by Mark Palmer
The K Shoes board decided that Ward White were not the right partners for us … we gained the feeling that they did not understand the real strengths of K Shoes, and we saw no chance that the two companies would work together in harmony.
But he saw every chance that K Shoes could work with Clarks. On 30 October 1980, Clarks offered 68 pence per K Shoes share, significantly less than the £1 a share K Shoes was looking for. ‘George Probert left the meeting in disgust, feeling that they were not really serious in making an offer,’ according to Crookenden. There was also concern that the Monopolies and Mergers Commission (MMC) could scupper any deal, given that Clarks already had around 9 per cent of the total UK shoe market, and K Shoes had 3.5 per cent.
Ward White re-entered the chase after K Shoes published its year-end results on 26 November 1980, showing pre-tax profits of £5.5 million, an increase of 10 per cent on the previous year. The K Shoes share price rose to 78 pence on the back of its results. Ward White submitted a draft of its take-over proposal to K Shoes on 2 December 1980. Meanwhile, K Shoes sent its own terms to Clarks, and on 9 December Daniel telephoned Crookenden to confirm an offer of 95 pence per share, a cash bid of £22.4 million. The deal was done, subject to confirmation from the Office of Fair Trading, which duly came shortly after Christmas, that the bid would not be referred to the MMC.
Crookenden and Probert immediately joined the main C. & J. Clark board, with the former expected to retire in 1983. It was agreed that the K Shoes shops would not have to stock Clarks shoes nor Peter Lord shops be required to sell K branded shoes. Additionally, K Shoes would continue to have its own sales force, its own advertising and marketing department and would negotiate its own terms with the unions. Clarks issued a statement saying that it did not ‘foresee any redundancies or job losses, salary or wage reductions’ for K Shoes employees.
There are two ways of looking at the purchase of K Shoes. The first is that the two firms were a perfect fit, sharing a shoemaking heritage and a commitment to a wider social responsibility. Clarks had 550 shops and K Shoes had 220. Clarks had 20,000 employees worldwide, K Shoes had 5,700. Clarks produced 15 million pairs of shoes a year, K Shoes made 5 million, and so joining forces made commercial sense. Together, Clarks and K Shoes would provide stiff competition for other UK-based manufacturers and shoe retailers. Both companies would gain from fresh input from their respective senior management executives. Neither brand would be diluted and both companies would continue to negotiate separately with their customers about discounts and other promotions.
As Daniel put it to shareholders:
The Clarks board in 1981 shortly after the acquisition of K Shoes. George Probert, previously K Shoes managing director, is standing at the far left. Others in the back row (left to right) are Jan Clark, Eric Gross, Anthony Clothier, John Frith and Lance Clark. Front row: William Johnston, Spencer Crookenden (previously K Shoes chairman), Daniel Clark and Ralph Clark. George Probert was later managing director of Clarks, from 1985 to 1987, when he made extensive changes to the board.
We now have the major share of the manufacturer branded business in the UK, distributing national promoted brands through our own shops and some 3,000 or so other outlets. We believe that for the future this is the one significant way of competing in the market place with the major national retail multiples.
And indeed there were years when K Shoes made a significant contribution to the profits of the company.
But an alternative view – and one that has gained weight with the benefit of hindsight – was that Clarks had bought a company with very similar problems to its own. Rather than helping the firm to move forward, the acquisition of K Shoes would root it to the past. Indeed, when it came to matters such as sourcing from overseas, marketing and distribution, Clarks was, if anything, ahead of K Shoes. Paying £22 million – money borrowed from the bank and due to be repaid in 1987 – simply to compound your difficulties was a risk.
And so it would prove. Arguably, K Shoes should have followed the Clarks lead and begun closing some of its less profitable factories. Instead, it pushed ahead with the new Millbeck plant in Kendal, which was built by the Eden Construction Company at a cost of £820,000 with a completion date set for June 1982.
‘In spite of the overall trading situation, Daniel Clark urged the K Shoes directors not to be too pessimistic about the economic outlook and to continue to invest in order to improve productivity and to expand retailing,’ wrote Crookenden.
