Dr Martens share surged on Thursday as investors chose to look past dismal sales performance and focus on substantial cost cuts.
The group met already subdued guidance which would have pleased investors with low expectations for the full year results.
Although the CEO was fairly upbeat about the earnings report, sales performance would have made horrible reading for investors. Group sales were down 12% as North American sales dived 24% – a region the company says it wants to focus on in 2025.
“Our FY24 results were as expected and reflect continued weak USA consumer demand. This particularly impacted our USA wholesale business and offset our Group DTC performance, where pairs grew by 7%,” said Kenny Wilson, Chief Executive Officer, Dr Martens.
“We are clear that we need to drive demand in the USA to return to growth in FY26 onwards and are executing a detailed plan to achieve this, with refocused and increased USA marketing investment in the year ahead.”
With group sales falling double digits in percentage terms, Dr Martens needed to take a long hard look at their business to figure out how they were going to stop the erosion of the bottom line.
The easy answer to this conundrum is almost always cost cuts and that’s what the company has decided to do.
The company has highlighted ‘organisational efficiency’ and ‘operational streamlining’ as methods to reduce costs suggesting some staff members could be facing the boot.
“The firm has announced a raft of cost cutting measures and it seems they do need to pull themselves up by the bootstraps to get out of this financial quagmire. The new CFO is targeting savings of £20-25 million, news of which is being well received by the market this morning. This morning’s bid however is a drop in the ocean, given that the shares have pretty much been on the decline since the IPO in 2021,” said Adam Vettese, analyst at investment platform eToro.
“Consumers have been under pressure in this higher inflation environment and with their punchy ticket price, a pair of Docs is probably one of the first luxuries to make way. The numbers would back this up.”
