C&J Clark (Clarks) reported a 4.5 percent increase in total revenues to £709.8 million (€957.6m-$1,091.1m) for the first half of its current financial year, ended July 31, but its net profit fell to £16.3 million (€22.0m-$25.0m) from £33.5 million in the corresponding period of 2014. “Generally, in terms of profitability, we find ourselves in a weaker position than we had expected at the beginning of the year,” commented Tom O'Neill, executive chairman of the group, listing the factors of the deterioration.

He criticized a “less than optimum” transition in the Americas from the company's old warehouse in Hanover, Pennsylvania to a new distribution center, resulting in delayed deliveries to customers. Also in the Americas, he said that Clarks was slow in launching more aggressive promotional actions earlier in the year.

One of the consequences was a drop of 10.5 percent in volume deliveries to wholesale customers in the Americas, with a higher mix of discounts that led to a 13.9 percent decline in the wholesale turnover.

On the other hand, the performance of Bostonian and other retail chains owned by the group in the Americas improved in the first half, leading to an increase of 6.4 percent in retail sales, against a 1.4 percent increase in the market. On a same-store basis, sales in the group's full-price retail stores declined by 1.3 percent in the region, but its factory outlets performed slightly better. Online sales grew by 16.6 percent, but they were more promotional than before, contributing to a drop in retail profits of 8.4 percent.

Clarks booked a 21.8 percent fall in regional profits in the Americas to £25.9 million (€34.9m-$39.8m) on 5.3 percent higher sales of £268.5 million (€362.2m-$412.2m).

O'Neill noted that many of the challenges that Clarks had faced in the second half of last year, including shifts in consumer behavior, have intensified, and said that the company was able to react properly only in some regions. He mentioned in particular the consumers' search for differentiated products, for value for money and for excellent service, while purchasing more in an online environment.

He also said that Clarks' product offer failed to respond strongly enough last spring to the “athleisure” trend toward lightweight casual footwear in the market. He said the company failed at times to make targeted promotions to drive traffic to its stores.

O'Neill admitted to some external factors that affected the group's profitability, notably in the European region outside the U.K. and Ireland, where the weaker euro diluted sales and profits. Aside from macroeconomic disruption of the market in Russia, Ukraine and Greece, Clarks had to deal in the region with a reduced order volume of premium men's shoes due to last year's loss of production from a factory in Vietnam. It also had to cope with high customers' inventories at retail.

Profits declined by 18.2 percent to £14.4 million (€19.4m-$22.1m) in the European region during the first half. Due in part to the depreciation of the euro against sterling, sales fell by 4.1 percent to £72.7 million (€98.1m-$111.6m). Clarks delivered 2.4 million pairs in the region, 1.1 percent below the level of the year-ago period. The gross margin declined to 50.2 percent.

In the U.K. and Ireland, where Clarks continues to operate many stores, retail profits declined by 14.0 percent to £35.8 million (€48.3m-$55.0m) on nearly flat revenues of £290.9 million (€392.5m-$446.6m). Because of insufficient volumes, same-store sales were up by only 1.0 percent during the period, compared with an increase of 3.7 percent for the whole British footwear market. According to O'Neill, the product offer in Clarks stores was perhaps too heavily weighted toward fashion-forward styles at higher price points, at the expense of the brand's core premium classic collections.

Clarks maintained its position as the leading online shoe retailer in the U.K., with home deliveries rising by 29.5 percent and in-store collection growing to more than 5 percent of retail sales. The turnover was flat in the factory outlets and in the wholesale channel, but profits improved by 13.2 percent and by 6.8 percent, respectively.

The Asia-Pacific performed best. Total volumes increased by 9.8 million and average prices went up by 4.7 percent, contributing to an overall sales increase of 20.2 percent to £73.3 million (€98.9m-$112.6m). Clark sold as many pairs in Asia-Pacific as in Europe, but Europe was left behind in terms of actual turnover. The cost of the group's retail expansion in China limited the growth in regional profits to 9.8 percent, but at £18.0 million (€24.3m-$27.6m), they were higher than the profits reached in Europe.

The strong performance in the region was led by China, where sales volumes rose by 20.3 percent and profits by 31.2 percent. Improvements were also recorded in Japan and Australasia. Sales went up by 4.6 percent in India. On the other hand, customer traffic flows declined in Southeast Asia. Import restrictions affected Clarks' business in Indonesia and its profitability in Turkey.

The results of the second half of this year will be largely dependent on the progress in the transition to its new logistic structure in the U.S. On the other hand, orders are up by a modest single digit in Europe, and the brand continues to enjoy strong demand in Asia-Pacific.

The back-to-school season showed record sales and margins in the U.K. and Ireland, partly due to higher sales of sneakers. Excellent sell-out rates were achieved in the U.K. as well as in the Americas with the brand's new active-casual Cloud Stepper and the Trigenic category, described as its response to the athleisure phenomenon.