Dr. Martens shares lose a third of their value on U.S. warning

By Steve Goldstein

CEO to leave after six years, shoe maker says

Shares of iconic shoe brand Dr. Martens fell as much as 32% on Tuesday with the company's U.S. business going so badly it needs to extend paying for additional storage space as it announced its chief executive will leave.

Dr. Martens shares (UK:DOCS) fell even though it said its fiscal year results should be in line with consensus expectations, helped by what it said was high-single-digit year-over-year growth in direct to consumer sales.

But it's expecting U.S. wholesale revenue in the next fiscal year to be down by double digits in percentage terms. It's going to require the additional inventory storage facilities that in the current year cost it GBP15 million.

That will lead in the "worst case" to a profit before tax for the company as a whole to be just one third of fiscal 2024 levels and it's assuming revenue falls by single digits.

Analysts polled by Visible Alpha had expected 12% pretax profit growth in fiscal 2025 on 3% revenue growth.

"The company served up four profit warnings in 2023 with a difficult consumer backdrop not helping. However, it has also been the author of its own misfortune with a series of operational mishaps including inventory mismanagement," said Danni Hewson, head of financial analyst at AJ Bell.

The private equity group Permira, which floated the business three years ago, still holds a 38% stake in the business.

CEO Kenny Wilson will step down after six years, to be replaced before the end of the current fiscal year by Ije Nwokorie, currently the chief brand officer and previously a senior director at Apple (AAPL) in its retail operations.

"Key for Nwokorie will be returning the U.S. business to growth and reigniting demand in this market -- he will need to bring all of his experience to bear to revive the brand and restore Dr. Martens' fortunes," said Hewson.

-Steve Goldstein

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04-16-24 0830ET

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