Nov 24, 2022
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Dr Martens revenue rise continues, but investment dents profits

Nov 24, 2022

Dr Martens has released what it calls "another strong set" of results, covering the six-month period to the end of September. Underlying revenue was up as much as 18%, although EBITDA was flat and profit before and after tax fell.

Dr Martens x The Clash

Reported revenue was up 13% at £418.6 million and, as mentioned, there was an 18% rise on an underlying basis (taking into account its exit from Russia and the end of its South America, distribution agreements).

EBITDA was at the same level as a year ago at £88.8 million but pre-tax profit was down 5% at £57.9 million and net profit fell 8% to £44.7 million, all affected by higher investment and increased costs.

The company said it saw growth in all channels with direct-to-consumer (DTC) up 21% to £179.8 million and wholesale up 15% to £238.8 million. Retail rose 38% to £91 million and e-commerce 8% to £88.8 million.

It was strong globally and in America, underlying revenue rose as much as 31% to £179.7 million (+15% constant currency). EMEA underlying growth was 9%, driven by DTC that jumped 22%. 

APAC revenue was up 9%, partly held back by the slower recovery from Covid-19. Japan is now its third most important market and contributed 40% to APAC revenues and 55% to EBITDA. 

While the gross margin improved by 0.3 percentage points to 61.6%, the lack of progress in EBITDA was down to increased investment in new stores, marketing and people to drive future growth. That meant the EBITDA margin was lower by 2.8 percentage points at 21.2%. 

Retail, wholesale and product

The company is focusing more on its own stores and said that during the period the DTC mix was up 3 percentage points to 43% as it opened 21 new directly-operated stores across its three regions.

But wholesale remains important and revenue here was up 15% on 13% fewer accounts via “better quality partners”. Planned September wholesale revenue of £10 million is set to be recorded for October, mainly due to a labour shortage at a logistics hub and port strikes in the UK. But that will at least boost the second half.

The wholesale order book is “in excess of” its full-year estimate and it has “headroom for increased cancellation risk”.

As for products, in boots, it saw “continued success" of platform soles, including the Quad range. Platform boots that performed well included the Audrick, the Jetta in APAC and the Jarrick in EMEA. Within the casual range, it launched the new Boury utility boot in September.

In shoes, it did well with the Adrian loafer range (“supported by our relationship with Blondie McCoy”), Mary Janes and limited edition 1461 offerings, such as the City Pack. This included a shoe from each region based on London, New York, LA and Tokyo.

Dr Martens

In sandals, growth was again led by its Voss and Blaire styles, and products using the innovative Zebrillus lightweight platform sole. Strong growth was seen in mules, led by the Carlson and Jorge, with particular success for its Made in England line.

Collaborations were also key to its Originals strategy. Successful launches in H1 included a three-way collab with Supreme and Yohji Yamamoto and a fifth link-up with Engineered Garments, paying tribute to the manufacturing techniques of its Northamptonshire factory.     

Strong foundation for the future

The company says it has recovered from last year's pandemic-related supply challenges and it's powering ahead with new and larger third-party logistics distribution centres in LA and the Netherlands.

It has implemented AW22 price increase “successfully” and its latest survey “confirms headroom to offset future inflation”. 

It’s maintaining its revenue guidance of high-teens growth for the full year, despite the consumer environment having weakened throughout H1 and DTC trading having been variable. 

Its peak trading weeks are ahead and given that last year they were impacted by Covid-19 restrictions and stock availability issues, the comparison isn’t too tough. 

Over the medium term, it continues to guide for mid-teens revenue growth and a medium-term EBITDA margin milestone of 30%, with price continuing to offset inflation.

The company is also planning to increase marketing spend as a percentage of revenue by around 0.5 percentage points a year. This was achieved in H1 as marketing spend grew 23% with much of its spend directed at building its social media communities. It now has 10.3 million followers across all channels, up 15% on the year.

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