K Shoes results for 1981 were worrying, but were even worse in 1982, when profits fell from £4.2 million to £2.8 million. A new lightweight walking boot designed in close cooperation with Chris Brasher, the Olympic gold medallist, failed to raise spirits in Kendal, and even a range trading under the name of top fashion designer Mary Quant was withdrawn after less than two years.
In the annual report for the whole group, Daniel confirmed that all chains within C. & J. Clark Retail Ltd had ‘failed to meet budgeted sales, in some cases, by a considerable margin’. Furthermore, there had been losses in North America – ‘partly by expanding too rapidly’ – and in Europe, while Avalon Industries had experienced a ‘bad year’. It was also the case that during the recession consumers were ‘buying down’, unlike in the past when they had tended to stick with brands they trusted.
While telling the K Shoes directors not to be downcast, Daniel seemed a little disheartened himself, saying that prospects in the UK ‘do not look very encouraging’ and that trading conditions were so unpredictable that ‘I am reluctant … to forecast what the outcome will be.’
The outcome for the first six months of 1982 was a disaster. Net profit before tax for the first six months in 1981 was £10.7 million, falling to a loss of £1.2 million twelve months later.
But there were some happy diversions in the early 1980s. The wedding of Prince Charles and Lady Diana Spencer in the summer of 1981 led to a run on traditional, low-heeled court shoes as worn by the young princess. Clarks capitalised on this by introducing its ‘Princess Di’ shoe, formally known as the Quiver, which retailed at £14.99. Starting with this one model, Quiver soon became a whole range of footwear. Developed in the Barnstaple factory, Quiver shoes were then produced in bulk in Plymouth, Barnstaple, Exmouth and Shepton Mallet, as well as in Dundalk, where 60 extra staff were taken on to cope with demand.
Meanwhile, the Queen had dropped in to the Peter Lord shop in Staines in March 1980 when she opened the new Elmsleigh shopping precinct. Three years later, the Duke of Edinburgh, in his role as president of the Royal Society of Arts, presented Clarks with the Award for Design Management, an accolade to mark the contribution design makes to the commercial success of an organisation. And just in case Clarks’ younger customers were in danger of losing interest, Noel Edmonds, then a leading radio DJ, attended a children’s division sales conference to endorse Clarks teenage ranges.
But nothing could disguise the anxiety over the company’s overall performance, and there was no attempt to do so in the pages of the Courier. In the spring of 1982, the following exchange was printed when Lance Clark was grilled by the company’s public relations manager, Ian Ritchie.
‘So why have sales been worse than expected?’ asked Ritchie.
‘The main factor is price,’ said Lance. ‘In the bad economic times people are paying less for their shoes. We’ve got to get the price of our footwear down.’
‘I think you’re blaming outside influences a great deal,’ said Ritchie. ‘You blamed the imports and you’ve blamed the consumer for buying the lower price shoes, but surely some of the criticism must be directed inwardly at the management of the business?’
‘Yes, I must accept, as managing director, that it is my total responsibility. We have made mistakes. Looking back, had we forecast more accurately the severity and depth of this depression, yes, I should, knowing what I now know, have taken much tougher action more quickly and more aggressively than we did.’
Within months of giving that interview, Lance
was replaced as managing director of Clarks Ltd – which was responsible for all UK manufacturing, wholesaling marketing, advertising, personnel and planning – by 43-year-old Malcolm Cotton. Lance, a major shareholder, faced the prospect of being sidelined when he was given the role of developing C. & J. Clark Continental Ltd. The Courier thundered once more, this time with a whiff of mischief, quoting Petronius, a Roman satirist, who in AD 66 observed:
No sooner did we form into teams than we were reorganised. We tend to meet every new situation by reorganisation, and what a wonderful method it is for giving the illusion of progress whilst only producing confusion, inefficiency and demoralisation.
10
Taking sides
THE GULF between manufacturing and retailing at Clarks seemed impossible to bridge. Manufacturing wanted – and was encouraged – to protect its margins, while retailing wanted – and was encouraged – to buy in shoes at the cheapest possible price. Divisions between the two arms were historic. Manufacturing represented the past: retail was positioning itself as the future – but without the retail experience at managerial level to embrace that future. There were even lifestyle differences. Retailers tended to smoke, manufacturers didn’t. As one member of the Clark family recalls:
Retailers and property people made up the hard core of smokers. They tended to be at the happy-go-lucky, can-do, cup-always-more-than-half-full end of the spectrum. Originally, smokers and non-smokers all mixed together in Street. Then the Human Resources lot got busy and closed the separate senior staff canteen so that all grades shared the same canteen space. However, the canteen was divided into smoking and non-smoking sections, forcing the two cultures apart.
