Clarks reports another loss, says times are still tough
UK shoe giant Clarks has filed its results for its financial year to February 2020 and the figures show just how much it was struggling even before the pandemic forced all of its stores to temporarily close and sent footwear demand plummeting.
Since the period it’s reporting on, it has launched a CVA and brought a new investor on board with the founding family relinquishing control for the first time in centuries. That has helped put it on a much more stable footing.
But in the 2019/20 financial year before all that happened, it said its turnover fell 8% to £725.3 million and this meant an operating loss of £14.1 million, although this was much better than the £48.7 million it lost in the previous year. Its loss after tax was £15 million, which was narrower than the £20.9 million of the previous year.
The turnover reduction came as it sold fewer pairs of shoes overall, “reflecting continued difficult conditions in the UK and ROI retail channel as footfall declines continue[d]”.
The trend from the previous year of reduced discounting was continued into the period in question. This helped improve the margin rate achieved, which was one piece of good news.
And while it made an operating loss, that could also be seen as good news given how much lower it was than the previous year. This was helped by “strong cost control”. And that was also responsible for the smaller post-tax loss, as was the margin improvement.
The company said that the Covid crisis “has had a significant impact on Clarks’ global operations”. We've heard plenty about how much pressure it has been under in the past year already. But it also said that it has seen greater foreign exchange volatility and post-year-end “many orders have been reduced or cancelled due to Covid-19, while inventory payments were also delayed compared to the original forecast”.
It mentioned Brexit too and so became the latest company to highlight how much of a problem the UK's final exit from the EU is. This week both JD Sports and Ted Baker have said that despite claims the UK-EU relationship would be tariff and quota-free, there would be tariff issues and other costs adding up to between £5 million and £10 million this year.
Clarks too said that Brexit “will have an impact on our profitability and cash flow over the foreseeable future and brings risks and uncertainties in a number of areas”. There will be specific new costs, of course, but it also highlighted how the continued weakness of sterling could hurt it in relation to buying stock.
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