ii view: new CEO has high hopes for Dr Martens

Third-quarter trading update to 29 December

• Currency adjusted revenue up 3% to £267 million

Guidance:

• Continues to expect a single digit fall in currency adjusted full-year sales

Chief executive Ije Nwokorie

"I am excited to be CEO of Dr. Martens. The global relevance of our iconic brand, the strength of our product line and the passionate commitment of our team give me great confidence for FY25 and beyond. Our Q3 trading was as expected and our outlook for FY25 remains unchanged. 

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ii round-up:

Under new head Ije Nwokorie, boot maker Dr. Martens Ordinary Shares (LSE:DOCS) today detailed an increase in sales, driven by improved demand in the group’s Americas region which generated just over a third of all sales. 

Currency adjusted third-quarter sales to 29 December rose 3% to £267 million, helped by a 4% increase in Direct-To-Consumer sales across the Americas. That’s up from an overall group-wide currency adjusted decline of 16% during the first half, with DTC sales for the Americas down 4%.  

Shares for the FTSE 250 company fell 1.5% in UK trading having come into this latest news down 17% over the last year. That’s similar to fellow high-end goods seller Burberry Group (LSE:BRBY). The 250 index itself is up almost 6% over that time.

As well as selling millions of pairs of boots, Doc Martens also sells shoes, sandals, and accessories either Direct-to Consumers (DTC) through its own store network and online channels or via its Wholesale division and other retailers.  

Former brand director Ije Nwokorie took charge in early January with ex CEO Kenny Wilson remaining available to assist until late March.  

Currency adjusted DTC sales for Europe, the Middle East and Africa (EMEA), its biggest region at around a half of total sales, fell 5% for the quarter. Asia Pacific sales on the same basis, making up the balance of just over a tenth of revenue, climbed 17%.

On a selling channel basis, there was a gain of 1% in currency adjusted DTC sales and 9% increase in Wholesale revenues, although numbers were aided by comparative figures versus a year ago. 

Full-year results are scheduled for 5 June.   

ii view:

Founded in 1960, Doc Martens today operates in more than 60 countries. Group recovery initiatives under former CEO Kenny Wilson included a change in marketing towards products and away from brand, improving its performance in the major USA market, and reducing costs. 

For investors, currency adjusted sales for the core EMEA and Americas regions for the current financial year over nine months are down 9% and 12% respectively. The high fashion nature of the group’s products cannot be overlooked. A previous push to reduce group debt saw the interim dividend cut to 0.85p per share from 1.56p per share the year before. A one-year estimated price/earnings (PE) ratio above the three-year average may suggest that even now the shares are still not obviously cheap.

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To the upside, initiatives under the old CEO have aided some third-quarter sales improvements, with the new boss also trying to reinvigorate performance. Group net debt fell to £349 million as of late September from the prior year’s £479 million. Despite being cut, a forecast dividend yield of around 3.5% is still not to be overlooked, while the group’s brand name could potentially attract the attention of a major fashion house. 

In all, a new CEO offers hope, but more cautious investors may wish to await more concrete signs of a recovery before taking an interest. 

Positives: 

• Geographical diversity
• New CEO

Negatives:

• Pressured consumer spending
• Exposure to currency movements

The average rating of stock market analysts:

Hold