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IPO costs weigh on Dr. Martens’ profits

Exceptional charges overshadowed a 73 per cent increase in online sales
June 17, 2021
  • E-commerce momentum saw revenue rise by 15 per cent in the year to 31 March
  • The British bootmaker will start paying dividends in the new financial year

In an experience that will be familiar to its loyal customers, Dr. Martens' (DOCS) first months as a public company have generated some blisters. Despite good sales growth from its initially-painful boots and shoes in the year to 31 March, the group's share price fell by a tenth following the release of its full-year numbers, although remains above the 370p IPO price. 

Sales from physical stores dropped by two-fifths, but Dr. Martens still managed to increase its overall revenue by 15 per cent in the year to 31 March, to £773m. The iconic bootmaker benefitted from consumers’ migration online during the pandemic, with e-commerce sales surging by 73 per cent.

Online sales now account for 30 per cent of the group total – up from 20 per cent a year earlier – and it is aiming for this proportion to reach 40 per cent in the medium term. In the meantime, it will still expand its footprint in physical retail. Having opened 18 new stores across the world in FY2021, it plans to open between 20 and 25 new locations this year.

Higher sales translated to adjusted operating profit climbing by a quarter to £193m. But on a statutory basis, operating profit plunged by 21 per cent to £113m. This was largely due to £80.5m of IPO costs, of which more than half relate to a one-off bonus paid to staff.

The group is sitting on £253m of net debt, but expects to start paying dividends in the new financial year, handing shareholders up to 35 per cent of profit after tax.

Analysts at Peel Hunt believe that “there’s lots to like about Docs, apart from the valuation”. Indeed, the group enjoys high margins – which should be bolstered by the focus on direct-to-consumer (DTC) channels – as well as a strong brand that should keep attracting new customers. But the shares look rather expensive at 29 times consensus 2022 earnings. Hold.

DR. MARTENS (DOCS)   
ORD PRICE:446pMARKET VALUE:£4.46bn
TOUCH:445-447p12-MONTH HIGH:522pLOW: 414p
DIVIDEND YIELD:NAPE RATIO:124
NET ASSET VALUE:15p*NET DEBT:£253m
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2018**3490.70-57.0nil
2019**45428.9172nil
2020** (restated)6721017.50nil
202177370.93.60nil
% change+15-30-52-
Ex-div:na   
Payment:na   
*Includes £261m in intangible assets or 26p a share, **Pre-IPO. Last IC View: na