Dr. Martens H2 2025 Earnings Report

Dr. Martens EPS Results

• Actual EPS: GBX 2.40
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dr. Martens Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dr. Martens Announcement Details

• Quarter: H2 2025
• Date: 6/5/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, June 5, 2025
• Conference Call Time: 2:00AM ET

Dr. Martens (LON:DOCS) is an iconic British brand founded in 1960 in Northamptonshire. Originally produced for workers looking for tough, durable boots, the brand was quickly adopted by diverse youth subcultures and associated musical movements. Dr. Martens have since transcended their working-class roots while still celebrating their proud heritage and, six decades later, “Docs” or “DMs” are worn by people around the world who use them as a symbol of empowerment and their own individual attitude. The Company successfully listed on the main market of the London Stock Exchange on 29 January 2021 (DOCS.L) and is a constituent of the FTSE 250 index. Dr. Martens operates across three geographic regions: EMEA, Americas and APAC. Our product segments include Originals, Fusion, Kids and Casual and a complementary range of Accessories.

Dr. Martens H2 2025 Earnings Call Transcript

Key Takeaways

• The company beat its inventory reduction target, achieving a £67 million inventory decrease and driving a £95 million net debt reduction, materially strengthening the balance sheet.
• Adjusted EBIT declined to $67.1 million from $126.4 million last year, weighed down by £25.3 million of exceptional charges, but remained slightly ahead of consensus estimates.
• Americas D2C returned to growth in H2 while APAC D2C saw robust gains in Japan, South Korea, and China, contrasted by EMEA D2C underperformance amid a strategic decision to limit promotional activity.
• The cost action plan delivered £25 million of annualized savings, with only a 2% year-on-year rise in operating costs due to increased demand-generation investment, and the full benefit will flow in FY 26.
• Net debt/EBITDA improved to 1.9x, well below the 3.0x covenant, and the company outlined a medium-term goal of market-beating revenue growth and mid-to-high-teens EBIT margins underpinned by strong cash generation.

Presentation

[Ije Nwokorie, CEO at Dr. Martens plc]

Hello and welcome to our FY twenty twenty five Results Presentation. I'm joined today by Giles Wilson, our CFO. I'll do a short introduction before handing over to Giles to run through our FY twenty twenty five financial results, and then I'll return with some closing comments. FY twenty five was a year of stabilization. At the start of the year, we laid out four key objectives, and I'm pleased to say that we delivered against all of these.

[Ije Nwokorie, CEO at Dr. Martens plc]

We turned around our America's DTC performance, with America's D2C back to growth in h two. We pivoted our marketing to relentlessly focus on product, with great initial results. You heard me talk about these back in November. We have reduced our operating cost base, taking $25,000,000 of annualized savings out of the business. And really importantly, our balance sheet is significantly strengthened with inventory and net debt both down significantly ahead of guidance.

[Ije Nwokorie, CEO at Dr. Martens plc]

Over to Giles to talk you through the year's financial performance.

[Giles Wilson, CFO at Dr. Martens plc]

Thank you, EJ, and good morning, everyone. Continuing on from the four points EJ just set out, FY 2025 has been about stabilizing our financials and delivering against our core objectives. Firstly, my focus this year has been about strengthening our balance sheet. We've started with securing the refinance as announced at our half year.

[Giles Wilson, CFO at Dr. Martens plc]

At the beginning of the year, we committed to reduce inventory by £40,000,000 and we have beaten this with our closing inventory, in fact £67,000,000 lower, a key driver of the £95,000,000 overall reduction in net debt. Secondly, we reset our cost base through the cost action plan, delivering £25,000,000 of cost savings with the full benefit being seen in FY '26. There was some benefit in FY '25. The cost action plan helped reset the business' overall approach to cost, and we have embedded into the culture a strong cost discipline. As EJ highlighted, we have seen America's d two c return to growth, and that momentum is now building in The USA as we enter into FY '26, albeit these are smaller d to c months.

