ii view: Dr Martens details maiden stock market results

An iconic British brand growing sales both online and in China. Buy, sell or hold?

Full-year results to 31 March

• Revenue up 15% to £773 million
• Adjusted earnings up 22% to £224 million
• No dividend

Guidance:

• Expects high teens revenue growth for full-year 2022

Chief executive Kenny Wilson said:

“We continue to prioritise selling directly to our consumers, and, with retail severely impacted by Covid-19 restrictions, we focused our efforts on a step-change in ecommerce. The investments and improvements we made in our supply chain in recent years, along with our multi-country sourcing model and close supplier relationships allowed us to quickly react to a rapidly changing environment, ensuring minimal disruption and maintaining good availability throughout.”

ii round-up:

Boot maker Dr Martens (LSE:DOCS) reported a 15% improvement in sales in its first results since listing on the stock market in January. Ecommerce sales jumped by 73%, helping to counter a 40% fall in pandemic disrupted sales at retail outlet. 

Adjusted earnings rose by just over a fifth to £224 million, aided by supply chain efficiencies, although reported pre-tax profit fell by almost a third to £71 million hit by both costs relating to its IPO and a staff bonus. 

Dr Marten shares fell by more than 10 % in UK trading to just over 440p per share, having earlier in the year come to the stock market at a price of 370p. A market value of over £4.5 billion leaves the company just outside the FTSE 100 index. The iconic boot maker now sits alongside Burberry (LSE:BRBY) and Watches of Switzerland (LSE:WOSG) in the personal goods sector. 

Accompanying management guidance for the year ahead pointed to hopes of high teen revenue growth year-over-year as it laps pandemic hit trading for the year to the end of March 2021. 

Strong sales growth across all geographical regions was seen in the pandemic scarred year. Sales for both Europe, Middle East, and Africa (EMEA) and the Americas rose by 17%. Sales for its Asia Pacific region grew by a more sedate 7%, hit by Covid disruption to its Japanese retail outlets. Demand in China grew by an impressive 46%. 
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Despite Covid-19, the boot maker opened 18 new own stores globally, taking its total own-store estate to 135. Dr. Marten sells via the four channels of ecommerce sites, own store retail, wholesale and direct to consumer, with wholesale currently its largest avenue at just over half of total sales.  

The boot maker expects to pay its first dividend for the first half of the current full year in January 2022. A first-quarter trading update is scheduled for 29 July.

ii view:

Dr Martens was founded in 1960 in Northamptonshire. Today it mainly focuses sales efforts on the seven core markets of the UK, France, Germany, Italy, the USA, Japan and China. Its four key strategic pushes are to accelerate its direct to consumer and ecommerce channels, helping it to control brand engagement; improve its operational and IT infrastructure; create deeper connections with more consumers and grow globally on a sustainable basis. 

For investors, fashion trends can change quickly, leaving the business open to volatility. Covid-related uncertainty also needs to be remembered, while some announced senior management departures potentially add caution. That said, these initial results are broadly in line with pre-float forecasts, sales are tipped to keep growing, and the payment of a dividend is soon expected to begin. For now, and with forecast growth arguably priced in given an estimated 2022 price earnings ratio (PE) of over 30 times, the shares look up with events. 

Positives: 

• Geographical diversity
• An expected dividend payment

Negatives:

• Covid outlook uncertainty
• Exposure to currency movements

The average rating of stock market analysts:

Hold