Dr. Martens H1 2027 Earnings Results & Report

Dr. Martens EPS Results

• Actual EPS: -GBX 1
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dr. Martens Revenue Results

• Actual Revenue: £290.40 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dr. Martens is an iconic British footwear brand founded in Northamptonshire, England. Its first silhouette, the 1460 boot - named after the date it was produced - rolled off the production line on 1st April 1960. Originally chosen by workers for their air-cushioned comfort and durability, "Docs" or "DM's" were later adopted by musicians and subcultural pioneers who took them from the street to the global stage. Over six decades later, Dr. Martens operates in more than 60 countries and employs around 3,600 people. The company continues to honour the brand's heritage through its 'Made in England' footwear, manufactured at its original Northamptonshire factory, while meeting global demand from multiple high-quality production sites across Asia. All our products are made with an unwavering commitment to craft, combined with innovative techniques. A brand built to put a bounce in the step of those who stand out from the crowd, Dr. Martens is available through Direct-to-Consumer (Retail and Ecommerce) and Wholesale channels. The brand's collections range from its Original silhouettes - The Icons such as the 1460 boot, 1461 shoe, 2976 Chelsea boot, and Adrian loafer - to modern franchises like the Zebzag, Buzz, and Lowell. The lineup also includes an extensive range of sandals, a dedicated Kids collection, and a curated selection of bags, small leather goods, and accessories. Every Dr. Martens product reflects craftsmanship, heritage, timeless style, comfort, and versatility. Having transcended generations, the brand stays as relevant today as it was at its inception. Its signature yellow welt stitching, grooved sole edges, and scripted "With Bouncing Soles" heel loops remain iconic symbols recognised around the world. Dr. Martens (LON:DOCS) (DOCS.L) is listed on the main market of the London Stock Exchange and is a constituent of the FTSE 250 index. For more information, visit www.drmartens.com or www.drmartensplc.com

Dr. Martens H1 2027 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Revenue fell 9.2% year over year to £292.4 million, and adjusted EBIT swung to a £2.2 million loss from a £3.1 million profit. The decline was concentrated in Europe and DTC, with boots sales down 20% amid unusually hot weather and ongoing pressure on core styles.
• Positive Sentiment: Margin and cost discipline cushioned the sales decline: gross margin rose 80 basis points on a comparable basis to 65.4%, while operating costs benefited from prior cost actions. Management said margin should remain resilient, though some first-half benefits may ease in the second half.
• Positive Sentiment: Debt remained broadly flat year over year at £158.9 million, and covenant net debt to EBITDA was 2.2 times versus a 3.0-times limit. Cash generation was seasonally negative by £66.2 million as the company built working capital ahead of peak trading.
• Positive Sentiment: The company reported encouraging early responses to its With Bouncing Soles campaign, upgraded Brand Centres, and new Spring/Summer sandals range. Management cautioned that the campaign and store results are still early, and the new e-commerce platform has required time to bed in.
• Negative Sentiment: Second-half performance is pivotal: management expects boots to remain a headwind for the rest of FY 2027, with core boot styles still under pressure, and said the business is focused on the key trading weeks ahead. Its full-price mix priorities in the U.K. and DACH are weighted to the second half.

Presentation

[Ije Nwokorie, CEO at Dr. Martens]

Good morning, and welcome to our half-year results for FY 2027. We are live from Camden, and I am joined by Giles Wilson, our CFO. In a minute, Giles will take you through the financial performance for the half, and I will then return with an update on our strategy. Our central message today is straightforward. While we are disappointed with our first-half performance, we are executing the strategy as planned. The major programs are now landing, and we are focused on delivering a second-half weighted plan with big trading weeks just ahead of us. We are delivering the transformation we committed to while continuing to take decisions for the long-term health of the brand and the business. Our H1 decline was driven primarily by boots, exacerbated by hot weather, historically hot weather. Europe and especially the U.K. were most affected. We expected the half to be relatively weaker.

[Ije Nwokorie, CEO at Dr. Martens]

Market and investment activity was deliberately weighted to With Bouncing Soles, which launched at the end of the half. At the same time, we embedded a new operating model and a new e-commerce platform. Our new sandals program comes in later in the second half. Strong gross margin, tight cost controls, and overall financial performance, financial management have limited the impact on the sales decline on profits. This remains an H2 weighted business, and we are focused on the big trading weeks ahead. I will now hand over to Giles to take you through the financial results.

[Giles Wilson, CFO at Dr. Martens]

Thank you, Ije, and good morning, everyone. I will take you through the first half financial performance, starting with a short explanation of the changes to our reporting structure before covering the usual financial slides. For reference, here are the reporting changes we announced on October 7. In addition, we have also reclassified retail outbound freight costs from operating expenses to cost of goods sold. The H1 FY 2027 impact is GBP 2.2 million, or equivalent to a 70 basis point reduction in the prior year gross margin. This is a presentational change only and does not affect the total adjusted EBIT. I will now take you through the half-year results. Group revenue was GBP 290.4 million on a reported basis and GBP 292.4 million on a constant currency basis, down 9.2% year-on-year on a constant currency. The D2C to B2B revenue mix in the half was 54%-46%.

