Dr Martens takes a kicking from shareholders as distribution disruption wears down profits
Shares in Dr Martens plummeted 22 per cent as investors stuck the boot in, after the shoemaker downgraded its profit expectations.
The company said it expected disruption at its new distribution centre in Los Angeles to eat into its full-year revenues and earnings.
Dr Martens estimate it will suffer a hit to profits of between £16 and £25m for the year.
The company was trading at 163.4p per share on the FTSE 250 this morning , having started the day at over £2 per share.
The footwear brand admitted third quarter turnover was “below our expectations,” and revealed it would be taking a supply chain cost hit of between £8m and £11m.
The Northamptonshire-based firm expects full-year revenue growth for the full year to be around 11 to 13 per cent on an actual currency basis.
Meanwhile full-year earnings are forecast to be around £250m and £260m, below previous predictions.
Despite the setbacks, turnover has risen at the company, with Dr Martens’ revenues increasing nine per cent in its third quarter to £335.9m – putting year to date takings at £754.5m.
This included eight per cent growth in its established European market, and an overall 16 per cent across the US.
Dr Martens grapples with fresh setbacks
Today’s slide on the stock exchange is the latest in a series of setbacks for Dr Martens – which suffered a 20 per cent plunge in its share price last November after it revealed a sharp hit to profit margins due to weaker than expected demand ahead of Christmas and a robust US dollar.
Its former largest shareholder Permira Funds also sold 65m shares in the company last January – which contributed to a sustained fall in share prices in early 2022.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown argued Dr Martens’ had been “caught seriously on the back foot” with operational problems.
She said: “The transfer of inventory to the new hub was faster than planned, causing a bottleneck of stock, and the chaos is set to reduce wholesale revenues by up to £25m. It’s forced the company to take on new space and an extra shift of staff to sort out the problems which will also push up costs.
“This is another big migraine for Dr Martens, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth for the company.”
Looking to next year, it expects the distribution issues to weigh down trading at the start of the year, but that it still expects growth to be in mid to high single digits on a constant currency basis.
In a statement to the London Stock Exchange, the company said: “We expect there will be knock-on effects from this year’s disruption in 2024, but we anticipate these should normalise in the first half of 2024.”
