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(Alliance News) - Dr Martens PLC on Tuesday hit shareholders with another profit warning as it forecast a sharp drop in profit in the coming financial year.
Shares in Dr Martens plunged 31% to 65.35 pence in London on Tuesday morning giving the firm a market value of around GBP629 million. The company attracted a valuation of GBP3.7 billion when it made its market debut back in 2021.
The Northamptonshire, England-based boot maker said a worse case scenario would see pretax profit in the year to March 2025 of around one-third of the level in the current financial year.
Broker Peel Hunt forecast pretax profit for the year to March 2024 of around GBP100 million. It expects to cut forecasts for the following financial year to around GBP35 million to GBP40 million.
Peel Hunt said the warning is "not a surprise, but the scale of the impact is much greater than feared."
Dr Martens said US wholesale revenue is anticipated to be double-digit down year-on-year.
The decline in wholesale has a significant impact on profitability, it explained, with a base assumption being in the region of a GBP20 million pretax profit impact year-on-year, assuming no meaningful in-season re-orders.
Dr Martens also expects a GBP35 million headwind from inflation where it is seeing single-digit inflation in its cost base but leaving selling prices unchanged.
The company also expects to continue to require the additional inventory storage facilities, and therefore the majority of the GBP15 million of extra costs incurred in financial 2024 are expected to repeat in 2025.
Chief Executive Kenny Wilson said, "The FY25 outlook is challenging, and the whole organisation is focused on our action plan to reignite boots demand, particularly in the US, our largest market. The nature of US wholesale is that when customers gain confidence in the market we will see a significant improvement in our business performance, but we are not assuming that this occurs in FY25."
"We have built an operating cost base in anticipation of a larger business, however with revenues weaker we are currently seeing significant deleverage through to earnings."
Dr Martens said Wilson will step down and that this "will be his final year" at the helm.
Wilson will be succeeded by Ije Nwokorie, currently chief brand officer.
In 2023, the firm lowered profit guidance to reflect operational issues in the US and a challenging consumer environment.
By Jeremy Cutler, Alliance News reporter
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