Dr. Martens Faces Challenges in Q3, Mainly Due to Issues with US Operations.

The latest quarter proved challenging for Dr. Martens, with its typically lucrative Golden Quarter falling short of expectations.

Reported revenue for the quarter declined by 21% to £267.1 million, or 18% in constant currency (CC), marking a weaker performance compared to the overall fiscal year. Across the first three quarters combined, reported revenue decreased by a more moderate 12% to £662.9 million, or 10% CC.

In Q3, direct-to-consumer (DTC) revenue dipped by 5% reported or 3% CC, while wholesale plummeted by 49% reported or 46% CC. E-commerce revenue saw a 9% reported decline or 8% CC, with retail revenue showing a modest 3% increase, remaining flat on a CC basis.

The main issue driving the negative numbers was attributed to “a weak USA performance, as expected,” alongside volatile trading conditions in December, aligning with industry trends.

The decline in e-commerce was predominantly felt in the Americas, where online revenues dropped significantly. In contrast, the EMEA region recorded marginal growth, and APAC saw only a slight decline year-on-year.

Retail revenue experienced double-digit growth in APAC, primarily led by Japan, solid growth in EMEA, and declining revenue due to persistently weak footfall in the US, as anticipated.

During the quarter, Dr. Martens expanded with the opening of 13 new stores across EMEA and APAC, totaling 235 own stores globally by the quarter’s end.

The substantial wholesale decline was attributed to significant decreases in both the Americas and EMEA, in line with expectations and assumptions outlined in the FY24 guidance. Weak wholesale customer re-orders and unpredictable inventory levels continued to challenge visibility in this segment.

Across regions, similar industry-wide challenges impacted performance. EMEA DTC revenue saw low single-digit growth, with fluctuations due to weather conditions and differences in the phasing of orders. EMEA wholesale declined significantly as planned, contributing to an overall revenue decline of 15% year-on-year.

In the Americas, DTC revenue declined by double digits, accompanied by softer e-commerce sales and reduced foot traffic. Wholesale revenues also experienced a sharp decline due to cautious ordering from wholesale customers. However, the new Americas leadership team is actively implementing strategies to bolster revenue and brand growth.

APAC revenue decreased by 8% reported, but only 1% CC, with Japan delivering overall growth and DTC and wholesale performance affected by store transfers.

Despite these challenges, Dr. Martens maintains the guidance provided during H1 results. However, currency fluctuations may pose a £5 million headwind to the P&L, alongside a non-cash Balance Sheet translation charge, contingent on current FX rates.

CEO Kenny Wilson remains optimistic, noting ongoing efforts to grow the iconic brand and invest in the business, expressing confidence in the product pipeline for AW24 and beyond amidst a persistently challenging consumer environment.

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