[Giles Wilson, CFO at Dr. Martens]

This reflects both softer D2C trading in a number of markets and the overall resilience of our wholesale business. It is worth noting there are some small timing differences in wholesale with shipments and sales that happened in H1 last year moving to H2 this year. Despite the revenue decline, gross margin increased, which I will cover in a couple of slides, and we also continued our tight control of operating costs. Adjusted EBIT was a loss of GBP 2.8 million on a reported basis and GBP 2.2 million on a constant currency basis, compared with a profit of GBP 3.1 million last year. Adjusted profit before tax was a loss of GBP 13.7 million reported and GBP 13.1 million on a constant currency basis. We have declared an interim dividend of 0.85 pence in line with policy for a formulaic one-third of the final dividend to be paid as the following year's interim dividend.

[Giles Wilson, CFO at Dr. Martens]

Net bank debt was GBP 158.9 million at the half, broadly flat on last year. As usual, the September position reflects the seasonal investment in working capital ahead of our peak trading period. I will cover this more in detail later. The key message is that while the top line was challenging, margin resilience and cost discipline limited the impact on the bottom line. Turning to revenue, the bridge takes us from the GBP 322 million in H1 FY 2026 to GBP 292.4 million in H1 FY 2027. On a constant currency basis, a reduction of GBP 29.6 million. The key message is that the decline was driven by European performance, specifically the U.K. and the large European markets included in Other Managed Markets. This has been predominantly D2C led, with B2B resilient through the period.

[Giles Wilson, CFO at Dr. Martens]

As I will show in a couple of slides, the shortfall revenue has nearly all been Boots performance, which though not fully quantifiable, was undoubtedly significantly impacted by the very hot summer across Europe, and to a lesser extent, the U.S. The U.S. performance went slightly backwards, driven by B2B timing of certain shipments, which will happen in H2. We saw a resilient performance in DACH and Japan, and included in Other Managed Markets is South Korea, which saw revenue growth double digit year-on-year, and other strong performance. The drag in Other Managed Markets was driven by Italy and France, again, with particularly weak performance in countries which suffered extreme heat over the second quarter. As I said on the previous slide, the revenue shortfall is nearly all in boots.

[Giles Wilson, CFO at Dr. Martens]

This slide clearly shows the drop in products sold, with boots volume dropping from 2.6 million pairs in FY 2025 to 1.9 million pairs this year. Shoes have grown from 1.4 million to 1.8 million pairs, and sandals has been pretty resilient at 0.5 million pairs. In the half, shoes grew 1% off the back of a 24% comp last year, and sandals grew 5% year-on-year. Not reflected on this slide, but it is important to mention that across all product categories, revenue per pair was up year-on-year, demonstrating continued price and mix discipline. As we enter the second half and the weather changes in the Northern Hemisphere, the priority is to stabilize boots while continuing to build momentum in shoes. As Ije will touch on later, we have a good sandals program for Spring/Summer 2027, which will help underpin the wholesale order book.

[Giles Wilson, CFO at Dr. Martens]

Ije will return to the product actions later in the presentation. Moving to gross margin, the performance was good despite the lower revenue base. Reported gross margin was 65.4%. For a like-for-like comparison, the H1 FY 2026 margin is rebased from 65.3% to 64.6% for the retail outbound freight classification I explained earlier. From that comparable 64.6% base, there are three main movements. First, channel mix was a headwind of approximately 30 basis points, reflecting the higher proportion of B2B revenue in the half. Second, average selling price contributed approximately 80 basis points. The main factor here was higher quality U.S. wholesale business, and this was supported by pricing and disciplined promotional activity. Third, cost of goods contributed approximately 30 basis points, reflecting good cost control and lower U.S. tariffs year-on-year.

[Giles Wilson, CFO at Dr. Martens]

This delivers an increase of 80 basis points in the gross margin, and overall demonstrates the resilience of the model. Even in a difficult trading environment, we protected margin through disciplined pricing, promotional control, and active cost management. Turning to the EBIT bridge, adjusted EBIT moved from a profit of GBP 3.1 million last year to a loss of GBP 2.2 million on a constant currency basis. Lower volume reduced gross profit by GBP 21.8 million. There was a price and mix benefit of GBP 2.7 million and a gross margin percentage benefit of GBP 2.3 million, leaving total gross margin impact of GBP 16.8 million. Other operating costs provided a GBP 13 million year-on-year benefit. This now reflects the full benefits of previous cost action plans, including the benefits of our global technology center, the simplified operating model, and the cost action plans taken during 2025.

