Clarks: Made to Last

by Mark Palmer

  Results for 2001 were particularly heartening – a fourth consecutive year of record returns. Even Ravel, which had been flat for those four years, increased sales by 6 per cent, against an industry average of 1.5 per cent. Overseas, Clarks saw a drop in business in the USA following the 11 September terrorist attacks on the World Trade Center, but still saw operating profits for the year as a whole rise 31 per cent to $30 million.

  Much of this success was down to more than £5 million spent on advertising. In addition, a new range for crawling babies performed well, and so too did Clarks winter boots on the back of a return to fashion for footwear of this style. A particularly strong poster ad targeted the young and the young at heart, with the copy saying: ‘Feel like an adrenalin charged finely tuned trained to the max pumped up top level athlete. On his day off.’

  Towards the end of 2001, Parker gave an interview to the Daily Telegraph during which he reflected on some of the changes he had introduced:

  One of the things I don’t like is people feeling they are entering an institution [in Street headquarters] … When I turned up here, everyone was in cubbyholes, and we’ve pulled down the partitions. Some people don’t like open-plan, but you can never please everyone.

  Asked about Clarks’ growing international reach, he said,

  Half a million people in Hong Kong buy a pair of Clarks – that’s one in ten. And we make 25 per cent of our sales in America, where they call it ‘Euro comfort’. Apart from Reebok and Nike we are the biggest shoe brand in the world.

  The interviewer noticed Parker was wearing a pair of Clarks Desert Boot Originals, the famous range that had reinvented itself over and over again. Then came a question about his future, especially since it was now unlikely there would be a public flotation.

  ‘Aren’t you bored?’ he was asked.

  ‘When I was young I thought a great objective would be to retire early,’ replied Parker, ‘but the question is: retire to what? Who wants a husband at home?’

  Parker didn’t retire, but when it became clear that Clarks was indeed not going to float – not now and not even sometime in the near future – he took himself off in August 2002 to join Kwik-Fit, which three years later he sold to a private equity firm, PAI Partners, for £800 million. He subsequently ran the Automobile Association and oversaw its merger with Saga. At the time of writing he is chief executive of Samsonite, the luggage company, after a brief three-month stint in 2008 working as a deputy to the London mayor, Boris Johnson.

  He is quoted in the Harvard case study saying:

  There are points in a business career when you go in to work in the morning, and it’s all fresh and you’re really getting traction. If you have strong esprit de corps on the team, you’re having fun, everybody’s making a bit more money and it’s a positive vibe. Post-restructuring, those early days are exhilarating because you can see things really taking off. And of course they can’t stay that way for ever. In shoes, you’re only as good as your last season. I tend to get a bit bored, and that’s not good for anyone.

  Parker was replaced by Peter Bolliger. This amounted to a ‘handing over of the keys’, as Bolliger puts it, because he and Parker had worked closely to forge a powerful partnership. The only other serious candidate to succeed Parker was Bob Infantino, but he ruled himself out and remained in charge of CCNA.

  Building on Parker’s achievements, Bolliger concentrated on developing Clarks as a global brand rather than, as he describes it, overseeing a ‘collection of shoes’. Under Bolliger, the company finally completed the transition from being a manufacturing company to being a wholesale and retail branded business, sourcing its shoes from abroad. He set the goal of doubling the business in the USA and substantially strengthening the workforce in the Far East, where by now some 30 million pairs of shoes were made a year, primarily in China and Vietnam. In his first annual report, for the year ending 31 January 2003, he was able to tell shareholders that operating profits in North America were up just over 40 per cent on the previous year. This trend continued during 2003, with Clarks going through the 10 million pairs a year sales barrier in North America for the first time.

