25th Jan 2024 11:54
(Alliance News) - Dr Martens PLC's shares recovered slightly on Thursday after maintaining its annual guidance, though the footwear firm is still struggling to crack the US market.
The Northamptonshire, England-based boot maker said its third-quarter performance was in line with its November guidance.
In the three months to December 31, revenue fell 21% year-on-year to GBP267.1 million, while revenue in the year-to-date was 12% behind the prior year at GB662.9 million. For the three months to December 31, 2022, Dr Martens reported revenue of GBP335.9 million.
The bootmaker left in place its guidance of a full-year constant currency revenue decline of high single-digit percentage year-on-year. However, it warned of a GBP5 million currency profit headwind stemming from the appreciation of sterling after the first half.
Shares in Dr Martens were up 8.1% at 81.45 pence each in London on Thursday around midday. The stock is down 39% over the past year.
"It's been a long time since we've seen Dr Martens' shares rise on a trading update but it has finally happened. While the headline figures look miserable, the positive market reaction is down to Dr Martens maintaining previous guidance rather than having to rachet it down once again. Investors are breathing a sigh of relief although the company still has considerable issues to resolve," said AJ Bell investment director Russ Mould.
The firm has suffered from operational struggles over the past year, particularly at its Los Angeles distribution centre.
In the third quarter, Ecommerce revenue fell 9%, driven by a decline in the Americas. Retail revenue was flat, while wholesale revenue plunged 49%, with significant declines seen in the Americas and Europe Middle East and Africa regions.
"It's starting to look like Dr Martens is the latest in a long line of British companies which have failed to break through in the US. The bootmaker is not giving up and has a new Americas leadership team in place to fine-tune marketing strategy and e-commerce capabilities," said AJ Bell's Mould.
Yanmei Tang, analyst at Third Bridge, offered some insight: "Our experts say the US market is more complex, and as a European brand, they need to adopt a more US-centric approach to comprehend the market better. The emphasis on boots and low-risk products, while maintaining control over price points, may not always align precisely with consumer preferences."
The overall US boot market has seen a decline, Tang noted, and while Dr Martens has made an effort to shift focus towards sandals and shoes, boots remain "crucial" to their business.
More generally, AJ Bell's Mould noted that the macroeconomic environment was not providing the ideal trading conditions for the firm. "Dr Martens' boots may be iconic but they also don't come cheap. The company should thrive in stronger economic conditions when customers are feeling flush, but we're not currently in that environment," he noted.
By Elizabeth Winter, Alliance News deputy news editor
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