[Giles Wilson, CFO at Dr. Martens]

Marketing costs, as I set out the full year, increased by GBP 3 million, with particular investment in our new With Bouncing Soles campaign, which Ije will give you more details on later. We started to pull back on performance marketing and focus more on top of funnel as we look to focus on brand awareness. Marketing activity in the half itself was lower year-on-year, ahead of the With Bouncing Soles campaign right at the end of the half. As we have slowed our store openings, and actually during the period closed stores, we see the benefit of our depreciation charge coming through. Exceptional credit of GBP 5.5 million includes the funds received from selling the U.S. IEEPA tariffs claim, which we previously wrote off in exceptional last year, partly offset by other smaller exceptional costs.

[Giles Wilson, CFO at Dr. Martens]

Overall, the margin improvement and the cost discipline has mainly offset the effect of lower volumes, with the planned investment into With Bouncing Soles campaign as a cost in the half. Though not on this page, the movement in PBT is less due to the lower interest charge from reduced year-on-year debt position throughout the period. Returning to top-line growth remains the key to delivering operational leverage and our medium-term margin ambitions. Finally, turning to the balance sheet and the net debt. Net debt, the beige-colored bars at the half was GBP 158.9 million, broadly flat on the year as we return to the group to more normal cash flows following the deleverage of the balance sheet and the reduction in inventory levels. The small increase in debt year-on-year really reflects the employee benefit trust share purchase in the year of circa GBP 7 million.

[Giles Wilson, CFO at Dr. Martens]

The increase from year-end of GBP 69.7 million bank debt is absolutely seasonal, as we build inventory purchases in advance of our peak period, and therefore, better comparison for net purposes is H1 position last year, shown here on the right. Cash generation in the half was a negative GBP 66.2 million. The bridge shows the seasonal working capital build, the lease payments, interest and tax, capital expenditure, and dividends partly offset by the EBITDA generated. On a covenant calculation basis, net debt to EBITDA was 2.2x, well within our banking covenant of three times. The average lease term to break was 2.4 years, which continues to give us significant flexibility in managing the store portfolio and is a slight reduction on last year. Including lease liabilities, total net debt was GBP 310.8 million.

[Giles Wilson, CFO at Dr. Martens]

The IFRS 16 lease debt has increased slightly, reflecting our new head office lease, which we entered into during the period. Our balance sheet remains in a healthy place following two years of disciplined focus on cash generation and inventory reduction. We will, of course, remain focused on cash generation, disciplined investment, and maintaining a strong balance sheet. With that, I shall hand back to Ije.

[Ije Nwokorie, CEO at Dr. Martens]

Thank you, Giles. Let me now come back to the strategy, the progress we have made in the half, and the work still ahead of us. As we have shared before, we are moving Dr. Martens from a channel-first, DTC-first mindset to a genuinely consumer-first mindset. The old model was primarily about building direct-to-consumer distribution. The new model starts with the consumer, understanding who they are, what they want, and being present wherever they choose to discover and buy the brand. This means earning the right to serve each wearer across our own channels and through the right wholesale and distribution partners. The execution of the strategy has three phases, and they overlap. FY 2025 was about stabilizing a business that had been in decline by addressing costs, inventory, and balance sheet.

[Ije Nwokorie, CEO at Dr. Martens]

FY 2026 and 2027 are focused on the much harder work of transforming the business, putting the consumer at its center, reducing our dependence on any one product category, channel, or market, lowering our reliance on discounting, and simplifying how we operate. In some areas, including wholesale and brand investment, we are entering the scale phase. In other areas, particularly DTC and boots, that pivot is still underway. We have always said this would take time and progress would not be linear, and we are making deliberate choices now to create sustainable growth. Our ambition remains the same, to make Dr. Martens the world's most desired premium footwear brand. We are confident in our ability to do that. Our strategy is anchored in four levers for growth: engaging more consumers, driving a more relevant product offering, creating the right market and distribution model in each market, and simplifying the organization.

[Ije Nwokorie, CEO at Dr. Martens]

I will update you on each of those levers and show what we have delivered in the first half, as well as some hints as to what we are going to do next. We, of course, have set very clear priorities in each of those levers for FY 2027. For consumers, we are focusing on improving full price mix in the U.K. and DACH. This was always weighted to the second half, so trading in the months ahead is key to achieving this objective. For product, our new sandals program goes live in Spring/Summer 2027. Early wholesale response has been encouraging. For markets, the first wave of Brand Centres is now open. I will say a bit more about that in a moment. For the organization, we are unlocking the benefits of the new operating model and strengthening the leadership capability needed to drive growth.

[Ije Nwokorie, CEO at Dr. Martens]

Let me take you through each of these levers in a bit more detail. I will start with the consumer lever. Our aim is to lead with product grounded in comfort, craft, confidence, and to build a clearer, more consistent, and more premium expression of the Dr. Martens brand around the world. On September 22, we launched our refreshed global brand platform With Bouncing Soles. These three words have been stitched into every Dr. Martens heel loop right here since 1960. They connect our craftsmanship, our archive, the attitude of the brand, and the comfort of our products. This is an important milestone in our consumer-first strategy. It gives us an authentic and globally resonant expression designed to deepen our relationship with existing wearers, reach new consumers, and build greater desire for our products. That last point is important, and I will come to it in a minute.

