Dr Martens shares up as guidance held despite Q3 sales slump

Shares in Dr Martens surged on Thursday as investors breathed a sigh of relief that the UK bootmaker held full year guidance after third-quarter revenues slumped by a fifth, driven by a poor performance in the US and from its wholesale channel.

The company, which issued a profits warning in November, posted revenues of £267m for the last three months of 2023, down 21%. Wholesale orders plunged by 46%.

“Trading in the quarter was volatile and we saw a softer December in line with trends across the industry. Whilst the consumer environment remains challenging, we are taking action to continue to grow our iconic brand and invest in our business. We remain confident in our product pipeline for autumn/winter 2024 and beyond," said chief executive Kenny Wilson.

"The guidance for full year constant-currency revenue decline of high single-digit percentage year-on-year, remains unchanged. All other guidance for 2024 also remains unchanged."

Total revenues dropped by 31% in the US, compared with 15% in Europe, the Middle East and Africa, and by 8% in Asia.

Dr Martens added that the stronger pound since the end of the first half would result in a £5m forex headwind if current exchange rates persist, along with a non-cash balance sheet translation charge of approximately £5m.

“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," said AJ Bell investment director Russ Mould.

"Investors are breathing a sigh of relief although the company still has considerable issues to resolve."

“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.

“An uncertain economic backdrop does not make for ideal trading conditions, particularly if people are still watching their pennies and pulling back from buying bigger ticket items. Dr Martens’ boots may be iconic but they also don’t come cheap."

Reporting by Frank Prenesti for Sharecast.com