Retiring as chief executive after 16 years with C&J Clark, Peter Bolliger is handing the chief executive's position over to Melissa Potter as the world's leading casual footwear company reports an improved balance sheet and a drop of only 1.9 percent in net profit after extraordinary items to £60.8 million (€71.4m-$88.3m) for the financial year ended last Jan. 31.

Consolidated revenues grew by 4.6 percent to £1,173.5 million (€1,379m-$1,705m). At constant exchange rates, though, the figure would have been about flat. By volume, sales crept down by 5.7 percent to 46.4 million pairs, but average selling prices increased. The gross profit margin was 48.6 percent, up from 47.4 percent last year.

The operating profit before exceptional charges rose by 4.4 percent to £97.4 million (€114.5m-$141.5m), but pre-tax profits fell by 2.0 percent to £85.1 million (€100.0m-$123.6m), due essentially to increased pension financing costs. There was a net exchange loss of £5.1 million (€6.0m-$7.4m), and the company took an exceptional charge of £3.3 million (€3.9m-$4.8m) related to a program of layoffs in North America, offset by a £3.9 million (€4.6m-$5.7m) gain from sale of a piece of property.



Clarks International, which groups all business outside North America, made up 66.6 percent of the group's total revenues and grew by 1.4 percent to £782.1 million (€919.1m-$1,136m). Volume sales dropped by 4.7 percent, but prices went up and the division's operating profit before exceptional items rose by 26.6 percent to £94.2 million (€110.7m-$136.9m).

Clarks remains the biggest factor in the British retail market, but it apparently lost some market share as its retail division reported a 0.6 percent increase in comparable sales, well below the 5.5 percent growth estimated by the British Retail Consortium for the market. According to Clarks, the growth of the market was largely due to strong promotional activity, but its own selling prices rose of average by 4.7 percent in order to maintain margins through a more premium product mix and selective changes in category pricing.

Other main distribution channels in the U.K. and Ireland showed mixed performance. Wholesale customers had a challenging environment, and major accounts such as Brantano placed significantly lower order levels than usual. Weaker market demand and credit concerns held down the independent retail sector. Ireland was particularly tough and shipments to independent customers there fell by more than 20 percent, while Clarks' comparable sales at its own Irish stores dropped by 13.6 percent. In the end, profits from the wholesale business in the U.K. and Ireland fell by £4.7 million (€5.5m-$6.8m) as shipments decreased by 22.7 percent.

On the other hand, following the launch of Clarks' e-commerce operation, the results of the company's new multi-channel retail strategy in the region exceeded expectations for the first full year with more than 600,000 pairs worth £20.7 million (€24.3m-$30.1m) shipped direct to people's homes or picked up by them in stores after the sale, for a profit of £6.9 million (€8.1m-$10.0m). Overall, across all distribution channels in the U.K. and Ireland, sales were down by 3 percent in volume, though the net achieved margin rose by 1.8 percent.

Outside the U.K. and Ireland, Clarks International's deliveries slipped by 11.9 percent in volume to 6.1 million pairs. However, average prices were up by 15.5 percent in pounds sterling thanks to good currency effects and a better product mix, so the net turnover rose by 0.4 percent and controllable profits were up by 7.6 percent.

Before exceptional items, profits in the U.K. increased by 0.4 percent to £75.7 million (€89.0m-$110.0m), but they plunged by 47.8 percent in the rest of Europe to £1.2 million (€1.4m-$1.7m), while in the rest of the world they almost doubled to £3.5 million (€4.1m-$5.1m).

Outside the U.K. the biggest problems were seen in the Middle East and South America. Europe saw good performance in Germany and the Benelux countries, but Spain continued to suffer from the recession. Central and Eastern Europe's financial instability hurt there as well. Shipments to China grew by 26 percent, but sales dropped in Hong Kong and Taiwan. Sales were flat in Japan, but favorable currency effects meant a good increase in profit.

The good results of Clarks Companies North America helped the rest of the group. Calculated on the basis of the turnover in the geographical area of origin rather than the ultimate geographical market, as outlined in the previously featured income statement, the subsidiary delivered revenues of £391.4 million (€459.9m-$568.7m), up by 11.5 percent from the previous year. Its operating profit before exceptional items rose by 20.5 percent to £28.8 million (€33.8m-$41.8m).

Commenting on the economic crisis that hit the U.S. particularly hard in the previous financial year, Clarks noted that the second half of the latest fiscal year saw much bigger strides than the first half in North America, but business there is still below pre-recession levels. Improvements in demand were led by Clarks men's and women's products and the Unstructured comfort casual group. Sales to key accounts grew stronger. Canada was the stand-out entity in this division, with sales up by 8.2 percent and profits up by 37.8 percent as Clarks' presence increased in department and ?big box? stores.

North American comparable store sales ended up down by just 0.5 percent for the year, better than the industry average of a 1 percent decline for the major shoe retail chains. Clarks' outlet stores in North America raised their sales by 3.5 percent. The sales increase on a same-store basis has been higher in the first few weeks of the current financial year.

Clarks continued to roll out its international franchise store format across the world, opening 57 new stores during the year to reach a total of 196 franchised locations. About 1.3 million pairs were sold through this format, making up about a third of the company's profits. The format's strength has helped to offset problems with wholesale revenues.

The company had a total of 1,045 stores worldwide at the end of the year, compared with 1,000 the year before, but the number of company-owned stores remained largely constant at 742 units, including 399 Clarks shops, as the group decided to reduce its investments in order to generate more cash.

Clarks says is still working on a joint venture in India, a plan already mentioned in its annual report one year ago. Clarks Future Footwear, a joint venture with the Future Group of India, should now be open for business in the spring of 2011 (more on this in a special issue of Shoe Intelligence on India coming out very soon).

Year-end inventories were at their lowest level in years and working capital was reduced significantly. The company ended the year with a positive cash balance of £77.4 million (€91.0m-$112.5m), a turnaround of more than £100 million from the end of 2008. Capital employed was £353.1 million (€414.9m-$513.0m) at the end of the year, a 20.4 percent decrease from the prior year.

Clarks remains cautious about the outlook for the present financial year, not expecting the global economic recovery to be quick in view of the high unemployment rate in many countries and the danger of a double-digit recession after governments relax measures intended to relaunch their economies. The beginning of the new fiscal year has been positive, with comparable stores sales growth in North America, but conditions in the U.K. are still unsteady. Wholesale orders in both regional segments for the current spring/summer season have recorded increases.

All these data and comments were reported in Clarks' annual report. Company managers have been reported elsewhere as saying that the company is spending about £40 million (€46.8m-$58.0m) annually on marketing.