[Giles Wilson, CFO at Dr. Martens plc]

As well as the focus to right size our own inventory, we saw reduced sales to our wholesale customers in EMEA and US as they encouragingly right size their inventory. This sets up the markets for future growth. Overall, we have delivered on our objectives, delivered in line with market guidance, exceeded our inventory and debt reduction targets, and stabilized the business, setting ourselves up well for future growth. Following on from the half year, we are now presenting the financials in both reported and constant currency terms to show the true underlying trading. In addition, this year, we have introduced adjusted performance metrics, stripping out the impact of one off exceptional and other non trading related items.

[Giles Wilson, CFO at Dr. Martens plc]

Turning to the financials themselves. In the later slides, I'll give more detailed explanations of some of these key metrics. Our key financial headlines are as follows: Total pairs are down 9%. However, due to the slightly better D2C mix, revenue is only down 8% at $8.00 5,000,000 on a constant currency basis, in line with our expectations. Gross margin is down in line with revenue, with gross margin rates slightly down year on year, mainly driven by the product mix as the shoes and sandals increase and boots, which has slightly higher margin, declined.

[Giles Wilson, CFO at Dr. Martens plc]

In addition, in quarter four, we took the opportunity to clear some aged, discontinued, and fragmented stock at reduced rates through our US B2B channel, although, to be clear, this was still profitable to us. As highlighted on the previous slide, operating costs have been tightly controlled, with the slight increase of 2% year on year, mainly driven by the increased investment in demand generation, as highlighted at the outset of the year, to support the move to product led marketing. Overall adjusted EBIT was 67,100,000.0, and adjusted PBT was 40,300,000.0, both significantly back on last year, but slightly ahead of consensus. During the period, we incurred £25,300,000 of adjusting items, mainly driven by the £17,300,000 of exceptional costs, of which the cost action program accounted for the largest part. I will cover this in more detail on a later slide.

[Giles Wilson, CFO at Dr. Martens plc]

EPS on a constant currency basis is 1.1p. As highlighted during the FY twenty four results, it was the intention of the board to keep dividend flat year on year given this is a year of stabilization. Starting with Americas, the key driver in revenue decline was wholesale, as expected, with 27,000,000 of the 13,000,000 recorded in the first half as our US wholesalers reduced their inventory levels. Americas D2C was marginally down by £2,000,000 with the decline all in the first half and, as discussed, a return to D2C growth in the second half. In quarter four, we consciously pulled back on discounting over previous year, We slightly reduced our revenue in this quarter following a good performance in the crucial quarter three as highlighted in the statement in January.

[Giles Wilson, CFO at Dr. Martens plc]

Turning to EMEA. Here, it is the same story as with Americas for wholesale. Of the £25,000,000 shortfall, 23,000,000 related to h one and was in line with our expectations. EMEA D To C continued to be impacted by a highly promotional back backdrop generally, together with weaker consumer confidence, particularly in The UK. We chose not to participate in promotional activity over and above our plans.

[Giles Wilson, CFO at Dr. Martens plc]

Of the 16,000,000 shortfall year on year, the majority, 80% related to The UK. In other key markets, France was flat year on year in d To C, and Germany showed growth at a total market level. Finally, in APAC, D 2 c saw continued strong year on year growth in Japan, South Korea, and China, with South Korea of a particular note in quarter four. Our distributor in Australia and New Zealand, a nice business for both of us, and our partner showed good revenue growth. The slight decline in APAC wholesale was as planned.

[Giles Wilson, CFO at Dr. Martens plc]

Overall, our regional and channel performance was in line with our expectations. Though we are disappointed in the overall EMEA D2C performance, this was in part due to a conscious decision not to participate in wider discounting. We were pleased to deliver against our objective of returning Americas D2C to growth in H2. The underlying EBIT drops from $126,400,000 last year to $67,100,000 on an adjusted basis this year. Stepping through the bridge, dollars 50,800,000.0 reduction from the impact of volume at average gross margin, predominantly due to the decline in wholesale revenue as explained, again with the majority in the first half.

