Boot maker Dr. Martens warns that annual profits could drop by two-thirds
- Dr. Martens is known for his association with various youth subcultures
- It blamed the gloomy outlook partly on declining US wholesale revenues
Dr. Martens shares plummeted on Tuesday after the shoe maker unveiled a major profit warning and the impending departure of its CEO.
The iconic shoe brand, known for its association with youth subcultures such as mods and punks, said pre-tax profits could fall by around two-thirds this financial year.
It blamed the gloomy outlook on falling U.S. wholesale revenues, which are expected to fall by double digits, and expectations that it will not raise prices to offset cost inflation.
Departing: Bootmaker Dr. Martens announced that its CEO, Kenny Wilson (pictured), would step down later this financial year
Dr. Martens expects the former to cost around £20 million in revenue if there are no ‘meaningful’ customer reorders during the season, while the latter is likely to result in a £35 million loss in profits.
The shares of Dr. Martens fell 29.9 percent to 66.55p in early trading as a result, making them by far the biggest fallers on the FTSE 250 Index.
The Northampton-based company added that results for the year ending March 2024 would be in line with expectations, thanks to a recovery in direct-to-consumer sales in the fourth quarter.
Kenny Wilson, CEO of Dr. Martens, said: “The entire organization is focused on our action plan to revive demand for boots, especially in the US, our largest market.
“The nature of the U.S. wholesale business is that when customers gain confidence in the marketplace, we will see significant improvement in our business performance.”
In addition to this outlook update, the company announced that Wilson would step down later this year after overseeing a period of transformation at the shoe maker.
Wilson joined Dr. in May 2018. Martens after seven years leading the floral fashion retailer Cath Kidston, whose intellectual property was acquired by Next last year.
Since the takeover, the group’s turnover has almost tripled to £1 billion, while the popularity of its chunky 1460 boots has enjoyed a resurgence among a young, social media-focused audience.
Unlike many retailers, it has weathered the Covid-19 pandemic quite well, despite being forced to temporarily close its UK stores due to strict lockdown restrictions.
In January 2021, Dr. Martens on the London Stock Exchange with a value of £3.7 billion, netting Wilson, many other executives and private equity group Permira a significant windfall.
The shares of Dr. However, Martens have since fallen approximately 82 percent due to cost-of-living pressures, adverse weather conditions and supply chain constraints, including operational issues at the Los Angeles distribution center.
Wilson’s replacement as CEO is Ije Nwokorie, who only became Chief Brand Officer of Dr. Martens became and previously was head of global branding company Wolf Ollins and senior director at technology giant Apple.
Wilson said: “After six years in the role, I feel the time is right for me to hand over this year, and I am excited that Ije will be my successor.
“I have enjoyed working with Ije over the past few months, both as a board member and on the executive leadership team, and I have seen his brand knowledge and passion firsthand.”