LionRock acquires UK shoe brand, targets China expansion
LionRock Capital, an Asian private equity firm that invests in global consumer brands with a China growth angle, has agreed to acquire a majority stake in British shoe brand Clarks.
An investment of GBP100 million ($130 million) is intended to position the company for long-term growth, while LionRock will support global expansion. The Clark family, which has controlled C&J Clark since its establishment 195 years ago as a single store in a village in southwest England, will retain an interest in the business.
The deal is contingent on creditor approval for a company voluntary arrangement (CVA) regarding Clarks’ 320-store network in the UK and Ireland. The company has proposed a restructuring that would see 60 outlets move to nil rent, with landlords receiving a share of turnover rather than fixed rental payments. Clarks said there will be no immediate store closures.
The company claims to operate in 100 markets globally through retail, wholesale, franchise, and online channels with a workforce of nearly 10,000. Annual turnover is GBP1.5 billion, with revenue generated by the rights to a portfolio of more than 22,000 pairs of shoes, as well as direct sales and franchise and wholesale fees.
Clarks has 1,265 outlets, maintaining a presence in Australia, Canada, China, India, Japan, Malaysia, Singapore, the US, and across the EU, in addition to the British Isles. CEO Giorgio Presca told the Financial Times in May that 673 stores were directly owned and about half are in the UK and Ireland.
The same month, Clarks announced plans to cut 900 jobs worldwide – and create 200 new ones as part of efforts to stabilize the business following a contraction in profit over several years. Presca said the company should focus on being a brand rather than a retailer.
Cost-cutting measures were also a response to COVID-19 and the ensuing economic uncertainty, which has impacted all retailers with brick-and-mortar exposure.
Gavin Maher, a partner at Deloitte, which is advising Clarks, noted that retail in the UK has been suffering for some time due to weaker consumer confidence and reduced footfall. COVID-19 exacerbated these challenges, significantly impacting the company’s working capital and turnover, and creating acute liquidity pressure.
“The turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the proposed investment from LionRock, provides a stable platform upon which the management’s transformation strategy can be delivered,” he said in a statement.
Presca added that the company’s strategy going forward is based on brand segmentation and revitalizing our brand communications, digital experience, and product design. LionRock will provide the investment required to deliver on this strategy while providing “the expertise to grow the Clarks brand in China, which remains a primary opportunity.”
Daniel Tseung, founder and managing director of LionRock said: “We believe our investment would create a stable platform for the company from which to manage through the unprecedented crisis, holistically restructure and transform the business and further expedite the brand’s growth globally going forward.”
He established LionRock in 2011 after a 10-year stint with the PE division of Hong Kong-based conglomerate Sun Hung Kai Properties. The firm has more than $750 million under management across one fund, currently in divestment mode, and several special-purpose investment vehicles. Most of its LPs are entrepreneurs and family offices from around the world.
Last year, LionRock launched a sports-focused fund with Chinese sportswear retailer Li Ning participating as an anchor LP. The plan is to target brands at the nexus of consumer and sports – such as clothing, shoes, accessories, and food and beverage – that have growth potential in China.
The firm’s deals follow a broad China consumer theme, covering sports brands, new economy, food and beverage, and healthcare. Investments include Italian football club Inter Milan and, in China specifically, sports media business Suning Sports, ride-hailing platform Didi Chuxing, café and bakery chain Gourmet Master, and financial technology player Lufax, which recently listed in the US.
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