Clarks, the renowned footwear retailer, is entering into discussions with its landlords to finalise a company voluntary arrangement (CVA). This proposal includes a transition to a turnover-based rent structure and the closure of around 50 out of its 347 stores across the UK. Successful negotiations with landlords are critical because securing a cash injection of over £100 million from LionRock Capital, a Hong Kong-based private equity firm, is dependent on the CVA.

If this agreement is reached, it will mark a significant milestone in Clarks’ almost 200-year history, as it would mean the founding Clarks family relinquishing their majority ownership for the first time. The upcoming discussions are expected to be challenging, as both parties have been heavily impacted by the Covid-19 pandemic, making discussions of rent reductions and store closures particularly sensitive. The decision-making process will also involve Clarks’ pension trustees.

The proposed CVA comes at a time when the UK high street continues to suffer from the severe consequences of the pandemic, with the footwear sector being particularly hard hit. The demand for footwear has significantly decreased due to work-from-home policies and social restrictions enforced during lockdown. However, with localized lockdowns being implemented, there has been a resurgence in the need for footwear purchases.

To navigate these challenging circumstances, Clarks has already announced plans to reduce its global corporate workforce by approximately 900 positions within the next year. Among these job cuts, 108 will occur at the company’s headquarters in Somerset, UK. However, Clarks also mentioned that it will be creating around 200 new roles.

Clarks’ actions highlight the broader challenges faced by retailers in adapting to the “new normal” shaped by the pandemic. The company’s willingness to engage in negotiations with landlords and explore alternative rent models demonstrates its commitment to finding innovative solutions in these turbulent times. Like many other businesses, Clarks’ survival and success will depend on its ability to adapt and evolve in this rapidly changing landscape.

Useful links:
– [Clarks Official Website](https://www.clarks.co.uk/)
– [LionRock Capital Official Website](https://www.lionrockcapital.com/)