Operational issues mean Dr Martens third-quarter sales fall below expectations

Image courtesy of Dr Martens

Image courtesy of Dr Martens

Dr Martens says third quarter sales were lower than expected as operational issues at its new LA distribution centre had far-reaching knock-on effects.

Stock bottlenecks

The footwear retail brand says a bottleneck at the centre, caused as too much stock was sent there too soon, adding to a number of operational issues at the new 3PL centre, is now limiting its ability to meet wholesale demand in the market. It has now opened three temporary warehouses near the centre, will launch a third shift at the centre by the end of this month, and is to reconfigure its east coast distribution centre in order to ship wholesale orders. But as a result, it expects a further £8m to £11m of supply chain costs, a reduction in wholesale revenue of between £15m and £25m, while earnings before interest, taxes and one-off costs will be between £16m and £25m lower than expected. The effects are expected to be seen into its 2024 full-year.

Third-quarter figures

Sales of £335.9m in the three months to December 31 2022 were 9% up on the same time last year. The biggest lift came in its own stores (+19%), while online sales grew by 5% – giving an 11% lift to its direct-to-consumer sales, which accounted for 65% (+1 percentage point on last year) of sales. Wholesale revenues grew by 7% at the same time.

Sales rose in EMEA (+8%) and America (+16%) but sales in the APAC region (-4%) fell as Covid-19 infections rose and as the retailer managed down distribution inventory. 

Dr Martens says it saw strong direct-to-consumer sales in December alone (+20%), as store sales grew quickly, with double digit ecommerce growth. But DTC sales were more variable in October and November (+5%). The brand opened a net nine new shops in the quarter an expects to open 30 in the full-year. 

In the year to the end of the third quarter, sales of £754.5m were 12% up on last year – especially in-store (+29%), while online growth of 6% took direct-to-consumer sales to growth of 15%. Wholesale was 8% up on last time. 

Dr Martens chief executive Kenny Wilson says: “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 to 13% on an actual currency basis and full year EBITDA [earnings before interest, tax and one-off costs] to be between £250m and £260m.”

Dr Martens is ranked Top500 in RXUK Top500 research.

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