Jun 1, 2023
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Dr Martens admits mistakes but stays confident for future growth

Jun 1, 2023

Preliminary full-year results at Dr Martens contained a mix of good news and bad, but a bit too much of the latter. However, the company is generally headed in the right direction on many fronts despite areas of weakness that must be addressed.

Dr Martens

On the plus side, revenue was up 10% to just over £1 billion for the very first time and it sold almost 14 million footwear pairs.

And trading since the start of FY24 “has been in line with expectations” with “very good” direct-to-consumer (DTC) growth. It’s maintaining its revenue guidance for the current year of mid-to-high single-digit growth in constant currency (CCY).

Price increases will cover supply chain cost inflation but it will see ongoing costs from the widely-flagged problems at its LA distribution centre (DC), although these costs will “unwind in FY25.”


Looking back at last year, it was buoyant in EMEA and APAC, especially Japan.

But the US performance wasn’t great and was hurt by those with its LA DC, as well as “softer consumer sentiment”, although it added that “self-help measures” are “in full swing and [the] brand remains strong”.

While gross profit was up 7% to £618.1 million, the margin declined 1.9 ppts to 61.8%. And operating expenses jumped 18% to £373.1 million, driven by its “planned, long-term growth investment in new stores and marketing, but also warehouse and labour costs at the LA DC”.  

EBITDA dropped 7% to £245 million, with the EBITDA margin 4.5 ppts lower.  

Pre-tax profits plummeted 26% to £159.4 million, due to lower EBITDA, increased depreciation from system investments, new stores, DC expansion, and impairment charges that it hadn’t seen in the previous year. Profit after tax fell 29% to £128.9 million.

The weaker numbers had been widely expected but it said “the board retains its conviction in the future performance and cash generation of the business”.

Looking more closely at the figures for last year, that £1 billion revenue was described as a “milestone” for the business and the 10% increase on a reported basis was a 4% rise CCY.

It called out various achievements, including revenue in the DTC channel rising 16%, (or 11% CCY), while Retail was up 30% (25% CCY) and E-commerce up 6% (1% CCY).

Wholesale rose 4% but fell 3% CCY. Weaker shipments in America, and the decision to stop sales to its China distributor ahead of its agreement end were to blame.

Overall, the DTC mix was up 3 ppts to 52% as it opened 52 own retail stores including the transfer of 14 franchise stores in Japan.

It also said “brand equity is strong. All our brand indicators confirm that the slower pace of growth this year is not a reflection of weakening brand momentum, but rather a combination of execution and macro factors. And our EMEA DTC performance in the year, with growth of 20%, shows what we can achieve when we execute our… strategy well”.

That EMEA achievement included “a very good year in the UK”. Total regional revenue grew 11% (10% CCY) to £443 million. All channels accelerated in Q4.

Dr Martens

Meanwhile APAC revenue rose 2% (but fell 1% CCY) to £129.1 million. Japan traded well in FY23 and has a stronger platform for future growth following the successful transfer of those franchise stores.

But it was “a disappointing year in America”. Revenue was £428.2 million, up 12% but down 1% CCY. Yet DTC growth was 15%, or 2% CCY.

Across its product categories, it saw good growth in shoes and sandals, although boots were down. There “were successes within our ongoing infrastructure investments, including the launch of an omnichannel trial in the UK, an important step in our journey to a seamless omnichannel capability”. And it “made further good progress including the launch of a repair and resale trial on Depop in the UK and an investment in recycled leather company Gen Phoenix to support our sustainable materials strategy”.


But there’s no getting away from the fact that it was held back by the performance in America. The weather and consumer backdrop were challenging at times, but “the biggest driver of our weak performance was poor operational execution”.

The move of its DC from Portland to LA “was poorly implemented” and it “made mistakes executing our marketing campaigns, which were too focused on shoes and sandals, which grew well, but not focused enough on boots”. Its e-commerce execution also “wasn't strong enough”. It all meant that at group level, the price increases it put through didn't offset fully cost inflation.

It also said it ordered “too much inventory for America”, although most of that stock is “best-selling, continuity, black boots and shoes” so there’s “minimal markdown risk”.   

It has made key new hires in America to strengthen leadership there and it said those “LA DC issues and reaching the £1bn revenue milestone” have led to some hard thinking as it works to “de-risk future growth”. 

In FY24, it will increase investment in global product and marketing teams, e-commerce development, supply chain capability and wider talent within the business.

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