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Bottleneck at new US distribution centre results in weak Q3 for Dr. Martens


British bootmaker Dr. Martens has blamed operational issues and a bottleneck at its Los Angeles distribution centre for a weaker than expected Q3.

In its latent trading statement covering the three months ending on 31 December 2022, Dr. Martens reported total revenue up by 9%, largely driven by an 11% growth in DTC trading. The footware brand confirmed that sales in Europe, Middle East and Africa, as well as Asia-Pacific, matched expectations.

However, revenue was “below expectations” due to slower than anticipated direct-to-consumer growth in America – the group’s largest market.

Kenny Wilson, chief executive officer, Dr. Martens, explained: “Demand for Dr. Martens remained resilient through challenging conditions during our peak trading period of Q3. However, due to a combination of significant operational issues creating a bottleneck at our new LA distribution centre and weaker than anticipated US DTC trading, in part due to unseasonably warm weather, we now expect full year revenue growth of 11-13% on an actual currency basis and full year EBITDA to be between £250m and £260m.”

The retailer admitted that inventory was transferred from its Portland DC to the new 3PL DC in LA faster than was originally planned. While, inbound shipping times from its factories to to the LA site was also quicker than anticipated, with both creating a “significant” bottleneck.

While Dr. Martens has introduced three temporary warehouses near the LA facility, it expects the resulting lost wholesale revenue and incurred costs will together reduce FY23 EBITDA by £16-25m.

The retailer also admitted that the knock-on effects from the FY23 disruption and a more uncertain economic environment are likely to impact its revenue growth into 2024.

As a result of its latest statement shares in the group were down 25% in late-morning trading on Thursday [19 December]. This follows an unpropitious run for the footware brand as a public company – since its initial public offering in early 2021 shares have dropped 60%.

Dr. Martens is ranked Top500 in RXUK Top500 research.

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