21 Feb 2017

Analysis: Should Clarks give some stores the boot?


In a rapidly-evolving retail environment, Clarks has found the going as tough as any retailer as it fights to maintain its foothold in the UK market.
Tumbling profits, “ambitious” strategies that hindered rather than helped, and head office restructures were three of the issues the footwear business has grappled with over the past few years.

This morning the retailer added to that list, revealing it had drafted in commercial property agency Harper Dennis Hobbs to lead a strategic review of its 550-strong UK store portfolio.

New boss Mike Shearwood tells Retail Week the review is designed to ensure stores “are the right size and in the right locations”, but admits it’s “a big task”.
Globaldata analyst Kate Ormrod suggests it’s a task that should have been carried out before now.

“They’ve clearly been a bit slow to do this review, it would have been useful a couple of years ago,” she says.

Store closures anticipated “Having 550 stores in the UK and Ireland is just not necessary given the rise of online. There is a need to cull some stores so hopefully it does happen, whether [Clarks] is admitting to it yet or not.

“It has been losing footwear share for a while and is in a similar position to Shoe Zone, which also has an oversized portfolio and has now started to slowly shut some stores.”

She suggests Clarks could “cull quite a few”.

But Andy Smith, director in the retailer services team at commercial property agency JLL, dubs that school of thought “a knee-jerk reaction”. He says Clarks will be looking at leases approaching expiry, but believes the retailer will assess how it can “maximise and lever the Clarks name” to obtain more favourable rental terms, rather than closing stores.

“From a landlord’s perspective, Clarks is a good brand that they don’t want to lose out on,” Smith states.
“It’s a bit of a British institution, so you almost want to protect the brand. “They’ve got such coverage at the moment; it’s a 500-strong portfolio. But because it’s such an old, established estate, it might look at shifting some of those stores to reflect changes within certain towns.

“There is no need for an immediate cull, but there needs to be an open conversation between Clarks and its landlords to work out the right deal to keep those stores going. I don’t expect wholesale closures.”

Andy Smith, JLL “There is no need for an immediate cull, but there needs to be an open conversation between Clarks and its landlords to work out the right deal to keep those stores going. I don’t expect wholesale closures.”

Nick Symons, partner at retail property consultancy MMX Retail, agrees and reckons Clarks still has plenty to offer. “Over 500 does sound a lot of stores, but Clarks is a very local offer. If that’s your strategy, then it takes you into the same realm as [retailers] like Specsavers and Boots in terms of store numbers,” he argues.

“It’s a very well established, traditional heritage footwear retailer that is still sought after by landlords.

 “The updated shopfits are good, they give it a fresher look and offer something a bit different than other footwear retailers. So I’m hoping that in some schemes this will actually result in Clarks taking bigger, full-range stores.

”Even if the portfolio review does bring about a push into fewer, larger stores, is Clarks offering what customers want?

Ormrod believes the retailer has work to do to breathe new life into the proposition.

Heritage position

“Clarks definitely needs to improve brand and destination appeal,” she says. “Clarks is deemed slightly uncool and, looking at its product range recently, it has been overreaching.

“Its new focus on fashion is a good thing, but you’re not suddenly going to get 16-year-olds clamouring to get into a Clarks shop on a Saturday.”
Symons isn’t convinced that represents a problem for the retailer.

Instead, he thinks Clarks should focus on carving out a niche for itself by playing on its heritage further.

“It’s probably the strongest footwear brand for families and is seen as being traditional and reliable. I think Clarks should be happy with that position and look to exploit it more,” Symons explains.