REG - Dr. Martens PLC - FY24 trading and FY25 outlook update

Dr MartensAnnouncement

16/04/2024 07:00

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RNS Number : 7050K  Dr. Martens PLC  16 April 2024

16 April 2024

Dr. Martens plc

FY24 in line with expectations and update on FY25 outlook

 

FY24 results

Dr. Martens Plc (the Company) will announce its FY24 results on 30(th) May,
with results expected to be in line with guidance and consensus expectations.

As expected, we saw a pick-up in Direct to Consumer ("DTC") in Q4, to high
single-digit year-on-year growth, compared with a 3% decline in Q3 (all on
constant currency terms). This was as a result of good growth across EMEA, a
flat outcome in the USA and a very strong result in APAC, led by Japan. Q4
Group wholesale performed in line with our expectations.

FY25 planning assumptions

As we start the new financial year, the Board is taking a prudent view and
would like to share with investors our planning assumptions:

·      USA wholesale revenue is anticipated to be double-digit down
year-on-year. We have recently finalised the Autumn/Winter order book, which
makes up the majority of the second half of USA wholesale, and this is
significantly down year-on-year. If wholesale customers become more
optimistic, we could see in-season re-orders, however these are hard to
predict. Given the nature of wholesale orders, the full benefit of any restock
always has a lag into the following season. The decline in wholesale has a
significant impact on profitability, with a base assumption being in the
region of a £20m PBT impact year-on-year, assuming no meaningful in-season
re-orders.

·      We are seeing single-digit inflation in our cost base, and also
intend to invest in retaining and incentivising talent throughout the
organisation; together these equate to a year-on-year PBT headwind in the
region of £35m. As previously communicated, we do not anticipate increasing
prices further this year, and therefore in FY25 we are unable to offset cost
inflation as we have in prior years.

·      Given the ongoing challenging performance of our USA wholesale
business, we expect to continue to require the additional inventory storage
facilities in this market through FY25, and therefore the majority of the
£15m of additional costs incurred in FY24 are expected to repeat in FY25.

·      As previously communicated, we have a number of important
investment projects underway, incurring operating costs in addition to capital
expenditure, including our new Supply and Demand Planning system and Customer
Data Platform. These projects are progressing well and will deliver benefits
in outer years. We also continue to invest in brand marketing to drive future
growth.

There is a wide range of potential outcomes for FY25 given that we have only
recently started the year. However, we have assumed that revenue declines by
single-digit percentage year-on-year and at the PBT level we could see a
worst-case scenario of PBT of around one-third of the FY24 level. There are
also scenarios where the profit outturn could be significantly better than
this, with the key factor being if USA performance is stronger than our
planning assumptions as we progress through the year. We will also look to
drive cost savings wherever possible, whilst protecting our brand and future
growth opportunities. Against this backdrop, we are focused on cash generation
and have already significantly reduced purchases from the supply chain, which
will underpin the strength of the balance sheet.

Our business is always second half weighted, however this year, given the
phasing of USA wholesale and costs, this will particularly be the case.

Kenny Wilson, CEO, said, "The FY25 outlook is challenging, and the whole
organisation is focused on our action plan to reignite boots demand,
particularly in the USA, our largest market. The nature of USA 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. Against this backdrop, we will be laser-focused on
driving cost efficiencies where possible. We also have a number of ongoing
investment projects which will deliver results in outer years. We continue to
believe in our DTC-first strategy and the considerable headroom for growth.
Our brand remains strong, and we have a compelling product pipeline. These all
give us confidence as we look beyond this transition year into future years."

 

Enquiries

Investors and analysts
 

Bethany Barnes, Director of Investor Relations
Bethany.Barnes@drmartens.com            +44 7825 187465

Beth Callum, Investor Relations Manager
 Beth.Callum@drmartens.com                 +44 203 995 2644

 

 

Press
 

H/Advisors Maitland
 
                     +44 207 379 5151

   Katharine
Spence
+44 7384 535739

 

Gill Hammond, Director of Communications
                                                 +44
7384 214248

 

About Dr. Martens

Dr. Martens is an iconic British brand founded in 1960 in Northamptonshire.
Produced originally for workers looking for tough, durable boots, the brand
was quickly adopted by diverse youth subcultures and associated musical
movements. Dr. Martens has since transcended its working-class roots while
still celebrating its proud heritage and, six decades later, "Docs" or "DM's"
are worn by people around the world who use them as a symbol of empowerment
and their own individual attitude. The Company is a constituent of the FTSE
250 index.

 

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