[Ije Nwokorie, CEO at Dr. Martens]

I am going to play a short film to highlight some of how this has shown up around the world. For the first time, we are working with globally recognized talent, including Chloë Sevigny, Jordan Stephens, and Naomi Watanabe, and a host of local talents amplifying the campaign in their markets. Each talent brings their own craft, cultural relevance, and the independent spirit that has always been associated with Dr. Martens. These are not celebrity endorsements. They are genuine creative partnerships that present our brand in a more modern, yet authentic and relevant way. With Bouncing Soles, the distinctive multi-year brand platform that we will build on over time, ensuring it remains relevant wherever people encounter it. The launch has had real global scale, from Paris and Milan to Hong Kong, Tokyo, London, and New York, supporting over 30 events in 17 cities.

[Ije Nwokorie, CEO at Dr. Martens]

This is the largest and most coherent global marketing activity we have ever done. Our partners have been involved. They have embraced this platform and are carrying it into their consumer experience. This is Citadium in Paris, one example. They are combining our campaign imagery with a dedicated Dr. Martens product presentation. Here is ABC-MART in Japan, the country's biggest footwear retailer, putting our brand right at the entrance into their consumers' experience. We love how Naomi Watanabe, who is Japanese, is at the front and center of that storytelling. In the U.S., we work with some great retailers, and they have also partnered with us. You can see Journeys, Urban Outfitters, and Zappos. With Bouncing Soles allows us to leverage our powerfully and consistently in places that consumers have always trusted for premium footwear.

[Ije Nwokorie, CEO at Dr. Martens]

Still early, and we should be careful about overstating 30-day reads, but the initial response is encouraging. We are seeing stronger visibility and engagement in both out-of-home and social media. This is not simply about spending money on marketing. We are using this platform to build desire for our products and deepen our relationship with our consumers. It is great to see the growth in our Crazy Horse range of icons. These are the products that are at the center of that campaign. Ultimately, it is about the consumer. We have seen growth in our proportion of Craft Curators. That is the more loyal, high-spending consumer segment that cares about comfort, cares about craft, and the consumer segment that we are focused on. It is a good start, and we will continue to build on this brand platform for seasons to come.

[Ije Nwokorie, CEO at Dr. Martens]

Related, but also in its own way, is the launch of our new global e-commerce experience. New site started rolling out in August through September. We knew a platform change of this scale would create some short-term disruption as it bedded in, as search engines figured it out, as our existing consumers understood the new journeys. Our focus has been on establishing a stable platform in the run-up to peak and to create a much stronger long-term foundation for growth. As you can see, the new experience brings the brand, the product, craft, culture together in one globally connected destination. It is faster, smarter, more premium than what we had before, and makes it easier for our consumers to discover and shop for our products while enabling personalization and more relevant local marketing that our GMs can drive real relevance in their markets.

[Ije Nwokorie, CEO at Dr. Martens]

It will play a central role in how we continue to engage new consumers around the world. Now let me turn to the product lever, where performance in the half, as we have said earlier, was mixed by category, with weakness in boots dominating our H1 picture. The strategic objective, of course, is to reduce our reliance on just one category, in this case boots, without losing sight of the need to continue to invest in our core offering. To be clear, we are committed to rebuilding our boots business. I will say more about our plans at the full year. In the meantime, as we said we would, we are continuing to reinforce our icons, expanding the range of occasions for which consumers choose to wear Dr. Martens, and building meaningful growth in shoes, sandals, and with time, bags. Boots remained the most significant headwind.

[Ije Nwokorie, CEO at Dr. Martens]

Revenue in this category has been declining for some time, and with this historically hot summer, declined 20% on last year. Shoes grew 1% as general sale area against a tough comparator, with Mary Jane and Buzz performing really well. Sandals grew 5%. That performance and that resilient performance gives us confidence as we prepare to launch the new sandals program later on in this second half. Bags declined overall because of DTC headwinds, but B2B grew strongly, albeit from a small base. As we have said before, bags and accessories are a long-term opportunity for us, and expanding wholesale distribution that we are focusing on now is essential to unlocking that area for us. Across all categories, higher price point products and Made in England continued to outperform. That supports our premium positioning, while resilience in sandals shows the breadth of price points in which we can be relevant in.

[Ije Nwokorie, CEO at Dr. Martens]

We have work to do in boots. Product that you can see on the left drove the bulk of the decline, but is of course our biggest boots offering. It is worth saying weakness in boots is not universal. In H1, Crazy Horse boots were up 30%. This is one of them here. With the 1460 Crazy Horse up 84%. Made in England boots pairs were up 20%. New product families such as Lowell, and you can see in this picture the Chukka, and Buzz, and you see in this picture the Buzz Hi, also saw good growth. But those successes are too small to offset pressure on the core black smooth lines. The consumer is still looking for more variety, more comfort, more craft in our boots offering.