  The business in North America was primarily a wholesale operation, but there were now 143 Clark-owned stores. Sales of Bostonian ‘dress shoes’ had slowed – in keeping with a trend away from formal footwear in the USA – but there was excitement and anticipation about the launch of two new brands developed jointly by CCNA and the Clarks design team in Street. Privo was a range of men’s and women’s sporty casuals, and Indigo was a collection of contemporary ladies’ fashion shoes. Both were aimed at filling a gap between formal shoes at one end of the spectrum and trainers at the other. Privo was targeted at the unisex athletic and leisure markets, while Indigo was seeking to attract young, stylish American women. These two sub-brands exceeded expectation in their first full year of trading, with combined sales of more than half a million pairs.

  Closer to home, Bolliger – with the full support of the board and the shareholder council – moved to close the Elefanten children’s shoe business that was based in Germany. Clarks had bought this firm in February 2001 for £23 million, making it the first acquisition that the company had made for 20 years. Elefanten was the leading children’s shoe brand in Germany, with a strong reach in both the Benelux countries and in the USA. In 2000, it recorded sales of just under £56 million, but with a profit of only £600,000. At the time, Tim Parker justified the takeover by saying the Elefanten brand had ‘exciting prospects for growth’, but he also conceded that some people might find the acquisition ‘surprising’. He said the alternative – pushing the Clarks name in Germany – was not feasible: it ‘would take a long time and considerable expenditure to convince mothers of young children [in Germany] to try a new brand, even Clarks’. Elefanten would provide the ‘critical mass immediately on which to build an exciting business in the future’. This did not prove to be the case, however, and Elefanten ceased trading in the autumn of 2004.

  In the UK, planning for the new Westway Distribution Centre, next to the Bullmead Warehouse site in Street, followed Bolliger’s appointment. This extraordinary £50 million building would be fully functional within three years of its ground-breaking, capable of receiving and shipping some one million pairs of shoes a week and with capacity to stock five million pairs at any one time. There was some resistance to the building from people living near it and because of related traffic issues, but the employment it offered was welcomed locally.

  For those not used to seeing a 21st-century warehouse where computerised cranes fetch and carry stock with unfailing accuracy and astonishing speed, it’s a revelation. Containers arrive from the docks at Southampton or Felixstowe, whereupon bar codes on each box are read and the goods whisked to their allotted place before later being dispatched.

  The Westway Distribution Centre, completed in 2005, is packed with state-of-the-art technology and dispatches Clarks shoes all around the world.

  Knapp, an Austrian logistics company, was responsible for the equipment (stacker cranes, rollers, conveyors and a Beumer double-stack sorter), while Arup was hired as the building engineers, and the computerised warehouse management system was created by Manhattan Associates.

  The Westway building has a clever aesthetic. It looks a great deal lower and leaner than it really is because of its gentle curves and metallic grey/ blue colour scheme that blends with the sky above and the busy Street bypass below. There are nearly two miles of aisles inside, but retrieving a carton from the furthest location takes less than sixty seconds, with the cranes accelerating faster than a Ferrari. Westway dispatches Clarks shoes via 600 chutes to everywhere in the world except North America, where construction is under way on an even more advanced warehouse than the one in Street.

  Roger Pedder always made it clear he would step down when he reached the age of 65. This he duly did in May 2006, after twelve years as chairman.

  Circumstances dictated that the man who did so much to r
ebuild Clarks after the travails of 1993 found himself presiding over a difficult last year as chairman. Increased competition from discount stores and supermarkets, plus the launch of new fashion outlets such as Oasis and New Look, both of which added shoes to their product list, saw Clarks’ core UK market fall by 3.8 per cent. Then, shortly after Pedder’s retirement, Ravel was closed, with some but not all of its shops taken over by Clarks.

  Pedder was characteristically upbeat. ‘Look how far we have come,’ he said in his final annual report. ‘Look how we have grown and how profitable our business has become. The platform we have and are building for the future delivers even in a bad year an operating profit of £82.4 million.’

