30th May 2024 15:34
(Alliance News) - Dr Martens PLC shares surged on Thursday despite weaker annual results and US woes, and a warning from the bootmaker on revenue for the first-half of its new year.
Shares traded 2.5% higher at 86.00 pence each in London on Thursday afternoon.
The London-based company said pretax profit fell by 42% to GBP93.0 million in the financial year that ended March 31 from GBP159.4 million the year before. Before currency effects, pretax profit fell 43% to GBP97.2 million from GBP170.1 million.
Revenue was GBP877.1 million, down 12% from GBP1.00 billion. It was down 9.8% at constant currency rates. The company sold 11.5 million pairs of its iconic boots, down 17% from 13.8 million in financial 2023.
Dr Martens said financial 2024 was a "challenging year" for the company, with a difficult trading environment.
This was particularly true in the US, where revenue fell by 24%, or 20% at constant currency, primarily due to weak wholesale business. In Europe, Middle East and Africa, revenue was down 3%, while in Asia Pacific, it was down 7% at actual currency rates and up 1% at constant currency.
Globally, wholesale revenue was down 28%, or 26% at constant currency, swamping a 2% - or 5% - rise in direct-to-consumer revenue.
Looking ahead to financial 2025, Dr Martens said: "There remains a wide range of potential outcomes for both revenue and profit for the year, dependent on the performance through the key peak trading period.
"For the first half, we expect a group revenue decline of around 20%, driven by wholesale revenues down around a third. Combined with the cost headwinds which impact both halves, the impact of operational deleverage is significantly more pronounced in the first half. Overall results this year will therefore be very second-half weighted, particularly from a profit perspective."
Dr Martens declared a final dividend of 0.99p, taking the total dividend to 2.55p, down from 5.84p. It said it plans to pay the same again in financial 2025 before returning to its normal dividend policy of 25% to 35% of earnings from financial 2026 onwards.
Dr Martens announced a "cost action plan" to cut GBP20 million to GBP25 million in annual costs across the company. This will be led by its new chief financial officer, Giles Wilson.
At the same time, the company plans to invest in marketing to rebuild its US business.
"We are clear that we need to drive demand in the USA to return to growth in FY26 onwards and are executing a detailed plan to achieve this, with refocused and increased USA marketing investment in the year ahead," said Chief Executive Officer Kenny Wilson.
Wilson is set to be replaced as CEO this year by Ije Nwokorie, currently chief brand officer.
AJ Bell analyst Dan Coatsworth commented: "Markets love a good cost cutting spree, even if that might massage near-term earnings at the detriment of long-term benefits to the company. That won't be Kenny Wilson's problem as he's leaving as CEO later this financial year. Under the circumstances of Dr Martens attempting to break the record for the most amount of profit warnings for a listed company, it's surprising to see it continue to pay dividends. It's only natural to pause the shareholder reward when profits are falling, net debt is rising, trading is volatile and ongoing investment is needed in the business. Perhaps Dr Martens took the view that without the dividend, shareholders would have nothing to cling on for.
"What's certain is that Dr Martens looks like a ripe takeover target. One of the classic scenarios for takeovers is when a company is down on its knees, it's going through a leadership transition and there is a major shareholder who has been hanging around for longer than expected. That's Dr Martens all over."
Coatsworth noted Permira still owns just under 39% of the firm, despite trimming its stake during the footwear company's float in January 2021.
By Eric Cunha, Alliance News news editor
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