Clarks profits hit by rising costs and promotions

According to the group’s accounts filed at Companies House, Clarks pre-tax profit fell from £108.7m to £106.1m.

Group turnover for the period increased to £1.4bn from £1.3bn the previous year.

Clarks chief executive Melissa Potter said that higher labour and material costs from Clarks’ Chinese and Vietnamese supply base coupled with higher than planned volumes of promotional and sale product, both contributed to the dip in pre-tax profits.

Operating profits at Clarks International – which includes the UK and all markets other than North America – declined 16.4% due to the challenging domestic market.

Potter added: “While the UK has remained extremely challenging throughout and European markets became ever more clearly influenced  by the wider concerns over the sovereign debt crisis as the year progressed, North America has emerged with increasing confidence from the recession and our fledgling operations in Asia, India and the Middle East all prospered in a climate of business growth.”

In North America Clarks achieved a growth in turnover of over 9.1% to £524m as the company sold 20 million pairs of shoes in the market for the first time.

In the UK, Clarks’ best performing area was its multi-channel business, with its combined home delivery and collect-from-store business growing to £45.9m in turnover by the end of the full-year period. Clarks said it sold 1.5 million pairs through this channel, with sales up 42.7%.

Clarks’ wholesale and franchise business experienced a year of record growth, with net turnover up 26.4% to £263m.

Potter added that while conditions in the UK remained challenging Clarks will continue its current programme of exiting unprofitable store locations.

“This will be a gradual and long-term process which will still leave us with a substantial investment in retail distribution in our home market,” she said.

Another key part of Clarks’ strategy going forward will be to drive faster growth via its multi-channel operation , developing new ways of engaging with consumers and expanding its offer to include an online kids footwear business, which it launched in May of this year.