deloitte partner Gavin Maher, who is running the CVA process, 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.
“In the midst of Clarks undertaking its transformation plan, Covid-19 exacerbated these challenges, with working capital and turnover significantly impacted, placing acute liquidity pressure on the group.
“The turnover rent model better aligns the risk and reward of trading during these uncertain times, and the CVA, together with the proposed investment from LionRock, provides a stable platform upon which the management’s transformation strategy can be delivered.”
LionRock Capital founder and managing director Daniel Tseung said: “Clarks is one of the world’s most recognised consumer names and we look forward to working with the Clark family in extending its tradition of providing customers with top-quality products and exceptional service.”