British bootmaker Dr Martens has cut its profit forecast for the second time in three months, pinning the blame on a bottleneck at a new distribution centre in Los Angeles and sending its shares down 25 per cent.
The company said it had recently identified “significant operational issues” at the site in Los Angeles, which it opened last July and is at the heart of its operations in the US, the group’s largest market.
Disruption at the centre will reduce the group’s full-year profits by as much as £25mn. The bottleneck compounded the challenge Dr Martens faced last quarter in the US, leaving it unable to meet rising demand in December after warmer weather had hit sales in October and November.
“We’ve had a big problem in our LA distribution centre and all the problems that have changed our forecast are in America,” said chief executive Kenny Wilson.
It is the latest blow to Dr Martens, a brand best known for its eight-eyelet boots embraced by rebellious youth subcultures of the 1960s and 1970s. Shares in the group were down 25 per cent in late-morning trading on Thursday.
The drop extends the disastrous run Dr Martens has had as a public company since its initial public offering in early 2021. The shares have dropped 60 per cent since the group listed.
As a result of its weak performance in the US, Dr Martens said that revenues in the 12 months to the end of March would grow between 11 per cent and 13 per cent, short of the 16 per cent analysts expected.
Earnings before interest, taxes, depreciation and amortisation are forecast to be between £250mn and £260mn, shy of the £286mn analysts anticipated.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the distribution centre problems were “another big migraine for the company, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth”.
In November, Dr Martens cited weakening demand and a strong dollar as it scaled back its earnings expectations.
In its update on Thursday, the company said that revenues for the three months to December 31 grew 9 per cent to £336mn, with sales in Europe, Middle East and Africa as well as Asia-Pacific matching expectations.
However, revenue in Asia, which declined 4 per cent in the period, was hit by the winding down of its contract with a supplier and Covid-related disruption.
At its January 2021 IPO, Dr Martens sold shares for 370p, giving the company a market capitalisation of about £3.7bn.
