Dr Martens PLC (LSE:DOCS) reported slower revenue and lower profits in the first half and warned that it expects lower profit margins for the full year due to further investment, though it hiked the interim dividend 28% due to confidence that it will be able to pass on inflation via price rises.
The bootmaker posted results for the six months to 30 September 2022 showing revenues of £418.6mln, up 13% on last year or 7% without the benefit of currency swings. This compared to 18% growth in its past full year or 22% on a constant-currency basis.
Underlying earnings (EBITDA) were flat at £88.8mln, but profit before tax shrank 5% to £44.7mln.
Direct-to-consumer (DTC) growth in the second quarter has been slower than anticipated, the FTSE 250 company acknowledged, pointing to the weaker “consumer environment” through the half.
In the near-two months into the second half, DTC trading has been “variable on a week-to-week basis”, it added, though the peak festive period is ahead and comparisons with last year should be easier as it was affected by poor availability and Covid restrictions.
Lower first-half profits reflects a “proactive decision”, the company said, of investment in new stores, marketing, people, technology and inventory “rather than focusing on short-term profit”, while a stronger dollar has weakened profit margins - which may surprise some analysts.
Chief executive Kenny Wilson, who called it “another strong set of results”, said the group had “further pricing headroom” for the Autumn/Winter collection “so we will offset cost inflation once again”.
Due to the investment, full-year EBITDA margin will be 100-250 basis points lower than last year, the company cautioned.
The board’s confidence in the future was displayed with a half-time dividend of 1.56p, taking the payout ratio to 35% of earnings from 30% at the past full year and 25% a year ago.