Dr Martens PLC (LSE:DOCS) shares tumbled 11% in early exchanges as the company warned of lower margins in the year ahead alongside a 26% decline in annual pre-tax profit.
The City put the boot in as the iconic footwear manufacturer predicted EBITDA margins would fall by 1-2 percentage points in the financial year ahead with a 5-6 percentage point fall in the first half.
Susannah Streeter at Hargreaves Lansdown said: "Yet another downgrade was the last update investors wanted to see, but the company has lowered its guidance for pre-tax profits for the coming year and highlighted that recovery in 2025 isn’t going to be as strong as forecast."
The warning came as the FTSE 250 company posted revenue in the year to 31 March 2023 of £1.00bn, up 10% from £908.3mln, alongside a 26% decline in pre-tax profit to £159.4mln from £214.3mln.
Neil Shah at Edison Group commented: “This is a disappointing set of results for Dr Martens, which has been struggling unsuccessfully to maintain its share price over recent months.
“These full-year results suggest a case of one step forward, two steps back for the UK-based boot maker," he added.
The bootmaker has suffered from operational challenges which have led to two successive downgrades in profit forecast in a three-month period.
Supply-chain issues and serious bottlenecks across the company’s US arm, mainly the LA distribution centre, have combined with external pressures to cause major disruption for the firm.
Dr Martens said profitability was hit by slower revenue growth, continued investment in new stores, marketing and people, and £15mln costs associated with the Los Angeles distribution centre.
Shah continued: “What the bootmaker has working in its favour is a strong brand recognition and visibility; but to feel the full effect of these advantages, the group will need to pump extensive efforts into addressing operational challenges over the coming months.”
HL's Streeter agreed: "There are still plenty of problems to fix it seems and it’s going to take a chunk of expenditure to do so, which will eat into profit margins.
"Dr Martens may have a strong brand with good potential, but it needs to leave the repair shop and shine up its sales to help restore investor confidence.’’