ii view: Dr Martens shares 24% higher as new CEO stamps his mark

Full-year results to 31 March

• Currency adjusted revenue down 8% to £788 million
• Adjusted pre-tax profit of £34 million, down from £97 million the year before
• Net debt including leases down 31% to £249.5 million
• Final dividend of 1.70p
• Total dividend for the year unchanged at 2.55p per share

Chief executive Ije Nwokorie

"Our single focus in FY25 was to bring stability back to Dr. Martens. We have achieved this by returning our direct-to-consumer channel in the Americas back to growth, resetting our marketing approach to focus relentlessly on our products, delivering cost savings, and significantly strengthening our balance sheet.

“Looking ahead, there are significant markets for us to grow into, and we currently own just 0.7% of a total relevant market of £179 billion.”

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ii round-up:

Dr. Martens Ordinary Shares (LSE:DOCS) today detailed mixed sales and profit, although the boot maker outlined a refreshed strategy under new CEO and former Apple executive Ije Nwokorie.

The seller of boots, shoes, sandals, and accessories will now look to widen its customer audience, drive more purchase occasions, simplify the business and enhance distribution including entering new growth markets. 

Sales for the year to late March fell 8% to £788 million, with profits plunging to £34 million from last year’s £97 million. The City had expected outcomes of £799 million and £31 million respectively. 

However, shares in the FTSE 250 company rose by a quarter in UK trading having come into these latest results down by more than 80% over the last five years. That’s significantly below a 15% gain for the FTSE 250 index. Fellow luxury goods retailer Burberry Group (LSE:BRBY) are down by more than a third over that time. 

Dr Martens operates in more than 60 countries globally. Former brand director Ije Nwokorie took charge in early January.

Over the medium-term, the retailer is targeting profitable revenue growth above the rate of the wider footwear market, with operating leverage driving a mid to high teens profit margin. That’s potentially up from of margin nearer to 5% over the past year. 

For the year ahead, Dr Martens plans to reduce product discounting across the Americas and wider European regions with the aim of driving full price sales.

The City is currently forecasting annual adjusted profit of between £54 million and £74 million. 

ii view:

Started in 1960, Dr Martens today employs more than 3,650 people worldwide. The group sells either Direct-to-Consumers (DTC) via its own store network and online channels or through its Wholesale division and therefore sold via other retailers. Geographically, the wider European or EMEA region (Europe, the Middle East, and Africa) generated most profits during this latest financial year at 75%. That was followed by Asia Pacific at 15%, and the America’s the balance of 10%. 

For investors, sales for each of its Americas and EMEA region fell by close to 10% over this financial year. The high fashion nature and relatively high price tag of the company’s products cannot be overlooked in what is still a tough environment for consumers. US trade tariffs will now need to be either swallowed by the company or added to selling prices, while a one-year forecast price/earnings (PE) ratio above the three-year average may suggest the shares are still not obviously cheap.

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On the upside, group strategy is now being reinvigorated by the new chief executive. Company net debt is down by close to a third from a year ago to £249.5 million, including store leases. A failure of the new CEO's recovery plan could still see the group’s brand attract the attention of a major fashion house, while a historic dividend yield above 3% is not to be ignored. 

In all, and while optimism about the outlook has risen, more cautious investors might demand firmer evidence of a recovery before taking an interest. 

Positives: 

• Geographical diversity
• Refreshed strategy

Negatives:

• Pressured consumer spending
• Exposure to currency movements

The average rating of stock market analysts:

Strong hold