Dr. Martens shares fall after profit warning
- Written by Michael Rees and Ashley Swan
- Business correspondents, BBC News
Dr. Martens warned that its profits would fall below expectations after the shoemaker’s business was hit by warm fall weather and weak sales in the United States.
The iconic brand, which first became popular in the 1960s, said its US business had become more difficult in recent months and that two of its major wholesalers had reduced orders.
The company’s global profits fell by 55% to £25.8m in its half-year results.
The earnings warning sent shares down nearly 25% early Thursday.
Chief executive Kenny Wilson said trading in the second half of the year was “mixed”, with sales around the world affected by warm weather at the start of autumn.
“In the US, where there is an increasingly challenging consumer environment, our results faced greater challenges, led by weakness in wholesale,” he added.
The company said in its results that widespread caution among Dr. Martens’ wholesale customers had led to a “weaker order book than in previous years,” but added that trade in recent weeks in Europe, the Middle East and Asia-Pacific had improved.
Driven by weak trans-Atlantic trade, the company said it expects its full-year revenue to fall by “high single digits.”
In its latest results, the company revealed that US profits were 31% lower in the six months to September 30, compared to the same period last year.
Dr Martens generates more than half of its revenue from its most popular products, the 1460 eight-hole boot and its sister product the 1461 boot.
But it has been struggling with weak demand in the United States for some time, especially as costs of living rise around the world, with less money available for discretionary spending.
In 2021, Dr Martens raised the prices of its shoes by £10 due to higher production and material costs, bringing the price of the classic 1460 shoes in the UK to £159 per pair. They have continued to rise and currently cost £169, according to the retailer’s website.
“When times are good, Dr. Martens has shown that it is possible to achieve good returns from his signature products,” said Ross Mold, investment director at AJ Bell.
“But when the economic outlook is more uncertain, a company suffers from pricing its products a little above the level where someone doesn’t think much about paying.”
Lisa Amlani, director of consultancy Retail Strategy Group and a professor at the Fashion Institute of Technology in New York, told the BBC that while the brand once boasted some best-sellers, it now had “too many styles”.
“Today, their website has 592 women’s shoe styles, 382 men’s shoe styles, and 192 styles. That’s exaggerated,” she said.
“Each style includes a range of colors and sizes, resulting in an unclear marketing strategy that risks confusing and confusing customers.”
She said Dr. Martens should “rethink” its approach to promotion, scale back the tactics it offers, and “focus on finding the right influencer strategy relevant to the US market.”
The Dr. Martens brand was founded in 1960 in Northampton. Its air-cushioned sole was developed by Munich-based Dr Mertens and Dr Funk, and UK patent rights were sold to the R Griggs Group.
The shoes that resulted from the collaboration were initially sold as work shoes, but were adopted by the early skinhead youth movement of the 1960s. The shoes also became popular with punks in the 1970s and resurfaced when Britpop emerged in the 1990s.
Today, shoes, also known as Docs or DMs, remain popular.
When Dr Martens listed on the London Stock Exchange in 2021, its share price was 370p. On Thursday, its shares were trading at around 86 pence.
“There always seems to be a stone in Dr. Martens’ shoe since the IPO in 2021,” said Susannah Streeter, head of money and markets at Hargreaves Lansdowne.
“Earlier this year, the company experienced operational problems at its distribution center in Los Angeles. Once again, hopes for a sales rebound have been dashed, and the long-term growth of the brand looks highly uncertain.”
Mr Wilson said the company still has “confidence in our iconic brand, and we continue to believe in the long-term growth potential of the business”.