Dr. Martens Revenue, Profit Tumbles on Continued Weak USA Demand

Dr. Martens (LON: DOCS) reported a significant decline in revenue and profit for the fiscal year ending March 31, 2024, primarily driven by weak consumer demand in the USA.

The company's revenue dropped by 12.3% year-over-year to £877.1 million, while profit before tax plummeted 42.9% to £97.2 million.

CEO Kenny Wilson attributed the disappointing results to poor performance in the USA wholesale business, which overshadowed positive growth in direct-to-consumer (DTC) channels. Despite a 7% increase in DTC pairs, wholesale revenue in the Americas fell by 24%, causing a substantial impact on overall performance.

Regionally, EMEA saw a modest 3% revenue decline, with a 12% rise in DTC offset by reduced wholesale volumes. APAC remained stable with a slight 1% growth in constant currency terms, buoyed by strong sales in Japan.

The company's strategic focus includes a detailed plan to boost demand in the USA, with increased marketing investment set for the upcoming year. Additionally, a cost-saving initiative targeting £20-25 million is underway to improve financial stability.

Other notable achievements included robust growth in shoes and sandals, a 3.8 percentage point increase in gross margins, and the opening of 35 new stores globally, predominantly in Europe and APAC. However, net debt rose to £357.5 million due to returns to shareholders and increased lease liabilities.

Looking ahead, Dr. Martens said current trading is in line with its expectations. For the first half, they expect a revenue decline of around 20%, driven by wholesale revenues down around a third.

Overall results this year are forecast to be “very second-half weighted, particularly from a profit perspective.”

Furthermore, the company plans to maintain the FY25 dividend at current levels, with an anticipated return to a standard earnings payout in FY26.