[Ije Nwokorie, CEO at Dr. Martens]

We are acting on that through the medium term. As I said, we will share more of that in our full year. We expect boots to remain a headwind for the rest of FY 2027. Near-term growth will need to come from newness and other product categories while we rebuild the core boots offering. That is products. Now let me talk about the market lever, where we continue to make pleasing progress. Our objective is to build the right distribution for each market, stronger wholesale partners, a differentiated, disciplined, capital-light expansion. in May, we shared with you our tiered retail strategy, moving away from a one-size-fits-all retail model. Physical retail is important. It is the best place for our consumers to experience our products and understand our iconic brand. We are delivering a better, more differentiated estate, where each format has a clear role in the marketplace.

[Ije Nwokorie, CEO at Dr. Martens]

We said that in FY 2027, we will roll out Brand Centres, that is the second from the left format, in key cities around the world. Let me tell you a bit about how we are doing with that. Our reimagined Le Marais Brand Centre in Paris was the first of a new wave, launched just at the beginning of this second half. You can see the before and after pictures on the slide for yourself. It is a cleaner, more elevated, more open environment, still feels 100% Docs, designed to bring consumers closer to the product, to bring them closer to craftsmanship and to our brand stories. It goes beyond transactions and creates a stronger place of assembly for our wearers.

[Ije Nwokorie, CEO at Dr. Martens]

We have also opened Herald Square in New York, or reopened Herald Square in New York, and that is our first Brand Centre in the U.S. and a major opportunity in one of the countries, actually one of maybe the world's highest footfall locations. The store presents the brand more clearly, including a strong service area, an elevated icon wall, and a Made in England and bags area for extra emphasis on those products. Just last week, we opened in Munich Sendlinger. The before and after pictures gives you a real sense of how we are now inviting you in right off the street to come in and find out more and experience much more of what this brand has to offer. I think you can see that really for yourself in these pictures. Tomorrow, you are the first to hear this, we will open in Century City, L.A.

[Ije Nwokorie, CEO at Dr. Martens]

If you know this location, you will know how amazing it is as a destination. We cannot wait to see how Angelenos and their guests experience our brand in this location. It is early. We are literally, in some cases, days in, but the initial consumer response to these new upgraded stores is encouraging. In these stores, average transaction value is showing significant growth against comparable local stores, our stores in the local area. We also see in a stronger mix of bags and accessories. So far, they are doing exactly what they are designed to do. We will continue to track performance carefully as we scale to other cities. Across these locations, the plan is simple. Stronger product presentation, more visible craft and service, the consumer wants that, and a fuller expression of the brand.

[Ije Nwokorie, CEO at Dr. Martens]

We are creating stores that help our consumers discover more of what we have to offer and go deeper with us over time. This is at the heart of our value creation thesis. As we have said before, a bit of an update on what we are doing through our capital-light models. We have signed with Trend Marketing as our new distributor in Canada to simplify the way we serve the consumer in that market. In Latin America, our partner has opened a second store in Santiago, taking the region to three stores, and e-commerce is now live in Argentina and Mexico, following Chile going live at the back end of the last financial year. There is more work to do in some of the existing partner markets, particularly Australia, but the model allows us to enter and grow markets with disciplined capital deployment.

[Ije Nwokorie, CEO at Dr. Martens]

Finally, let me talk about the organizational lever. Our goal has been to simplify the operating model, and you can see some of the benefits of that in Giles' presentation. Optimize the cost base, build a culture of excellence, care, teamwork, and accountability. We are embarking on a necessary transformation to build a consumer-first organization. H1 has therefore been about bedding that model in and building the capabilities, particularly around leadership, needed for the next phase. Speaking of leadership, we have strengthened our leadership capability around very specific areas that the business needs to be truly consumer first. I am excited that Justin Lee has joined us as the General Manager for South Korea, bringing deep local but also global experience from Nespresso, Samsung, Unilever. Kate Vacovec, Katie Morton, and Nadia Svensson add, respectively, commercial finance, consumer, and merchandise leadership to work in partnership with our General Managers.

[Ije Nwokorie, CEO at Dr. Martens]

These are capabilities our market leaders and General Managers have not always had consistently alongside them. Isadora Versiani joins us from Marc Jacobs to lead product design, and in partnership with Nadia, she strengthens that connection between consumer insight, merchandising, and the product we create. Of course, their impact will take time to come through, but we now have the world-class leadership capability required to deliver growth. So, let me recap what we have delivered in the first half. We launched With Bouncing Soles, we launched our new e-commerce platform, and we opened the first wave of our Brand Centres. We strengthened the leadership team and the in-market capability. We deepened wholesale relationships and introduced our new Spring/Summer sandals range to our partners, and that response has been encouraging. As we are transforming the business, we are at the same time maintaining strong financial discipline. These are substantial developments.