But smoking was the least of the worries. The big question was how Clarks could continue as a profitable manufacturing and wholesaling company. The answer that dared not speak its name was that it couldn’t. This was to consume the minds of senior managers throughout the 1980s and almost consumed the company in the process.
Costs were too high to sustain the factory system and nothing could be done to stem the tide of cheap shoes coming into the country. Daniel Clark said in his annual report for the year ending 30 January 1982 that imports accounted for over half the total number of shoes sold in the UK. And in its 1981 ‘Strategy for C & J Clark Ltd: Final Report’, the Boston Consulting Group had painted a similarly gloomy picture, continually using the word ‘disadvantage’ when considering the company’s position as a UK-based manufacturer. ‘Unless Clarks can offer merchandise which is competitive with imports, erosion of its market share may be inevitable,’ it said, echoing a refrain in previous consultation documents.
Later in that report, it said: ‘Clarks [should] consider importing parts of its product offering. Failure to do so is likely to lead to a gradual erosion of Clarks market share.’ In its concluding recommendations, the group called for a halt on manufacturing certain women’s lines, including: ‘premium fashion courts and dress sandals’; women’s ‘sporty courts and moccasins’; women’s ‘warm-lined and fashion boots’; part of women’s ‘premium and medium price sandals’; and all ‘women’s slippers’; as well as some ‘men’s medium price casuals and sandals’ and all ‘children’s warm-lined boots’.
On the high street, meanwhile, the retailing arm of Clarks formed a complicated web of shops that fell under different command structures, encompassing disparate retail names. But Clarks was not one of those names – at least not until 1984. In total, C. & J. Clark Ltd operated some 900 outlets at the start of that year, trading under Peter Lord, K Shoes, Bayne & Duckett, Ravel, John Farmer and James Baker. Flotilla Shoes Ltd was a subsidiary set up to oversee the management and day-to-day operations of the smaller chains such as James Baker, which Clarks bought in 1977, and Bayne & Duckett, both of which operated in provincial towns in Scotland, Wales, the Midlands and north London. There were 290 Peter Lord shops, mainly in prime, rented city-centre sites, stocking Clarks, K and other higher-end brands. Ravel sold no Clarks or K at all, focusing almost exclusively on imported fashion shoes for the teenage and early-twenties market. Ravel shops tended to be close to major fashion retailers.
Three years earlier, the Boston Consulting Group had been scathing about Ravel, describing its performance as ‘volatile’ and ‘sub standard’ compared with competitors such as Dolcis, which habitually achieved 60 per cent more sales per shop and had some three times more outlets. ‘Ravel presently enjoys little synergy with other CJC [C. & J. Clark] operations’, Boston Consulting Group said.
John Farmer was bought in the spring of 1984. It was previously owned by Hanson Trust, which once controlled John Collier, Richard Shoes and Timpson, and had nearly 100 shops in the south of England, pitched at the middle market and selling a wide range of both Clarks and K. In addition, Clarks footwear was available in more than 2,000 independent shoe shops – and the independents accounted for 25 per cent of the UK market. Close ties were maintained with the independents and there were still perpetual fears about the consequences of jeopardising such long-standing links.
David Lockyer was the first-ever graduate trainee to be assigned to the retailing side of the company. Even since retiring from Clarks in 1996 he has continued to keep an eye on the shoe business, recently as a non-executive director of Barratts, the footwear firm based near Bradford, West Yorkshire, which went into administration in December 2011. He joined Clarks in 1968, after which he became a Peter Lord branch manager, then an area manager and finally general manager of Peter Lord before moving into resourcing in the mid-1980s.
