Clarks has posted a 65% slump in full-year profits as it admitted it was forced to review “ambitious plans” by former management.
The footwear retailer, which is still on the hunt for a chief executive following the shock departure of Melissa Potter last September, said pre-tax profits in the year to January 31 slid to £35m.
Operating profits fell from £112.7m to £45.8m in the period.
However, group sales rose 2.6% to £1.53bn. Turnover in the UK and Ireland increased from £637.4m to £654.4m.
Clarks executive chairman Thomas O’Neill, who is acting as interim chief executive, said as a result of “ambitious business plans and excessive focus on short-term performance, the business accumulated a significant amount of excess inventory in 2015.
He added: “The financial effect of this build-up of inventory is that borrowing levels and financial gearing at January 31, 2016 at £183.3m and 28.2% respectively are substantially higher than is normal for the group.”
He said this resulted in the company booking a financial provision against the cost value of part of that excess of £18.7m.
O’Neill said Clarks had ”confronted and dealt with considerable challenges in our business” over the past year.
He added: “Difficult trading environments in the UK, Europe and the Americas, a lengthy stabilisation period in our new distribution centre in Hanover in the US and changes of executive management in early September were all significant.
“Directly related to the last two points was a requirement to address three key fundamental underlying issues in the business: the need to restructure the business; the need to address a high cost base; and the need to work through a sizeable overstock position in the US, the UK and, to a lesser extent, in the Asia Pacific.”
Clarks restructured the business earlier this year with 170 people leaving the company and 300 asked to take on new roles.
The retailer, he said, would be focusing on a “global brand function” and would be adopting a “channel-led operating mode; focused around retail, wholesale, outlets and ecommerce, replacing the old model of gender-specific product developed in each region”.
On the potential new chief executive, he said the board had shortlisted a number of candidates.