[Ije Nwokorie, CEO at Dr. Martens]

They have been delivered to plan, and together they create a strong platform for growth. But we still have work to do, and I want to be very clear and transparent about that. First of all, Boots. Our newer and focused product lines are working, but the core remains under pressure, and recovery will take time. We are very focused on this internally, and I will talk a lot more about that in our full-year results at the end of the financial year. Secondly, DTC. We are making the right long-term changes to our direct-to-consumer model, but the new e-commerce platform, the retail estate, and the full price model require continued attention and disciplined execution. These actions and taking these actions are, of course, at the heart of the strategy that we have been sharing with you and executing. Our medium-term financial objectives remain unchanged.

[Ije Nwokorie, CEO at Dr. Martens]

We are targeting profitable growth above the relevant footwear market, operational leverage that supports a mid-to-high teens EBIT margin, and strong cash conversion. We know these objectives require a return to overall revenue growth. The work underway across consumer, product, marketplace, and organization is designed to create that growth on a high-quality and resilient basis. That is the transformation we are leading. We will deliver it through the talent, commitment, and passion of our people, and I am grateful for their commitment and work through a time of significant change. Let me make some closing remarks, and I will end where I started. H1 revenue was disappointing. Results were affected by unusually hot weather, which impacted primarily Boots in an ongoing tough consumer backdrop. There is more work to do, particularly in Boots and DTC.

[Ije Nwokorie, CEO at Dr. Martens]

We are not minimizing these challenges, but we are executing this strategy and doing what we said we will do. We are managing margins and costs with discipline, and the business remains weighted towards the second half. We are focused on the key trading weeks ahead as they determine our success for the full year. Our conviction in the medium-term objectives and our belief in the opportunity for Dr. Martens are as strong as ever. Thank you. We will now hand over to the operator, and Giles and I will take your questions.

[Operator]

Thank you, Ije. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question today is from Kate Calvert from Investec. Your line is now open. Please go ahead. Kate, your line is now open. Please ask your question. We will now move on to the next question. The next question is from Pedro Anton from Goldman Sachs. Your line is now open. Please go ahead.

[Pedro Anton, Analyst at Goldman Sachs]

Hi, good morning. I hope you can hear me.

[Ije Nwokorie, CEO at Dr. Martens]

Yes, we can.

[Pedro Anton, Analyst at Goldman Sachs]

I have two questions for you, and thank you for taking my questions. I think firstly on the Boots category a bit more generally. Clearly, as you communicated, weather has been quite unhelpful for this half. But I was wondering if you could comment a bit more on what else are you seeing in terms of inventory levels and on the competitive landscape, if you have seen any change on the back of that weakness. Then my second question has to do with promotional activity as we go into the second half. I remember very clearly last year you stated that you still wanted to give customers a chance to buy on sale while also staying committed to maintaining full-price sales are increasing. So I was wondering whether your approach this year is going to change relative to last year. Thank you very much.

[Ije Nwokorie, CEO at Dr. Martens]

Thank you. I'll split this way. I'll take the competitive environment, and I'll talk to you about the promotional activity. But Giles, do you want to start off with Boots inventory?

[Giles Wilson, CFO at Dr. Martens]

Yeah. I think the very simple answer is we're very happy or very comfortable with the levels of inventory following the last two years of bringing inventory levels down. We constantly review it. We constantly make sure it is, and there is nothing there that we would be concerned about. It's the levels we would expect.

[Ije Nwokorie, CEO at Dr. Martens]

In terms of the competitive space, as you can imagine, just because everybody categorizes things differently, it's not that easy to figure out what's happening everywhere else. We do know that the Boots category is under pressure generally, and some of that is just the fashion cycle, et cetera. Of course, as you also said, Pedro Anton, the hot summer. So, what we're focused on is what we make, and as I said, we do know that when we've introduced lightweight, when we've introduced something that is fresh, soft leather, that that works well with the consumer. We're really focused on making sure that we really look at the whole portfolio of our Boots offering in order to put us in a strong competitive space for Boots while making sure that we're not just dependent on Boots as a business.

[Ije Nwokorie, CEO at Dr. Martens]

In terms of the promotional backdrop for the season coming, maybe a couple of points to make there. Absolutely, as you said, we do believe that at certain times, particularly for our loyal consumers, it is great to reward them with a bit of a deal. Having a high gross margin product makes that possible and to still deliver really good quality revenue. Also, as you mentioned, it is our goal to make sure that full-price revenue remains and continues to be the bulk of our business, and our strategic objective for the U.K. and DACH is very much second half loaded. Final point I want to make about the big shopping season is that it's not just about promotions. It's also about giving consumers great things that they have.

[Ije Nwokorie, CEO at Dr. Martens]

While over Black Friday you might see us do things in specific product lines, we'll also have a really strong gifting offering. We'll also bring in new full-price products, some of which you can only get directly from us. The whole package around Black Friday, around the gifting season, and what happens post-Christmas isn't just about promotions. It's about really curating a wonderful set of offerings for our consumers.

[Pedro Anton, Analyst at Goldman Sachs]

Thank you very much. Very clear.

[Operator]

Thank you, Pedro Anton. Our next question is from John Stevenson from Peel Hunt. Your line is now open. Please go ahead.

