- Footwear firm saw ‘softer’ festive sales
- USA business still challenged
- Relief as guidance reiterated
Iconic British footwear brand Dr. Martens (DOCS) was in demand on Thursday, shares in the FTSE 250 retailer booted 7% higher to 80.7p after it swerved another profit warning despite a difficult Christmas for purveyors of bigger ticket items.
The Camden Town-headquartered company saw softer December sales in a volatile third quarter with US demand remaining weak, so investors were mightily relieved as Dr. Martens maintained the year-to-March 2024 guidance it downgraded back in November.
PAIN ACROSS THE POND
On a constant currency basis, group revenue tumbled 18% to £267.1 million in the third quarter to 31 December 2023, with wholesale revenues down 46% and direct-to-consumer sales 3% lower, although Dr. Martens’ retail sales nudged up 3%.
‘Given the weak consumer backdrop, the performance of our Americas business was challenging, as expected,’ said the boots, shoes and sandals seller as it reported overall Americas revenue down 26% at constant currency.
‘The new Americas leadership team continue to take action, particularly in marketing execution and ecommerce trading capabilities, to drive revenue and grow the brand’, insisted Dr. Martens.
Elsewhere, sales in the EMEA region fell 15% year-on-year due to a poor wholesale performance and the abnormally warm weather encountered in October.
Sales were 1% lower in APAC, although Japan, Dr. Martens’ biggest regional market, delivered ‘good growth overall’.
Having delivered four profit warnings in quick succession of late, there was relief as the footwear company reiterated annual guidance for a high single-digit percentage year-on-year constant currency revenue decline, although it also cautioned the strengthening of the pound could create a rough £5 million profits headwind.
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RECOVERY STEPS
CEO Kenny Wilson said Dr. Martens’ quarterly sales decline reflected ‘a weak USA performance, as expected. Trading in the quarter was volatile and we saw a softer December in line with trends across the industry’.
He added: ‘Whilst the consumer environment remains challenging, we are taking action to continue to grow our iconic brand and invest in our business. We remain confident in our product pipeline for Autumn/Winter 2024 and beyond.’
Russ Mould, investment director at AJ Bell, explained that while the headline figures look miserable, the positive market reaction was down to Dr. Martens ‘maintaining previous guidance rather than having to rachet it down once again. Investors are breathing a sigh of relief although the company still has considerable issues to resolve.
‘It’s starting to look like Dr. Martens is the latest in a long line of British companies which have failed to break through in the US. The bootmaker is not giving up and has a new Americas leadership team in place to fine-tune marketing strategy and e-commerce capabilities.’
Mould added: ‘An uncertain economic backdrop does not make for ideal trading conditions, particularly if people are still watching their pennies and pulling back from buying bigger ticket items. Dr. Martens’ boots may be iconic but they also don’t come cheap. The company should thrive in stronger economic conditions when customers are feeling flush, but we’re not currently in that environment.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