When I started, Clarks was a manufacturer and wholesaler, with a small retail sector, amounting to around ten per cent of the whole business. Those of us in retail always thought we should be pushing for the Clarks name to be above the shop door, but we weren’t sure that the ladies’ brand was strong enough, and it was only when we started resourcing from places like Brazil and Italy and one or two other countries that it became a viable option. Many of us had grown up in the business and we were perhaps too engrained in the idea that we were a manufacturing company and, let’s face it, we were good at what we did. I suspect that we needed someone to come along from outside to shake things up a little.
Retailing was expensive, involving the signing of 20- to 25-year ‘institutional leases’, with five-year upward-only rent reviews of the kind that pension funds involved in commercial property would find acceptable. At the same time, something needed to be done to challenge the British Shoe Corporation, which was still the biggest shoe retailer in the country. Its brands included: Saxone; Curtess; Lilley & Skinner, Freeman, Hardy & Willis; Dolcis; Trueform; and Manfield. Of those, Dolcis was the most fashionable and expensive, while Freeman, Hardy & Willis was regarded as downmarket from Clarks. Manfield, with its base in Northampton, occupied a middle market position not dissimilar to Clarks.
John Clothier, the son of Peter Clothier, was in charge of the retail side of Clarks’ business. He had joined the company in 1969 after spending two years at Humanic, a retail-led shoe business in Austria, with which Clarks had close ties. Reflecting on the some of the issues from the early 1980s, he says it was ‘quite clear’ that the British Shoe Corporation dominated the High Street and it was ‘just as clear’ that Clarks needed to strengthen its retail position if it were to compete effectively. He continues:
The costs of retailing were rising fast and we needed to prove that Clarks over the door would work. Then it was a case of completely reorganising our retail portfolio.
Among those pushing for the launch of Clarks ‘over the door’ and who hoped to see many existing Clarks-owned outlets coming under the one banner, was Robert Wallace, the company’s marketing director. He lobbied Howard Cook, Clothier’s right-hand retail man and a driving force behind the launch of the first Clarks shops – and finally, in the summer of 1984, four shops opened in quick succession of each other. Called ‘The Clarks Shop’ rather than Clarks, as they are today, they were regarded as ‘concept’ outlets that dealt alm
ost exclusively in branded Clarks and K shoes, plus a small proportion of ‘Levi’s for feet’. The first of these units opened several miles away from London’s West End in unfashionable Tooting. This was followed by a second shop in Knowle, just outside Bristol, in a store once owned by A. J. Bull, an independent selling mainly Clarks, and a third in Beaumont Leys, a new shopping centre on the outskirts of Leicester. A fourth shop was unveiled at the end of June in Welwyn Garden City, with a staff of four, two called Julie and two called Jane.
Until 1984, Clarks shoes were sold through a wide-ranging network of shops trading under many different names. In that year four shops were opened under the name of ‘The Clarks Shop’ for the first time.
Within twelve months, The Clarks Shop branding had been replaced by just Clarks, and there were eighteen such outlets, located in areas poorly served by traditional retailers stocking Clarks, especially in the inner cities. Brightness and space was what they had in common, with an emphasis on the shop windows displaying as full a range as possible. The consensus was that these shops immediately benefited from not having to feature conflicting brand display cards, but it was also the case that some of the gaps in the Clarks range were exposed. There was a particular under-representation of men’s formal shoes, for example.
The overall look of the shops was upbeat and modern. Perspex stands were kept to a minimum and there were zig-zag tiled walkways between the carpeted areas. Most were fitted out by Clarks’ own shopfitters – as they are today. The store in Stratford, East London, sought to attract younger buyers, which explained in part why it had a 24-year-old manager and a 20-year-old senior sales assistant, both of whom ensured that one of its better sellers were the Clarks new air-cushioned casuals that had been the subject of a £300,000 national advertising campaign earlier in the year. Building on the slogan, ‘Travel with the World’s Most Comfortable Air Line’, the advertisements emphasised comfort and a degree of luxury and appeared in the national press as well as magazines such as Radio Times and TV Times, occupying prime positions on their inside or outside back covers. ‘With this air line, everyone travels first class’; ‘No other air line cruises at our speed’; ‘New heights of comfort for air travel’; and ‘Only one air line can fly you to the office’ were some of the captions, displayed in capital letters above pictures of the shoes.