British footwear group Clarks lost its way under previous managers, but has the “brand and relevancy” to recover and eventually rival Dr Martens and Birkenstock, according to its chief executive.
Victor Herrero became Clarks’s sixth head in as many years in February following a £100m equity injection from new investors Lion Rock Capital and Chinese entrepreneur Li Ning. The transaction resulted in the Clark family relinquishing control of the company it founded almost 200 years ago.
Herrero, who previously ran US fashion label Guess, said Clarks, which went through a heavy restructuring last year, had been suffering from a “lack of drivers”. “Nobody was moving forward with a strategy in place. There was no urgency or desire to evolve the brand”.
“The team is controlling the company now. I am the first CEO and executive chair with skin in the game,” he added. Herrero is also an investor in the business.
He told the Financial Times: “We have iconic brands, like the desert boots and wallabees . . . Global brands will be the winners after the pandemic . . . we have the brand and relevancy, we just have to execute”.
Clarks, which sold more than 40m pairs of shoes worldwide last year, was founded by Cyrus and James Clark in 1825. The company has not been run by a family member since the mid-1990s, but the family holding company — which has more than 7,000 individual shareholders — retains a 49 per cent stake.
The transaction that installed Herrero as chief executive and executive chair valued the footwear group’s equity at about £200m.
By contrast, bootmaker Dr Martens is capitalised at more than £4.5bn while Nasdaq-listed Crocs is worth $6.4bn and German sandal-maker Birkenstock was recently sold for €4bn.
Herrero said such blockbuster valuations were “great news for the sector” and argued that with a presence in 70 countries and endorsements ranging from footballer Raheem Sterling to Jamaican singer Koffee, Clarks offered more than its “sensible shoes” reputation suggests.
Others were less optimistic. Patrick O’Brien, UK research director at GlobalData, said there were big differences between the companies. “Dr Martens is essentially a fashion brand with a few flagship stores . . . Clarks will always be hindered in its quest for fashionability by its reliance on well-fitted kids’ shoes.”
A financier who has evaluated the company agreed. “Clarks is different things to different people. In Asia it is a brand. But in the UK it is sensible shoes for work and school,” he said.
Herrero sees this as an advantage. “We will play to our strengths with consumers in providing comfortable casual shoes, continuing to use sub-branding to differentiate product propositions. I want Clarks to be accessible to all consumers around the world,” he said.
He added that while his immediate priority was to maximise both sales and profitability, rather than chasing unprofitable sales, he intended to change the internal culture.
“We will operate like a start-up, managing costs closely and transforming our support functions”.
Some of the hard yards were done under his predecessor, Giorgio Presca, who left in February after less than two years in charge. During that time, Clarks announced 900 job cuts and implemented a controversial company voluntary arrangement through which most of its 320 UK and Ireland stores moved to turnover-based rents and unpaid rent was written off.
The medicine was hard for a family-owned company to swallow, but Herrero said relations remained constructive. “They are very respectful people, there is no drama,” he said. “We tell them the reality and how we are going to sort it all out. Maybe it is a honeymoon period, but so far so good”.
Herrero said trading in the UK had been better than expected since stores reopened after the latest Covid-19 shutdown, certainly in comparison to the equivalent period last year.
When stores reopened in June 2020 after the first UK lockdown, sales were down 40-50 per cent compared with the year before and by November the company was estimating that Covid-19 would wipe at least £230m off sales in the year to February 2021.
“After the CVA the stores are profitable . . . I’m very comfortable with the stores we have in the UK,” Herrero said, adding that he still “believed in stores” and preferred to shop in them than order online.
He also said it was “clear that the US is going to have a very strong year” and has big ambitions in China, where he has considerable experience and where backer Li Ning is a big player in sports fashion.
“We are very profitable in China but we can put the company into another dimension there,” Herrero said, adding that the Clarks brand was seen as aspirational and premium by Chinese consumers.