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Dr. Martens posts third quarter results below expectations

Jan 23, 2023 United Kingdom
Dr. Martens posts third quarter results below expectations
The British label reported a third quarter revenue below expectations due to "slower than anticipated" DTC growth in America and major operational issues at the LA distribution centre
"Demand for Dr. Martens remained resilient through challenging conditions during our peak trading period of Q3. However, due to a combination of significant operational issues creating a bottleneck at our new LA distribution centre and weaker than anticipated US DTC trading, in part due to unseasonably warm weather, we now expect full year revenue growth of 11-13% on an actual currency basis and full year EBITDA to be between £250m and £260m", commented Kenny Wilson, Chief Executive Officer.


Third Quarter Results

In the third quarter of fiscal 2023, Dr. Martens revenue increased by 9% (3% on constant currency), reaching 335.9 million British pounds (414.4 million US dollars), on a comparable basis to the same period of last year, "driven by robust" Direct-to-Consumer (DTC) trading, which grew instead by 11% (by 6% on constant currency). The company added that performances in the EMEA* and APAC** regions were in line with expectations, but growth was slower than expected in America.

So, in the three months to the 31st of December, revenue in the EMEA region rose by 8% (by 7% on constant currency), whereas revenue declined in the APAC region by 4% (down by 4% on constant currency), "where a combination of COVID infections and the orderly managing down of distributor inventory impacted revenue negatively".

However, it was the performance in the Americas that dented the quarter's results, despite the revenue growth of 16% (by 1% on constant currency), as compared to the same period of last year. "Trading improved in December but the benefit of improved availability wasn’t as expected in DTC and therefore we weren't able to offset the softer October and November performance, which was due partly to unseasonably warm weather", detailed the company.

Additionally, Dr. Martens reported that a bottleneck at the LA distribution centre has been identified, which is "significantly impacting throughput" and limiting the brand's capacity to meet wholesale demand and fourth quarter shipment forecasts. "Prior to the LA DC bottleneck, wholesale availability was much better than in the prior year which was reflected in December wholesaler sales to their customers being up 32%, demonstrating the continued strength of the brand", added the company.

Thus, the company has revised its full year guidance, and is now expecting revenue growth to range between 11% to 13% (4% to 6% on constant currency). Moreover, "combining the profit impact of lower-than-expected revenue in both DTC and wholesale in America and costs associated with resolving the bottleneck", EBITDA for fiscal 2023 will come at between 250 million British pounds to 260 million British pounds (308 to 321 million US dollars).  


*EMEA stands for Europe, the Middle East, and Africa
** APAC stands for Asia Pacific countries

Image Credits: reuters.com


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