- Inventory bottleneck hitting profits
- Direct-to-consumer sales are slow
Shares in Dr Martens (DOCS) fell by a fifth after the boot maker revealed that full-year profits would be £30mn lower than analysts expected. The group is experiencing “significant operational issues” at its new distribution centre in LA which have led to an inventory bottleneck, according to a third quarter trading update. Lost revenue and incurred costs related to this are expected to reduce full-year Ebitda by £16-25mn. Management warned of some “knock-on effects” in early 2024, but predicted that they will normalise in the first half.
This is not the group’s only challenge, however. Management also noted “weaker than anticipated” direct-to-consumer sales in the US, where over 40 per cent of revenue is generated. October and November saw “variable trading” which a strong Christmas period failed to offset, and the company warned that future sales would also be impacted by the “more uncertain economic environment”.
The upshot is some gloomy forecasts. Revenue growth for the year to 31 March 2023 is only expected to reach 11-13 per cent, as opposed to “high-teens”. Meanwhile, Ebitda will be between £250mn and £260mn, compared with consensus forecasts of around £290mn.
The latest profit warning follows a similar misstep in November, when Dr Martens revealed that its margins were under pressure and sales growth was slower than expected. Shares have tumbled by 52 per cent since January last year.
