Dr Martens endures weak Q3, US business is biggest problem

​​Dr Martens issued a bleak Q3 trading statement on Thursday but at least its performance in the three months to the end of December was “in line with the updated full-year guidance provided in November”.

What that means is the so-called Golden Quarter wasn’t exactly sparkling for the brand.

On a reported basis, revenue for the quarter was down 21% at £267.1 million, or down 18% in constant currency (CC), which was a worse performance than the year as a whole. For the first three quarters of the financial year combined, reported revenue was down a more moderate 12% at £662.9 million and down 10% CC.

Q3 DTC revenue declined by 5% reported or 3% CC, and wholesale was down a massive 49% reported or 46% CC. E-commerce revenue fell 9% reported or 8% CC, with retail revenue up 3% and flat on a CC basis.

So what was the big problem? The negative numbers were driven by “a weak USA performance, as expected”. It also said that “trading in the quarter was volatile and we saw a softer December in line with trends across the industry”. 

The e-commerce drop was also mainly about the Americas, where online revenues were down in double-digits, with EMEA recording marginal growth and APAC only slightly down year-on-year. 

As for retail revenue, it achieved double-digit growth in APAC driven by Japan, solid growth in EMEA and declining revenue driven by continued weak footfall in the US, “as anticipated”. 

During the quarter it opened 13 new stores across EMEA and APAC and by the end of the period had 235 own stores globally, having opened 38 stores in the first nine months and closed seven. 

That giant wholesale drop was the result of it seeing a “significant decline” in both the Americas and EMEA, “in line with both our expectations and the assumptions within our FY24 guidance”. 

The company said its wholesale customers “continue to have relatively low levels of in-market inventory, however the timing and level of re-orders is unpredictable, meaning that our visibility over wholesale remains weak”.

Regionally, it seems to have been hurt by many of the same issues seen across the fashion sector late last year. EMEA DTC revenue grew in low single-digits in Q3, “with a weaker October, impacted by abnormally warm weather conditions, a strong November and a softer December”. 

It saw “a good DTC performance in our continental European conversion markets with a slightly softer result in the UK in line with industry trends. EMEA wholesale declined significantly as planned, due to both the reduction of sales to e-tailers, together with differences in the phasing of some orders. Overall EMEA revenue declined by 15% year-on-year, on both a reported and CC basis, driven by the wholesale performance”.

We’ve already heard how tough the Americas was. It saw a double-digit decline in DTC revenue, with softer e-commerce and low footfall. Wholesale revenues “broadly halved” year-on-year as “continued caution from wholesale customers resulted in a weak order book”. Overall, Americas revenue was down 31% reported, or 26% CC. 

But the new Americas leadership team “continues to take action, particularly in marketing execution and e-commerce trading capabilities, to drive revenue and grow the brand”. 

APAC revenue was down 8% reported, but only 1% CC. Japan, which is its biggest market in the region, “delivered good growth overall, with the relative DTC and wholesale performance driven by the transfer of 14 franchise stores at the end of FY23”. 

None of this has changed the guidance it provided at the time of its H1 results, but the rise in the value of the UK pound since the end of H1 means that, “if current FX rates persist, we anticipate a currency headwind to the P&L of approximately £5 million, together with a non-cash Balance Sheet translation charge, also of approximately £5 million”.

CEO Kenny Wilson stayed upbeat and added that while the consumer environment “remains challenging, we are taking action to continue to grow our iconic brand and invest in our business. We remain confident in our product pipeline for AW24 and beyond”.