It’s been a torrid year for FTSE 250 bootmaker Dr Martens (LSE:DOCS). On Thursday (5 June), the company released its results for the 52 weeks ended 30 March (FY25). Compared to FY24, there was a 10% fall in revenue and a 65% drop in adjusted profit before tax (PBT). Worse, earnings per share (EPS) tanked from 7p to 0.5p.
But investors were actually impressed. The group’s share price closed the day 25.8% higher.
To be fair, the group’s directors have been warning all year that the results were going to be bad. But they weren’t quite as bad as analysts had been expecting. The consenus was for adjusted PBT of £30.6m. In fact, it was £3.5m better at £34.1m.
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue (£m) | 1,000.3 | 877.1 | 787.6 |
| Gross profit margin (%) | 61.8 | 65.6 | 65.0 |
| Earnings before interest and tax (£m) | 176.2 | 122.2 | 60.7 |
| Adjusted profit before tax (£m) | 170.1 | 97.2 | 34.1 |
| Basic earnings per share (pence) | 12.9 | 7.0 | 0.5 |
| Dividend per share (pence) | 5.84 | 2.55 | 2.55 |
However, despite yesterday’s mini recovery, the stock’s changing hands for 11.6% less than it was 12 months ago.
Some of this probably reflects concerns over President Trump’s tariffs. But despite the US accounting for 36.6% of FY25 revenue, to my surprise the group doesn’t seem that bothered. All of its spring/summer stock is in the country and, by the start of July, the majority of its autumn/winter products will have arrived, or be in transit.
So could now be a good time to buy the stock?
Three out of four
At the start of the financial year, the group had four objectives. The first was to “rightsize” operating costs. Annualised savings of £25m are being claimed, which is at the top end of guidance. This is equivalent to 6.3% of the year’s selling and administrative expenses. Not bad.
The second aim was to strengthen the group’s balance sheet. Including lease liabilities, there’s been an impressive £249.5m reduction in net debt.
The third objective was to “relentlessly focus on product”. I’m not sure how to measure this, although the directors claim they’ve succeeded. In my opinion, with an 8.8% fall in the number of pairs sold, I think the jury’s still out.
Finally, the company gets a tick for returning the US direct-to-consumer business to growth in the second half of the year.
Pros and cons
But of concern, the company sounds cautious about current trading. It said the group’s performance in its EMEA (Europe, Middle East and Africa) region was “mixed” with the UK “continuing to see revenue decline due to a challenging market”.
This is a good illustration of the difficulties facing the fashion industry. Competition’s fierce and consumer tastes can change quickly.
Another issue I have is that the FY26 dividend’s likely to be cut. Future payouts will be 25-35% of earnings. Before yesterday’s announcement, analysts were expecting EPS to be 4.8p, implying a payout of 1.2-1.68p. That’s a significant reduction from the FY25 amount of 2.55p.
Personally, I think Dr Martens is a great brand and there are signs it might have turned the corner. And there’s plenty of scope to grow. According to the company’s own estimates, it has a 0.7% share of a global market worth £179bn. And judging by yesterday’s reaction, many investors appear to agree that the worst might be over.
But I’m more cautious. Sales in the UK are still falling and there’s no guarantee the US market recovery will continue. Therefore, after looking at the group’s results, I’ve concluded that the stock’s a little too risky for me.
