Dr. Martens, the popular footwear brand, has reported a weak performance in Q3, particularly in its US business. While the brand’s performance leading up to December was in line with its revised full-year guidance, the highly anticipated Golden Quarter fell short of expectations. Revenue for the quarter dropped by 21% to £267.1 million compared to the previous year or 18% in constant currency. The combined revenue for the first three quarters of the financial year also saw a decrease of 12% to £662.9 million.

In terms of revenue breakdown, direct-to-consumer (DTC) revenue in Q3 declined by 5% reported or 3% in constant currency, while wholesale revenue experienced a significant decline of 49% reported or 46% in constant currency. E-commerce revenue fell by 9% reported or 8% in constant currency. However, retail revenue saw a slight increase of 3% and remained steady in constant currency. The underperformance in the US market was expected as the brand faced volatility in trading throughout the quarter, with a weaker December in line with industry trends.

The decline in e-commerce revenue was mainly driven by the Americas, where online sales decreased by double digits. On the other hand, the EMEA region witnessed marginal growth, and APAC experienced a slight year-on-year decrease. Retail revenue in APAC achieved double-digit growth, primarily driven by Japan, while EMEA saw solid growth. However, the US continued to struggle with weak footfall, leading to declining revenue.

During Q3, Dr. Martens expanded its presence by opening 13 new stores across EMEA and APAC, bringing the total number of its own stores globally to 235. Additionally, the brand closed seven stores during the same period. The significant decline in wholesale revenue was a consequence of reduced sales in both the Americas and EMEA, as anticipated. Dr. Martens highlighted that its wholesale customers maintained low levels of in-market inventory, making reorder timing and quantities unpredictable and reducing visibility in the wholesale segment.

Similar to the challenges faced by the fashion sector, Dr. Martens experienced mixed results in Q3 of 2023. In the EMEA region, DTC revenue grew at a low single-digit rate, with weaker performance in October due to warm weather conditions, a stronger November, and a softer December. DTC performance in European conversion markets was favorable, while the UK experienced a slightly weaker outcome following industry trends. Overall, EMEA revenue declined by 15% compared to the previous year.

In the Americas, Dr. Martens observed a double-digit decline in DTC revenue, impacted by reduced e-commerce sales and low footfall. Wholesale revenues in the region halved year-on-year due to cautious behavior from wholesale customers and a weak order book. Consequently, overall revenue in the Americas dropped by 31% reported or 26% in constant currency. To address this, the brand’s new Americas leadership team is focusing on driving revenue growth through marketing execution and enhancing e-commerce trading capabilities.

In APAC, revenue experienced an overall decrease of 8% reported or 1% in constant currency. Japan, being the brand’s largest market in the region, showcased positive growth, with DTC and wholesale performance influenced by the transfer of 14 franchise stores at the end of the previous financial year.

Despite these challenges, the guidance provided during Dr. Martens’ H1 results remains unchanged. However, the increase in the value of the UK pound since H1 means that if current foreign exchange rates persist, the brand expects a currency headwind of approximately £5 million and a non-cash balance sheet translation charge of approximately £5 million.

Despite the challenging consumer environment, CEO Kenny Wilson remains optimistic about the brand’s ability to grow and invest in its business. Wilson assures that they are taking necessary actions to continue expanding the iconic brand and expresses confidence in the product pipeline for the AW24 season and beyond.

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