Dr. Martens plc reported sales rose 10 percent in its fiscal year ended March 31 to £1,0 billion ($1.25 bn) from £908.3 million a year ago. Sales on a currency-neutral basis grew 4 percent.
By channel, direct-to-consumer (DTC) was up 16 percent and gained 11 percent on a currency-neutral basis. Retail grew 30 percent, up 25 percent on a currency-neutral basis, and e-commerce gained 6 percent, up 1 percent on a currency-neutral basis.
Wholesale sales increased 4 percent on a reported basis but declined 3 percent on a currency-neutral basis. The wholesale decline reflected weaker shipments in America, due partly to the Los Angeles distribution center bottleneck, and the brand’s decision to stop sales to its China distributor ahead of the end of the agreement.
By region, a strong performance in EMEA offset a softer performance in America. In APAC, Japan’s strong DTC growth was offset by Covid-19 restrictions and lower sales to the brand’s China distributor.
EBITDA was down 7 percent to £245.0 million ($307 mm) due to slower revenue growth, continued investment in new stores, marketing, and people, and £15 million ($19 mm) in costs associated with the Los Angeles distribution center issues; EBITDA margin was, therefore, lower by 4.5 percentage points at 24.5 percent
Profit before tax (PBT) was down 26 percent to £159.4 million ($200 mm). The decline was more than EBITDA due to higher depreciation and amortization, as expected, a £3.9 million ($4.9 mm) impairment charge and a £10.7 million ($13.4 mm) charge from the FX translation of its Euro bank debt.
Kenny Wilson, Dr. Martens’ chief executive officer, said in a statement, “We achieved annual revenue of £1bn for the first time, up 10 percent and up 4 percent in constant currency. Reaching this milestone is a testament to the strength of our brand, our long-standing DOCS strategy and the hard work and dedication of our fantastic people globally. Direct-to-consumer is now more than half our revenue and the Dr. Martens brand remains strong with all key metrics either ahead of, or in line with, last year. In EMEA and Japan, where we executed our strategy well, performance was very good with encouraging momentum going into the new financial year.
“In America, against the backdrop of a challenging consumer environment, we made operational mistakes, such as the move to our LA Distribution Centre, and how we executed our marketing campaigns and e-commerce trading. We have undertaken detailed reviews to understand why these issues occurred and have begun to embed the lessons learned into the business. We are fixing the issues in America, including a significant strengthening of the team there, and returning America to good growth is our number one operational priority.
“We are focused on the successful execution of our proven DOCS strategy, which we will underpin with continued investment in the business and our people to support our increasing scale and capitalize on our iconic brand’s strength. The board retains its conviction in the strategy, long-term growth and cash generation of the business. It is therefore proposing to maintain the final dividend at 4.28p per share and will seek shareholder approval at the AGM to commence an initial share buyback program of up to £50m.”
Current Trading and Outlook
Dr. Martens said, “Trading since the start of FY24 has been in line with our expectations with very good DTC growth against a strong base and wholesale revenue lower than last year, as planned. We are maintaining our revenue guidance for the year of mid to high-single-digit growth in constant currency.
“Price increases will cover supply chain cost inflation. As previously announced, temporary warehousing costs in LA are expected to be £15m, split c.£10m in H1 and c.£5m in H2. These costs will unwind in FY25.
“The operational issues experienced during FY23 have demonstrated that continuing to invest in our infrastructure and capabilities to support our increasing scale and underpin our long-term growth is the right thing to do. We, therefore, anticipate the FY24 EBITDA margin will be 1-2 [percentage points] lower than FY23.
The H1/H2 split will reflect the usual trading pattern with lower revenue and margin in H1 than in H2, amplified by the expected timing of the recovery in America and our investments. We expect H1 revenue to be broadly in line with the prior year and EBITDA margin to be 5-6 [percentage points] lower.
“In FY25, we expect high single-digit revenue growth. While there will be a further incremental investment in FY25, we also expect an improvement in EBITDA margin. In the medium term, we expect double-digit revenue growth and further margin expansion.”
Photo courtesy Dr. Martens