Dr Martens profits drop 29% to £128m

Dr Martens has reported that its profit after tax declined 29% to £128m for the year ended 31 March 2023, despite generating revenues of £1bn for the first time. It stated that its profit before tax was down because of higher depreciation and amortisation, a £3.9m impairment charge and a £10.7m charge from the FX translation of our Euro bank debt Its EBITDA was also down 7% to £245m due to slower revenue growth, continued investment in new stores, marketing and people, and £15m costs associated with the Los Angeles distribution centre (LA DC) issues; EBITDA margin was therefore lower by 4.5%pts at 24.5% However, its revenues increased by 10% to £1bn year on year. Direct-to-consumer sales via stores and websites increased by 16% to a record 52% of the total, which was helped by opening 52 additional company-owned stores, including the transfer of 14 franchise stores in Japan. Wholesale was also up by 4%. Dr Martens said that weaker shipments in America, partly as a result of the LA distribution centre bottleneck, and its decision to stop sales to its China distributor ahead of the agreement end, impacted wholesale results. Looking ahead, Dr Martens stated that FY24 EBITDA margin will be 1-2%pts lower than FY23, However, in FY25, it expects high single digit revenue growth. Kenny Wilson, CEO of Dr Martens, said: “We achieved annual revenue of £1bn for the first time, up 10% and up 4% in constant currency. Reaching this milestone is testament to the strength of our brand, our long-standing DOCS strategy and the hard work and dedication of our fantastic people globally. Direct to consumer is now more than half our revenue and the Dr. Martens brand remains strong with all key metrics either ahead of, or in line with, last year. In EMEA and Japan, where we executed our strategy well, performance was very good with encouraging momentum going into the new financial year. “In America, against the backdrop of a challenging consumer environment, we made operational mistakes, such as the move to our LA Distribution Centre, and how we executed our marketing campaigns and ecommerce trading. We have undertaken detailed reviews to understand why these issues occurred and have begun to embed the lessons learned into the business. We are fixing the issues in America, including a significant strengthening of the team there, and returning America to good growth is our number one operational priority.” He added: “We are focused on the successful execution of our proven DOCS strategy, which we will underpin with continued investment in the business and our people to support our increasing scale and capitalise on our iconic brand’s strength. The board retains its conviction in the strategy, long-term growth and cash generation of the business. It is therefore proposing to maintain the final dividend at 4.28p per share and will seek shareholder approval at the AGM to commence an initial share buyback programme of up to £50m.”