Dr Martens sales plunge as it swings to loss, sees signs of improvement in AW24 (#1682527)

Dr Martens delivered its half-year results on Thursday and also confirmed that its new CEO, Ije Nwokorie, will take over from Kenny Wilson on 6 January. And the numbers in its report to the end of September showed how much new leadership could be needed.

Revenue fell 18% at actual exchange rates and 16% constant currency (CC) to £324.6 million with the direct to consumer (DTC) revenue mix rising to 56.4% from 49.6%. 

But DTC revenue overall was down 7% (or 5% CC) and Wholesale revenue was down 29% (27% CC), “as expected”. Within DTC, Retail revenue was down 9% (7% CC) and e-commerce was down 4% (2% CC).

Adjusted EBIT was actually a loss of £4.3 million compared to a profit of £39.7 million in the previous year and adjusted profit before tax was a £17.9 million loss compared to a £25.2 million profit. Unadjusted pre-tax profit was a loss of £28.7 million compared to a £25.8 million profit last time. It was impacted by exceptional charges of £9.2 million, largely related to its cost-savings plan.

The company highlighted how the results were in line with expectations and that it’s delivering on its strategic objectives. In fact, guidance had been for a 20% revenue decline so in that respect, -18% doesn’t look quite so bad.

All regions performed in line with its expectations, with EMEA revenue down 16% (actual and CC), Americas revenue declining 22% (20% CC) and APAC down 12% (7% CC).

In EMEA, DTC revenue fell 8% CC and Wholesale was down 23% CC. EMEA Q1 was weaker, particularly Retail, however trading improved as it progressed through Q2 and entered the AW season. This resulted in Q2 DTC pairs being back into positive growth. Q1 EMEA DTC had been impacted by the early timing of Easter and the clearance sale, as previously disclosed. It also saw a weaker sandals performance and a promotional competitive backdrop in the half, particularly in the UK. Its “newer conversion markets” of Italy, Spain and the Nordics all showed good growth, while Germany revenues were broadly flat. The decline in EMEA Wholesale revenue was again in line with expectations, “being impacted by some shipment timing differences”.

That big revenue drop from its Americas region divided into DTC revenue down 4% CC and Wholesale down 34% CC. “This performance was in line with expectations and we continue to expect positive DTC growth in the second half,” it said.

APAC is its smallest region and declined ‘only’ 7% CC, as mentioned, with DTC revenue up 4% CC and Wholesale down 24% CC, due to shipment timing differences. It saw a continued good performance in its Japanese business, “which remains a significant growth driver”.

The company said “swift action [was] taken to implement our cost-savings plan, which will now deliver £25 million in FY26, at the top end of previous guidance”.

Importantly, it added that trading since the start of the AW24 season “has been encouraging, with all three regions positive, albeit the peak weeks of trading remain ahead of us. Encouragingly, trading has been driven by good DTC sales of new products supported by our new product-led marketing approach”.

Its guidance for FY25 remains unchanged, “with results underpinned by the swift cost action taken”. It expects a currency headwind of around £18 million to revenue and around £6 million to pre-tax profit for FY25 as a whole.

Outgoing CEO Wilson said of all this: “Our first-half performance was in line with expectations and we remain confident in our ability to deliver on our plans and the targets we set for FY25. As we shared in May, this is a year of transition and we have made good progress with our four main objectives: pivot our marketing to a relentless focus on our product, turn around our USA DTC performance, reduce our operating cost base and strengthen the balance sheet. 

“Our new marketing campaigns are showing encouraging early signs, with strong sales of new product, giving us confidence that we will return USA DTC to positive growth in the second half. We took swift action to implement cost savings and now anticipate the benefit of this in FY26 to be at the top of the previous guidance range of £20 million-£25 million, alongside an ongoing focus on tight cost control throughout the business. 

“We have delivered a significant reduction in both inventory and net debt, together with successfully refinancing our debt facilities. The early success of our new product ranges provides a strong foundation as we enter the important peak trading period and as I prepare to hand over the reins to Ije in the New Year.”