  There is no doubt that Pedder over this period oversaw a remarkable turnaround in the company’s fortunes. During his chairmanship, his team had to cope with the £80 million cost of closing factories in the UK and North America, and the £28 million cost of writing off Elefanten, partially offset by the sale of assets worth £70 million, including Clarks Village. However, annual turnover increased 40 per cent from £655 million in 1994 to £921 million in 2006, and pretax profits were up nearly three and a half times, from £20.8 million to £71.9 million.

  Pedder, a member of the family by marriage, was replaced by Peter Davies, previously chief executive of Rubicon Retail Ltd and the non-executive chairman of Crew Clothing. Davies had held senior finance positions at Avis RentaCar and Grand Metropolitan before joining the Burton Group in 1986. For the first time in its history, Clarks had a non-family-member chairman in Davies, and a non-family-member chief executive in Bolliger. Not long afterwards, Charles Robertson replaced William Johnston as chairman of the shareholder council.

  Bolliger’s goal of transforming Clarks into what he called a ‘genuine global brand’ coincided with the so-called ‘credit crunch’ that led to a global financial crisis. Even so, results for the year ending 31 January 2008 showed growth of more than 8 per cent, amounting to sales of just over £1 billion for the first time. Vindicating the company’s strategy to raise Clarks’ profile in Asia, sales across China, Hong Kong and Korea increased by 19.6 per cent, and Japan enjoyed substantial growth, up by 25.1 per cent. In North America, turnover reached a new record during a year when department stores and independent retailers were having a torrid time. Clarks increased its retail outlets by eleven in the USA, making a total of 221. And Privo was the star performer.

  The global financial crisis that kicked off in 2007 and gathered steam in 2008 hit consumer spending hard. Nevertheless, Clarks opened a further 68 stores worldwide during 2008 and launched a new multi-channel, retail capability via its website. This new site – offering consumers a choice of direct next-day home delivery or a ‘click and collect’ option at any shop or Clarks franchise – made an encouraging start, generating £3.4 million of additional sales, a figure that would rise to £20.7 million a year later and £32.2 million in 2010.

  Bolliger retired on 31 March 2010, after sixteen years with the company. During that time, Clarks had become the market leader on the High Street, with more than 400 own-brand shops. But his achievement went far beyond that. Peter Davies, Clarks chairman, told shareholders that Bolliger had ‘overseen the transfer of manufacturing operations from the UK; the transformation of our UK retail operation; the investment in the modernisation of our infrastructure and systems and the launch of the vision for Clarks to become a global brand’. Davies added something else – that Bolliger had been ‘instrumental in helping develop a strong internal candidate as his successor’.

  That successor was Melissa Potter, who had joined the company as a graduate trainee in 1989 after reading English at Cardiff University. Her appointment was made following a global search using Egon Zendor, a firm of headhunters, but no outside candidates were felt to be her equal. As tradition dictated, Potter spent her first week learning to make a pair of shoes and then a year working in retail, notably in Clarks shops in Marble Arch in central London and in Kingston upon Thames. She had risen to be managing director of Clarks UK division and then of Clarks International, and had joined the board in June 2006.

  A Clarks web page from the new retail website that was launched in 2008.

  Potter became chief executive of C. & J. Clark Ltd in March 2010, aged 42. The following year, Clarks recorded its highest-ever results. Total sales grew 9.2 per cent to £1.28 billion, with operating profits increasing by 13.9 per cent to £110.9 million, the first time profits had ever exceeded £100 million. The North American business was especially successful, with profits jumping spectacularly by 82.7 per cent to $85 million, ‘well in excess of our best expectations and almost a third more than the previous highest result of $64.7 million recorded in the year ending January 2008,’ Potter told shareholders.

  There was a change of command in North America. Bob Infantino left the company at the end of 2010 and was replaced as president of CCNA by Jim Salzano, an internal appointee. Since then, business there has continued to flourish, with Clarks selling 20 million pairs for the first time during 2011, with a record turnover of $839 million, representing a rise of more than 14 per cent over 2010. There are currently 290 stores in the USA and Canada, with a further 130 planned to open by 2016. As part of Potter’s integrated worldwide strategy, they are to be fitted out almost exactly like Clarks shops in the UK and the rest of the world.