[John Stevenson, Analyst at Peel Hunt]

Great. Thank you. Couple of questions, please. First one just on the U.K. versus DACH. I mean, the U.K. and DACH, I guess, have been two of the more challenging markets over the past couple of years. But DACH seems to stabilize more versus the U.K. I do not know if you could talk a little bit about reasons behind that and what you have been doing. Secondly, I guess it is another way of asking the same question, but obviously around Boots. Interested how Boots were performing before September, and obviously the new boot styles are performing well. How much do you think really is down to newness in the product file versus external factors when you are looking at the overall boot performance?

[John Stevenson, Analyst at Peel Hunt]

Finally, just on U.K. wholesale partners, I noticed you have got a couple of new kind of big headline wholesale partners in the U.K. Can you talk about how this has been changing? Thanks.

[Ije Nwokorie, CEO at Dr. Martens]

Yeah. Thanks, John. I will take those, and I am going to wrap your first question, your third question into your first one, because it is part of what is going on there. The DACH recovery is wholesale driven, and we continue to invest in our DTC offering. I told you a bit about Munich, but we have had a really The team there has been able to move quickly with relationships that they have built with wholesale, which were beginning to yield fruit in FY 2026, and they have just continued that progress in a really strong way. So that is the difference. We have not had that happen yet in the U.K. If you like, we are a step behind. To your third question, that is why you are beginning to see the leadership in the U.K. really begin to think in a fresh way with this strategy around distribution.

[Ije Nwokorie, CEO at Dr. Martens]

That is why you are seeing us show up in more places that consumers buy instead of maybe some of the traditional channels that Dr. Martens had been in for, in some cases, decades. Not that we are pulling out of those places, but the team is asking themselves fresh questions with this strategy, which is why you are seeing us show up in more places. It is early days for all of those. Some of them are literally weeks old, but again, we are really encouraged by that performance. In all our markets, expect those leaders, because they all have a clear brief on this, to think strategically and in fresh ways about where our product shows up.

[Ije Nwokorie, CEO at Dr. Martens]

Again, to summarize that point, we are ahead in that wholesale journey in DACH compared to the U.K., but the U.K. team are squarely focused on that, and we expect to see that start yielding benefit quite soon. In terms of boots, it is a great question, John, and it is often difficult to pull apart what is newness, what is weather. The weather impacted all boots. I think that is the headline here. Because we hate focusing on things that are not within our control, we are saying to ourselves, having said that, we will continue to focus on our boots offering, and some of the newer things we do show us that even in a tough environment with both weather and consumer sentiment not being where it needs to be, we still have the opportunity to win. That is what we are focused on doing over time.

[John Stevenson, Analyst at Peel Hunt]

Okay. Thanks, Ije.

[Ije Nwokorie, CEO at Dr. Martens]

Thanks, John.

[Operator]

Thank you, John. We have a follow-up question from Kate Calvert from Investec. Your line is now open. Please go ahead.

[Kate Calvert, Analyst at Investec]

All right. Hopefully, I sorted the technology out now. Can you hear me?

[Ije Nwokorie, CEO at Dr. Martens]

We can hear you, Kate.

[Kate Calvert, Analyst at Investec]

Perfect. Just three questions from me. The first question is, could you talk about, well, you talked about actually, in your presentation about active cost management in the first half. How much of the first half cost reduction was of a temporary nature or just come back as sales come back, and how much was structural? What are your thoughts going into the second half? On the gross margin, could you just sort of categorize your thoughts on the headwinds and tailwinds in the second half? My final question is not just on the U.S., what is the feedback from your wholesale partners on the product that's coming through? I am wondering how much has the mix of their buy changed year-on-year? Are they buying less into boots as well, more into the shoe category?

[Ije Nwokorie, CEO at Dr. Martens]

Shall I let you take the first two questions

[Giles Wilson, CFO at Dr. Martens]

Yeah

[Ije Nwokorie, CEO at Dr. Martens]

on cost management and gross margin, then I will give some feedback on U.S. wholesale.

[Giles Wilson, CFO at Dr. Martens]

Yes. In regards to active cost management, of course, there is a degree of costs that are variable, which obviously relate to things like delivery costs or royalties, et cetera. Yes, there is a part of that. There is a good chunk of it that is fixed cost reduction from the past. I will not exactly split it out, but this to say it is a decent proportion of the savings year-on-year. As we go into the second half, we will see that slightly mitigate a bit. There has been the benefit of why we have been going through the operating model changes. You saw the five or six people that Ije referenced as example. We are now bringing those new people on board, so they will obviously both bring upside in terms of the work we are doing, but also will bring some cost.

[Giles Wilson, CFO at Dr. Martens]

In terms of your gross margin, we will see we benefited in the first half from a couple of things which will carry on into the second half, but slow down. The first, obviously, was we saw price increases in the U.S. They went up on January 1 last year, or this year, sorry, but obviously, we will then not comp those in the fourth quarter. We have a slightly lesser tariff impact in the second half, but overall, I expect gross margin to remain pretty resilient as we manage through the year, and you should see the similar sort of shape to it as you saw in the first half.

