Clarks sales and profit hit by discounting strategies and low demand

The footwear major Clarks has said that its sales and profits witnessed a sharp decline owing to discounting strategies and issues with its American business. While its annual sales declined 3.2percent to 1.49 billion pounds (2.29 billion dollars) in the last year, lower pension and interest costs led to rise in pre-tax profits to1.4 percent.

The company operating over 1,000 stores around the world blamed warm autumn weather and response during Black Friday for negative impacted on UK sales. Along with declining sales in UK and the Americas, damage to a supplier’s factory in Vietnam further led to inventory shortage of Clarks Originals shoes and men’s’ Gore-Tex. Now the company aims to focus its energies on reviving its business in the US. It sales decreased 10.6 percent and profits by 22.9 percent in this market.

“Our core trading strategy of building a more premium mix of full-price adult sales whilst protecting our dominant share of the children’s shoe market has proved consistently successful. It did not however prevent us from coming under severe pressure through the second half of the year as consumers intensified their search for value, shifted more of their purchases online and challenged brands and retailers more than ever to come up with compelling product and marketing propositions to give them a reason to buy,” said Melissa Potter, Chief Executive of Clarks.

Even impact of low consumer sentiment was evident in the UK and Ireland, where like-for-like store sales fell by an average of 3.6percent and total sales from 645 million pounds (995 million dollars) to 637 million pounds (982.9 million dollars).

Thomas O’Neill, Chairman of Clarks said that economic conditions in the UK and Ireland and America have certainly improved recently. “However, a discernible by-product of the improvement had been an aggressive and persistent consumer attitude in pricing. Consumers have been conditioned over the past few years to buy only when product is reduced, discounted, which represents perhaps one of the most significant risks for 2015, particularly in the Americas and the UK and Ireland,” he cautioned.