Clarks investment deal contingent upon agreement of a CVA
Clarks could close up to 50 stores as part of a potential CVA in order to gain the backing of investor LionRock Capital.
The Hong Kong private equity house is in discussions with the historic British footwear business to inject up to £100m into the business. However its investment would be contingent upon Clarks gaining support for a CVA to enable it to reduce its store estate, Sky News has reported.
Clarks operates around 500 stores in the UK (including concessions) and a deal with LionRock, should it come about, would lead to its founding family relinquishing overall control.
Late last month it was revealed that LionRock was one of two bidders in the frame to acquire a stake in Clarks. This news followed Clarks statement in May that it was considering selling a stake in the business in order to raise £100m-£150m.
In the same month CEO Giorgio Presca announced a company restructuring that would lead to 900 jobs being cut from its global workforce, though some 200 new roles would partly offset the losses. A total of 160 job losses were announced immediately.
As part of the "Made to Last" strategy Presca also announced Presca the company would be focusing on three main areas of the business moving forward: Clarks Originals, Clarks Collection and Cloudsteppers by Clarks.
A spokesperson for the company declined to comment on the potential LionRock deal saying: “We recently announced Clarks’ long-term ‘Made to Last’ strategy that is designed to ensure that our business has a sustainable and successful future, keeping it in step with changes in how consumers around the world choose and buy their shoes.
"As part of this strategy, the Clarks Board of Directors is currently reviewing options to best position our business, our people and the Clarks brand for future long-term growth.”
Pippa Stephens, Retail Analyst at GlobalData, a leading data and analytics company, commented: “Clarks’ reported proposal to shutter around 50 of its stores as part of a CVA is long overdue, as its lack of decisive action in recent years has put it in a far weaker position than it should be to withstand the current crisis. The retailer had 521 stores in the UK (including concessions) at the end of FY2019, and should have started the process of eliminating stores much earlier, as consumers have increasingly been shifting to purchasing online in recent years. With COVID-19 only accelerating this trend, the closure of just 50 stores is not significant enough to fully adapt, and the shuttering of more locations will likely be necessary so that it can prioritise its investments into its digital channel.”
“Clarks’ share of the UK footwear market is forecast to have fallen by 2.3ppts over the past five years, to 5.7% in 2020, as it has struggled to provide a compelling product offer, thus losing relevance among many of its core consumers. Though the athleisure trend had already been driving trainer purchases prior to the pandemic, COVID-19 has boosted appetite even further, due to greater importance being placed on fitness and being outdoors. This has caused sports specialists like JD Sports and Sports Direct to gain greater top of mind appeal, so Clarks must strive to increase its mix of comfortable and casual styles to help it win back market share and become more resilient to changing fashion trends.”
Clarks was founded by Cyrus and James Clark in Street, Somerset, in 1825. The Clarks family still retains 80% of the company spread amongst more than 400 family members.