[Giles Wilson, CFO at Dr. Martens plc]

Small impact on mix of 400,000.0 with upside of d to c mix shift offset by The US b to b clearance activity. We increased our demand generation OpEx by 4,700,000 to support the new product led marketing approach. We tightly controlled costs, limiting a year on year increase to 1,400,000, a small increase in depreciation due to the annualization of stores, and finally, items I will cover on the next slide. As highlighted at the half year, we have incurred exceptional one off items. These were comprised of £15,100,000 as guided relating to cost action plan 8,900,000.0 executive director changes and buyout related costs of 4,600,000.0, and 1,600,000.0 relating to the refinance.

[Giles Wilson, CFO at Dr. Martens plc]

In addition, a further 2,800,000.0 related to the setup of our new global technology center in India, which will deliver savings in FY '27 once fully established. For FY '26, the double running costs offset the benefits. Retail store impairment of 4,300,000.0 related to underperforming stores following a review of our store estate. This mainly relates to stores in The USA that have not seen traffic recoveries post COVID, together with some in EMEA. Currency losses of £3,100,000 due to the currency gains and losses impact on our accounts receivables and payable balances at balance sheet date.

[Giles Wilson, CFO at Dr. Martens plc]

One of the key objectives this year was to reduce our inventory. And as I said earlier, we are really pleased to have beaten our target of 40,000,000, delivering a reduction of 67,000,000. This slide is an extension of the slide I showed at h one. As a reminder, this slide sets out the planned inventory reductions over the two years split into half years. The chart starts at f y twenty three with inventory at 258,000,000.

[Giles Wilson, CFO at Dr. Martens plc]

During the first half of f y '20 '4, we build up the inventory to 300,000,000. And then during the second half of FY '24, we use that inventory to sell during the peak period, closing the year with 255,000,000 of inventory. As we started FY twenty five, the reduced planned purchases can be seen on the chart with the half year inventory position slightly down versus FY '24 year end. Then as we enter the busy period in FY '25, we utilize our inventories inventories and stock balances fall to 187,000,000. In addition, we also took advantage of an opportunity to sell some aged and fragmented line stock through a discount channel in The USA at reduced but profitable margin levels.

[Giles Wilson, CFO at Dr. Martens plc]

For the avoidance of doubts, no deal was transacted in the year at below cost. We have now normalized our inventory levels. Our supply and demand planning system will go live in the first half of FY twenty six, and that will enable us to continue to effectively manage and optimize our inventory levels going forward. So finally, for this year's financial results, turning to cash flow. I'm really pleased to report our significant reduction year on year net debt, both in terms of net bank debt reducing by 83,400,000.0 to 94,100,000.0 and a total debt, including leases, reducing by 110,000,000 to 249,500,000.0.

[Giles Wilson, CFO at Dr. Martens plc]

As a reminder on this slide, the gray boxes are the net bank debt being bank debt less cash and the white boxes show the lease liabilities. The bridge sets out the cash flow from FY twenty four year end position. The next four boxes show underlying operating cash movement in the period delivering 108,000,000 of cash inflow, including the 67,000,000 of inventory reduction from the previous page and after accounting for lease payments of 56,000,000 and interest and tax payments of 40,000,000. CapEx accounts for 19,000,000 and dividends in the year of 9,500,000.0. Finally, our net debt to EBITDA finished at 1.9 times, well below our bank covenant level of three times, leaving significant headroom reflecting the strong cash flow generation in the year.

[Giles Wilson, CFO at Dr. Martens plc]

So to conclude, we set out an FY 2025 to deliver on our four key objectives, which were grow America's d to c business in h two, pivot our marketing to a product led approach, take out of the business between 20,000,000 and 25,000,000 of cost, and strengthen our balance sheet through the reduction of inventory. We have delivered on all four of these objectives as well as securing new financing arrangements. We have stabilized the business and are now ready execute on our new strategy and set us up for future growth. And as we look forward to the medium term, we expect to deliver sustainable, profitable revenue growth above the rate of the relevant footwear market, with operating leverage driving a mid to high teens EBIT margin and underpinned by strong cash generation.

[Ije Nwokorie, CEO at Dr. Martens plc]

This year, our single focus was to bring stability back to Doctor. Martin's. We're now looking forward, and I'll talk in detail about how we're thinking about the business strategy and path from here in a separate presentation later today.

Participants

Executives

• Ije Nwokorie, CEO
• Giles Wilson, CFO