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​​​Iconic footwear brand Dr Martens braces for full-year earnings ahead

Iconic footwear brand Dr Martens braces for tough year ahead and possible disappointing full-year earnings on 30 May.

Building Source: Getty Images

​​​Iconic footwear brand Dr Martens braces for full-year earnings ahead

​Legendary British footwear company Dr Martens is facing a pivotal year in 2024. As the brand prepares to unveil full year results on 30 May as challenging market conditions, an executive shake-up and change of business model have investors bracing for lacklustre earnings and slowing growth.

​Dr Martens sent shockwaves through the market in mid-April when it warned of a significant profit slump. The company said pre-tax profits could fall by around two-thirds to plunging US wholesale revenues and its decision not to hike prices to offset rising costs. US wholesale revenues are forecast to tumble by double-digit percentages.

​The profit alert was accompanied by the impending departure of longtime Chief Executive Kenny Wilson, who will step down in 2024. His exit casts further uncertainty over Dr Martens as it continues shifting towards a direct-to-consumer sales model.

​Dr Martens became a cultural icon with its trademark yellow stitching and air-cushioned soles. The brand’s anti-establishment, rebellious image attracted hoards of followers from punks to working-class youths. However, Dr Martens now faces perhaps its biggest test in preserving brand loyalty while overhauling its sales strategy.

​Analysts believe Dr Martens’ brand remains resilient with consumers but say execution risks abound with its strategic reset. UK bank HSBC notes the direct-to-consumer push requires “significant infrastructure” that drives up expenses and pressures margins. It plans to monitor Dr Martens’ progress before advising investors.

​Dr Martens’ low valuation multiple may appear attractive relative to UK peers, but its falling earnings underscore risks. Its price-to-earnings (P/E) ratio sits at 8x, well below the 18x of the broader UK market.

​The low P/E ratio may explain why the Dr Martens share price has risen by around 30% from its mid-April post profit-warning low. It nonetheless remains in slightly negative territory when looking at year-to-date performance.

​If Dr Martens can demonstrate progress in expanding direct-to-consumer and stabilizing declines in other sales channels, it could prompt analyst upgrades down the road which in turn would likely prompt a further advance in the Dr Martens share price.

​For now, the upcoming full year 2024 results will underscore difficulties facing the company. Investors can expect another year of falling profits and potentially muted guidance for 2025. Dr Martens’ brand power still shows glimmers of hope, but near-term headwinds prevail.

​The next 12-18 months will prove critical for the footwear firm to stabilize performance. If challenges persist through 2025, its strategic reset could face deeper scrutiny even with a strong cultural lineage behind the Dr Martens name.

​Analyst ratings for Dr Martens

​LSEG Data & Analytics show a consensus analyst rating of ‘hold’ for Dr Martens with 1 strong buy, 6 hold and 1 sell – and a mean of estimates suggesting a long-term price target of 75.77 pence for the share, roughly 14% below the current price (as of 23 May 2024).

Dr Martens analyst Source: LSEG
Dr Martens analyst Source: LSEG

​Technical outlook on the Dr Martens share price

​From a longer-term perspective the Dr Martens share price continues to hover above its mid-April all-time low at 62.00p but on a daily time frame is trying to fill its profit-warning price gap with its 15 April low at 93.70p.

​Dr Martens Daily Candlestick Chart

Dr Martens daily chart Source: TradingView
Dr Martens daily chart Source: TradingView

​A close of the price gap and rise as well as daily chart close above the December-to-April highs at 99.40p to 100.3p would indicate that a long-term bottom has been formed with further upside being in store over the long-term.

​While this resistance area continues to cap, though, further sideways trading with a downside risk remains on the cards.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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