Clarks reports significant losses following Covid-19 lockdowns
Footwear brand Clarks has released its annual report for the financial year ending 30 January 2021, revealing significant losses as a result of the COVID-19 pandemic.
In the report, Clarks acknowledge the significant impact COVID-19 has had on the business.
Turnover fell by over £600 million from £137 billion in 2019/20 to £755 million in 2020/21. It made a profit of £17.2m after tax in the previous year.
Clarks reported that revenues were affected by several factors, including the first UK lockdown coinciding with the introduction of a new season of stock. Underlying operating loss for the 52 weeks to 30 January 2021 was £70.9m, compared with a profit of £46.2m in the previous year.
At the end of 2020, Clarks secured a new private equity owner. The £100m injection of funds from LionRock Capital came as part of a refinancing package, which cost the company Clarks £29.1m in fees to secure new equity and new banking facilities, and oversee a company voluntary arrangement (CVA). The annual results state that LionRock has a 51% controlling stake in Clarks following the completion of the refinancing in February this year.
On top of the £29.1m refinancing costs, a further £32.5m in reorganisation costs were accrued during the year, as well as £18.5m in onerous lease and store asset impairments.
The annual report stated: “Being a global footwear retailer with a seasonally driven business model, the impact of Covid-19 in the year was immediate given that reduced demand coincided with the commencement of our spring/summer season and new inventory resulted in a significant working capital impact which continues into 2021.
“In addition, many of our wholesale partners imposed extended payment terms, which has delayed the receipt of cashflow.”
During the pandemic, Clarks stopped all discretionary spending, extended payment terms with suppliers, stopped 70% of all capital expenditure and focused on critical business spend and stopped the company dividend.
The report states: “UK and ROI turnover is down 42.7% given the direct impacts of government-mandated lockdowns in spring 2020 and November/December 2020 and again in January 2021.”