Clarks' turnover increased by 4.2 percent to £739 million (€858.4m-$924.8m) in the six months ended July 31, but it would have declined by 0.5 percent if the U.S. dollar and other currencies had remained the same. The brand's new Trigenic range sold well, but a large part of the revenues came from the planned elimination of surplus inventories at distressed prices. Clarks sold 4.2 percent more pairs than in the same period a year earlier, but it did so at 3.2 percent lower average selling prices.
The company had to book an operating loss (Ebit) of £3.1 million (€3.6m-$3.9m) for the first half, compared with an operating profit of £18.8 million in the year-ago period, due in part also to exceptional charges of £12.8 million (€14.9m-$16.0m) caused by the dismissal of 170 employees in the framework of a reorganization program. The loss would have been £5.9 million (€6.9m-$7.4m) higher if exchange rates had remained the same.
After taxes, the company made a net loss of £8.8 million (€10.2m-$11.0m) against a profit of £16.3 million in the corresponding period of 2015.
Sales declined by 2.3 percent to £284.1 million (€329.9m-$355.3m) in the U.K. and Ireland in the first half, outperforming the local market by five percentage points on a same-store basis. The online business continued to grow. The company noted the emergence of a much softer pattern of consumer spending in the U.K. since the beginning of the year.
Clarks' sales rose by 1.3 percent to £73.7 million (€85.6m-$92.1m) in the rest of Europe, which is now led by the same team that is managing the U.K. and Ireland. Sales volumes generated by the European website of the company jumped by 26 percent during the period.
In the Americas, sales increased by 12.3 percent to the equivalent of £301.4 million (€350.0m-$376.8m), with growth of 1.8 percent in local currencies. Progress in the region is ahead of plan under the new management of Gary Champion, says the company, adding that the autumn/winter season started out well for its business in the region.
Deliveries to wholesale customers in the Americas grew by 7 percent in volume, but stock clearance affected margins. They have become more timely. Including the turnover in its outlet stores, the company's own retail sales in the Americas fell by 4.5 percent on a comparable store basis, against a drop of 1.5 percent in the U.S. footwear market. The multi-channel business grew by 19 percent.
Higher operating results were recorded in the rest of Europe and the Asia-Pacific region. A sales increase of 7 percent to £78.6 million (€91.3m-$98.3m) in Asia-Pacific helped boost regional profits by 14 percent to £20.5 million (€23.8m-$25.6m), better than the regional profit of £16.4 million (€19.1m-$20.5m) in the rest of Europe.
The growing profitability in Asia-Pacific was driven by China, and operating results improved also in Japan and Australasia. Sales in India rose by 24 percent, but increasing costs put pressure on margins. Singapore and Malaysia remained subdued. Customer traffic remained low in the Middle East.
The vote cast on June 23 for Britain's pull-out from the European Union created a feeling of uncertainty, but the back-to-school season went well for Clarks, with flat sales of 1.3 million pairs of school shoes at a one percent better margin than a year ago.
The drop in the value of the pound that followed the Brexit vote will significant impact the group's profitability in the second half of its financial year because it purchases its goods in dollars, outweighing the benefit of a strong dollar on its dollar-denominated sales.
In its interim financial report, which was published just before the recent appointment of a new chief executive for the group, Mike Shearwood (see our previous issue), Clarks said it will react to the new post-Brexit challenges by simplifying the business further, improving processes and concentrating on products that generate more cash and profits.
Last February, the board had set an 18-month scheduled to clear its excess inventories, but Thomas O'Neill, executive chairman, is now confident that the company will be able to do so sooner.