Clarks to give stores the boot in LionRock rescue deal
Written by on 6 October 2020
Clarks, one of Britain’s oldest shoe retailers, is preparing for dozens of permanent store closures by deploying an insolvency mechanism that it had previously denied was under consideration.
Sky News has learnt that a rescue deal for Clarks led by LionRock Capital, a Hong Kong-based private equity firm, is contingent upon the approval by creditors of a company voluntary arrangement (CVA).
Sources said that a CVA could involve as many as 50 shop closures and a switch to a turnover rent model for which the fashion retailer New Look recently won narrow approval.
The axing of scores of stores would entail hundreds of job cuts, although the precise figures were unclear on Tuesday.
A private equity source confirmed that LionRock’s injection of funds into Clarks, which is likely to involve more than GBP100m of new money, would only take place if a CVA was approved.
If a deal is completed, it would see the chain’s founding family shareholder relinquish majority control for the first time in its 195-year history.
Sky News revealed last week that LionRock was in detailed talks with Clarks, with the company’s pension trustees also in negotiations about the deal.
The wrangling over Clarks’ future comes as the COVID-19 panic continues to wreak havoc on Britain’s high streets, with numerous businesses having collapsed or been forced into swingeing job cuts.
In May, Clarks’ new chief executive, Giorgio Presca, unveiled a strategy – dubbed ‘Made to Last’ – that will aim to steer it into its third century of operation.
His plans involve 900 job losses, with 200 new roles being created.
The string of appointments come after a difficult period for Clarks, which was founded in 1825 and has become synonymous with generations of parents buying their children’s first pair of shoes.
It remains largely owned by descendants of Cyrus and James Clark, who founded the business in Somerset nearly 200 years ago.
Clarks trades from about 345 stores in the UK, employing thousands of people, many of whom were furloughed thousands of its store staff under the government’s Coronavirus Job Retention Scheme.
In the last year for which figures are available, Clarks reported a post-tax loss of more than GBP80m.
“We recently announced Clarks’ long-term ‘Made to Last’ strategy that is designed to ensure that our business has a sustainable and successful future, keeping it in step with changes in how consumers around the world choose and buy their shoes,” a spokesman for the company said recently.
“As part of this strategy the Clarks board of directors is currently reviewing options to best position our business, our people and the Clarks brand for future long-term growth.”