[Ije Nwokorie, CEO at Dr. Martens]

In terms of U.S. wholesale mix and what our partners are buying, the first thing, as I mentioned, Kate, we are encouraged by the response to our spring/summer offering, and particularly that new sandals line, so that is really encouraging. If you look at where the order book is more developed at the moment, it is spring/summer, so you are going to see, in any case, more shoes and sandals in there, rather than boots. It is not the same story for each partner, and I think that is maybe the big point to make here, that some of our partners who are more boots-focused are still boots-focused. Generally speaking, expect that there is some shift in what our partners are buying. As we have reinforced our sandals and our shoes offering, expect that there is some shift to that.

[Ije Nwokorie, CEO at Dr. Martens]

The more significant shift, particularly in U.S. wholesale, and wholesale as a whole, is the quality of what they are buying in terms of this is full-price product, this is product that the consumer is looking for, and that is what we are much more excited about, as opposed to which line of product they are buying.

[Kate Calvert, Analyst at Investec]

Okay. Thanks very much.

[Ije Nwokorie, CEO at Dr. Martens]

Thank you, Kate.

[Operator]

Thank you, Kate. Our next question is from Adam Tomlinson from Berenberg. Your line is now open. Please go ahead.

[Adam Tomlinson, Analyst at Berenberg]

Morning, everyone. Hopefully you can hear me okay.

[Ije Nwokorie, CEO at Dr. Martens]

We can.

[Adam Tomlinson, Analyst at Berenberg]

That's great. Thank you for taking my question. Just a couple, please. One was just on the fashion cycle. You mentioned for boots, we're probably in the less favorable part of that cycle at the moment, and I was just wondering, in your experience, whether you have a view on how that might play out, potentially what needs to happen for that cycle to come back into a more favorable part? That's just the first question on that. I appreciate it's difficult, but just any thoughts might be helpful. Then the second question was around, I suppose, with the weather impact, how are you thinking about, with potentially warmer summers sort of here to stay, how you're thinking about that evolution of the product mix and category? I think you mentioned you expect some exciting things to happen in sandals next year.

[Adam Tomlinson, Analyst at Berenberg]

Without giving too much away, a little bit of color around that would be interesting as well, please.

[Ije Nwokorie, CEO at Dr. Martens]

Yeah. Thanks, Adam. I will not pretend that I can predict every fashion cycle. I will probably not quite swerve, but not be too prescriptive about when I think, and let me be clear about this, when I think that black, more, if you like, chunky military look comes back in boots. To make the point again, there are lots of boots that we have that are doing well, they are just not as big a part of the core. That is why the strategy is to de-risk any one product or particularly silhouette of product being the thing that drives our year. We are doing well in tall boots, it is worth saying, and we are certainly doing well in soft leather boots, and it is really about making sure that we can continue to be relevant even when fashion cycles move around.

[Ije Nwokorie, CEO at Dr. Martens]

That is the brand we are building. That speaks to the second question as well around weather, Adam. We want to make sure that if there is a hot summer, that the consumer, not only that we have the right product for the consumer in that time, but that the consumer knows about the product. That is what With Bouncing Soles is about. That is why it is a multi-year strategy. With Bouncing Soles, we can use it to sell a Mary Jane shoe, but we can also use it to talk about a 1460 boot. Really making sure that the consumer understands that breadth, and therefore that we can merchandise the right product at the right time. Having local market leadership helps that, because they can make the right call about the assortment for their markets.

[Ije Nwokorie, CEO at Dr. Martens]

Working strategically with our wholesale partners also helps manage that, because they will make the right assortment for their consumer. Again, at the heart of the strategy, Adam, is to make sure that even weather is not a reason for the business to underperform. We have some work to do with that, and particularly in boots, but that is the work we are focused on.

[Adam Tomlinson, Analyst at Berenberg]

That is great. Thank you very much. That is very clear.

[Operator]

Thank you, Adam. As a reminder, to ask a question, please press star followed by one on your telephone keypad. We currently have no further questions, so I will hand back to Ije for some closing remarks.

[Ije Nwokorie, CEO at Dr. Martens]

Thank you so much, and thank you, everybody, for joining us today. I do not have a lot to say apart from to reemphasize the things I have said earlier. It was a disappointing first half, but we are focused on making the transformational changes that this business needs and on executing the strategy that we have laid out. Right now, we are focused on the key trading weeks that are right ahead of us. So we will update you on those towards the end of January. Thank you very much for coming again. Bye-bye.

[Operator]

Thank you very much. This concludes today's call. Thank you for joining. You may now disconnect your lines.

Participants

Executives

• Ije Nwokorie, CEO
• Giles Wilson, CFO

Analysts

• Pedro Anton, Analyst at Goldman Sachs
• John Stevenson, Analyst at Peel Hunt
• Kate Calvert, Analyst at Investec
• Adam Tomlinson, Analyst at Berenberg