It has been a tough couple of years for Dr Martens PLC (LSE:DOCS), but Berenberg thinks the bootmaker is lacing up for recovery.
The broker keeps its 'buy' rating and 114p price target, saying the company’s new strategy is beginning to take hold ahead of half-year results next month.
After a rocky spell in the US and a wholesale slowdown, management has tightened costs and focused on new products.
Berenberg expects the adjusted pre-tax loss to narrow to £10 million in the first half, from £18 million a year ago, with margins and cash flow starting to improve.
The brand’s turnaround plan centres on broadening its appeal beyond its trademark black boots. New styles such as the Zebzag and Buzz ranges highlight comfort and everyday wear, while marketing now targets a wider mix of customers.
Wholesale partnerships are expanding too, with new distributors in Latin America and the Middle East helping Dr Martens reach fresh markets without heavy capital outlay.
Berenberg notes the company’s strong gross margin of 65% gives it room to absorb short-term headwinds, including higher US import tariffs. It expects profit growth to accelerate as sourcing is optimised and cost savings come through next year.
A healthier balance sheet adds to the comfort. Net debt has almost halved to £94m, and the broker sees the group moving into a net cash position by 2027. With modest capex and steady free cash flow, dividends should be secure.
Berenberg’s “blue-sky” scenario imagines a 19% operating margin on £1 billion of revenue, implying a share price as high as 277p. That may be some way off, but for now, the broker reckons the stock’s steady recovery story is worth the wait.