Bootmaker Dr Martens lowers full-year earnings outlook again due to costs of resolving issues at L.A. warehouse
- Dr Martens now anticipates FY23 underlying earnings will be around £245m
- The firm’s warehouse in Los Angeles was affected by a significant bottleneck
- Finance boss Jon Mortimore said he would be retiring after 7 years in his role
Dr Martens has reduced its annual profit outlook again after ‘operational issues’ at its Los Angeles-based distribution centre led to higher costs and lower wholesale revenue.
The iconic British bootmaker now predicts underlying earnings for the financial year ending March will be around £245million, compared to a previously downgraded estimate of between £250million and £260million.
In recent months, Dr Martens newly-opened warehouse in California was affected by a significant bottleneck when it was flooded with stock being transferred from its Portland base and factories more quickly than expected.
Forecast: Iconic bootmaker Dr Martens now predicts underlying earnings for the year ending March will be around £245million due to problems at its Los Angeles distribution centre
As a result, Dr Martens said it lacked the necessary capacity to meet wholesale demand in the United States and its fourth-quarter shipment forecasts.
To resolve these problems, Dr Martens opened three temporary storage depots and introduced a third shift at the LA distribution centre, enabling it to release excess shipping containers.
Though shipment volumes at the warehouse have now returned to regular volumes, incremental costs related to the LA site were £15million greater than anticipated, primarily due to the expense of hiring containers.
‘We took decisive action to tackle the operational issues at our LA DC with shipments now back to normal levels,’ said the retailer’s chief executive Kenny Wilson.
‘However, costs associated with resolving these issues were higher than our initial estimates.’
Wholesale turnover was also 11 per cent down on a constant currency basis for the fourth quarter, with further effects coming from the planned shipment cutback to its Chinese distributor.
However, this was offset by very healthy direct-to-consumer growth in the Asia-Pacific and EMEA regions, as well as strong online demand.
For the full financial year, Dr Martens revealed revenue expanded by just 4 per cent, compared to double-digit percentage growth in the previous years.
Dr Martens further announced on Friday that chief financial officer Jon Mortimore would be standing down after seven years in his role.
During his tenure, the firm has more than quadrupled its annual revenue from £230million to £1billion as a new generation of celebrities and teenagers became fans of its chunky work boots.
The Northampton-based company was valued at £3.7billion in January 2021 when a rush of investor demand resulted in its initial public offering being eight times oversubscribed.
However, Dr Martens shares have contracted by over 60 per cent since that time amid slowing sales growth, profit warnings and a more uncertain macroeconomic backdrop. They were 6 per cent higher at 149.8p on Friday morning.
‘Ultimately, Dr Martens has a strong brand, but investors would like to see some further momentum on both the top and bottom line,’ remarked Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
