Dr Martens PLC (LSE:DOCS) stock market rating is on something of a knife edge with analysts at Barclay’s keen for visibility over the boot maker’s direct-to-consumer sales channel.
A less than emphatic recent trading update leaves investors guessing about the company’s prospects for the rest of the year.
Some retail market indicators, ‘brand heat’ measures, are moderately encouraging but demand in the United States could be key, suggests analysis from Barclay’s Richard Taylor.
“We believe there are a wide range of potential outcomes for financial performance, and believe that observing D2C trends, especially any signs of improvement in the US, will be critical to judge whether a recovery can be achieved, or whether forecasts are still too optimistic,” Barclays analyst Taylor said in a note.
Dr Martens in late May warned investors over its sales which it described as “very second half weighted”.
Analysis on the day of Dr Martens’ results for the 2024 financial year, released 30 May, described the numbers as “expectedly poor”, whilst flagging continued weak consumer demand in the United States as a key factor.
Taylor said that due to the drop in revenue, the company expects the fiscal year 2025 to be heavily dependent on the second half for profit.
He predicts a pre-tax loss of £26 million in the first half, followed by a rebound to a pre-tax profit of £47 million in the second half, compared to £50 million in the second half of the previous year.
Taylor also mentioned that this outlook hinges on achieving positive direct-to-consumer growth in the United States during the second half of the year. While this is a target and its success is uncertain, it is based on various initiatives in the US.
The company aims to achieve positive growth in direct-to-consumer sales in the United States during the second half of the year. While this is an objective and there is uncertainty about reaching it, it is based on various initiatives in the US.
Barclays analyst Taylor raised the price target for the company's shares from 80 pence to 85 pence, as recent data on the brand looks slightly better. The forecasted price-to-earnings ratio for the fiscal year 2025 is 30 times earnings, which is high, but it is expected to drop to around 16 times earnings in 2026 due to reduced costs.
However, if the expected growth in direct-to-consumer sales in the US does not happen, there could be a risk to the forecasts for the second half of 2025 and for 2026.
The investment bank has a ‘neutral’ rating for the footwear retail stock.