Dr. Martens Sees First-Half Sales Slide on Softness Within U.S. Wholesale

Dr. Martens plc reported revenue in the first half ended September 30 declined 5 percent, or 3 percent on a currency-neutral basis, primarily driven by weakness in U.S. wholesale channels.

Revenues reached £395.8 million against £418.6 million a year ago.

DTC revenue grew 9 percent (11 percent constant-currency) to 50 percent of the mix, up from 43 percent a year ago. Retail revenue was up 15 percent (17 percent constant-currency) and e-commerce gained 3 percent (5 percent constant-currency). The brand opened 25  stores globally in the quarter.

Dr. Martens said wholesale revenue was impacted by planned strategic decisions to reduce volumes into EMEA retailers and exit of the China distributor, together with a weaker U.S. wholesale performance than previously anticipated.

By region, Dr. Martens saw good growth in EMEA (revenue up 9 percent or 8 percent constant-currency) and a strong performance in Japan DTC (revenue up 41 percent constant-currency) while America revenue was down 18 percent (15 percent constant-currency), driven by wholesale.

EBITDA fell 13 percent to £77.6 million with the EBITDA margin eroding to 19.6 percent from 21.2 percent. Profits after tax were down 57 percent to £19.0 million from £44.7 million a year ago.

“We saw a mixed trading performance in the first half of the year,” said Kenny Wilson, chief executive officer. “We made good progress with our strategic priorities, continuing to invest in the business and our people to drive sustainable long-term growth. During the period we focused on controlling the controllables: we delivered significant supply chain savings, suconstant-currencyessfully transformed our North America distribution network, opened 25 new stores, and launched a Dr. Martens UK repair service. The DOCS strategy of brand control and prioritising more profitable sales via our own stores and websites continued to deliver, with Direct to Consumer (“DTC”) revenues up 11 percent in constant currency, representing half of Group revenues.

“We saw a continued strong DTC performance in EMEA and APAC. In the USA, where there is an increasingly difficult consumer environment, our results have been more challenged, led by weakness in wholesale. We have strengthened the Americas leadership team and they are taking action, including refocusing marketing and improving our ecommerce trading capabilities. It is likely, however, that given the challenging backdrop it will take longer to see an improvement in USA results than initially anticipated. Notwithstanding the clear challenges we face in the USA market we remain very confident in our iconic brand and the significant growth opportunity ahead of us.

“I am delighted that I’ll be joined by Giles Wilson as Chief Financial Officer and Ije Nwokorie as Chief Brand Officer in the new year, bolstering our leadership team. I would like to take this opportunity to thank the dedicated and passionate people of Dr. Martens for their exceptional hard work in H1 and their continued support as we enter the busiest period of the year.”

Current Trading And Guidance

Dr. Martens said, “Trading in the second half to date has been mixed, with the start of the Autumn/Winter season impacted by warm weather across all three regions and weaker traffic overall. However, in both EMEA and APAC, we have seen improved trading in more recent weeks. We expect trading for the remainder of the full year in these two regions to be broadly in line with previous expectations.

“In the USA, the consumer environment has become more challenging in recent months. Although we have seen some encouraging signs in very recent DTC trading, including over the Black Friday weekend, we expect that it will take longer to see a material improvement in USA performance than initially anticipated. The most challenging part within our USA business is wholesale, with widespread macro-economic caution amongst our wholesale customers resulting in a weaker order book than in prior years. Wholesale customers have low in-market inventory levels of our products and therefore we can expect them to re-order, however the timing and level of these re-orders are unpredictable, reducing visibility in our wholesale business.

“There is a large part of the financial year still ahead of us, however, given the backdrop, we expect that full year revenue will decline by high single-digit percentage year-on-year, on a constant currency basis. Assuming this revenue outturn, we expect FY24 EBITDA to be moderately below the bottom end of the range of consensus expectations, with PBT also impacted by c.£5m higher net finance costs in addition to this lower EBITDA *.

“Given macro-economic uncertainty, we are withdrawing our previous guidance of high single-digit revenue growth in FY25. Our medium-term expectations are unchanged, underpinned by the significant white-space growth opportunity and our iconic brand and product range.”