  Melissa Potter, appointed chief executive of Clarks in 2010, has worked for the company since joining as a graduate trainee in 1989.

  Meanwhile, Clarks has established a joint venture in India with the Future Group, one of the country’s largest retail businesses, divided 51 per cent/49 per cent in Clarks favour. A new company was formed for this purpose, Clarks Future Footwear Ltd, based at Gurgaon, near Delhi, and there are now 20 dedicated Clarks stores in India. Clarks shoes are also sold widely in third-party shops and department stores in India.

  Worldwide, Clarks sells more than 52 million pairs of shoes a year from a total of 1,156 shops – which include its wholly owned stores, concessions, factory outlets and franchises. There are some 15,000 employees, of whom 12,000 are based in the UK. In the financial year ending 31 January 2012, turnover for the whole group was nearly £1.4 billion, with operating profits of £115.8 million. The regional breakdown of turnover was £601 million in the UK, £536 million in North America, £162 million in Europe and £99 million in the rest of the world.

  During 2012, Potter set about establishing Clarks as a global business with four regional divisions: the UK and Republic of Ireland; the Americas; Europe, including Russia; and Asia Pacific.

  In seeking to develop a universal image for the brand, Potter says there are two crucial components. First, that some things never change – such as the ‘integral values’ of the company. And, second, that the company will thrive only by continually adapting to change.

  It is certainly true that Clarks has remained remarkably aligned with the values of its Quaker foundations. Clarks talks openly about ‘caring for people’ both within and outside the company, and in 2012 launched the Clarks Code of Business Ethics, the aim of which is to highlight the company’s ethical values and principles, ensuring the highest standards of behaviour and integrity wherever Clarks has a presence and in everything that it does. To support this, an independent Speak Up service was launched at the same time, which enables employees worldwide to voice concerns about inappropriate activity in strict confidence.

  In addition, and underpinning the company’s commitment to integrity, the Clarks Code of Practice sets standards for the company’s suppliers. This code requires full compliance with all local and regulatory requirements and supports the core principles of the International Labour Organization, the United Nations agency responsible for developing and overseeing international labour standards.

  Charitable giving by Clarks amounts to some £500,000 each year, through a combination of cash donation and value of goods donated. The company supports a range of organisations, including UNICEF education
projects funded from worn shoe returns, and Soul of Africa, which trains unemployed and unskilled women to hand-stitch footwear. Each sale of a pair of Soul of Africa shoes helps provide sustainable employment, with the profits from these sales being donated to initiatives aimed at children affected by Aids. In 2012, the company started to support projects by Miraclefeet in India, where children with clubfoot are treated without surgery, using plaster casting and bracing.

  Over the years, various members of the Clark family have set up trusts, which also own shares. Together with the Clark Foundation, these support wide-ranging interests such as education, international aid, historic building repair, conservation and the empowerment of women in the developing world, particularly in the Middle East and Africa, and also support present or former employees experiencing hardship. Clarks’ First Step Programme in the USA provides six-month paid internships to people with disabilities. The scheme involves challenging work and is aimed at giving the internees confidence to find full-time employment.

  True to its commitment to housing in Street, when the warehouses on the old Houndwood site became redundant on the completion of the new Westway distribution centre, the company, encouraged by family members Tom Clark, Caroline Gould and Richard Clark, who are all Street residents, and with the support of the shareholder council, developed an imaginative proposal.

  The shareholders worked with Chris Pleeth of the company’s property department to commission architects Feilden Clegg Bradley to develop a layout for the site and a design for the first phase of building, which was then adhered to by the developers, Crest Nicholson. The layout aimed to improve the balance between cars and people and to provide a variety of open spaces occupying 40 per cent of the site, including public squares and boulevards.