June 1 (Reuters) – Shares of Dr Martens (DOCS.L) fell more than 10% on Thursday after the British bootmaker warned investment would hit profit margins this fiscal year and the consumer situation in the United States was “the toughest in the world” at the time”.
The US is the company’s second-largest market, and the weakness there contributed to a drop in core earnings of more than a quarter in the year ended March 31.
Dr. Martens, whose expensive work boots have been in fashion since the 1960s, is facing declining demand in the US as consumers cut back on discretionary spending amid high inflation. It has also faced logistical issues at a recently opened distribution center in Los Angeles, which drove up costs.
“We think the consumer situation in the United States is the toughest in the world right now,” CEO Kenny Wilson said in an interview, adding that it looked like this would continue.
“I think their consumer has been under pressure for a long time…but this is also kind of a shared misery with everyone else,” added Wilson.
The company is seeing core profit margins (EBITDA) fall by 1-2 percentage points this fiscal year as it plans to invest £50-55m over the next few years, including in new stores.
Pre-tax profit fell 26% to £159.4 million ($198 million) in the year ended March 31.
“A series of profit warnings… has eroded investor confidence in the iconic British shoemaker – and full-year results are unlikely to lead to an immediate change in their perceptions,” said eToro analyst Mark Crouch.
One bright spot was that annual sales passed the £1bn mark for the first time, aided by demand in Europe and Japan.
Direct-to-consumer sales also made up more than half of the total, another first.
Dr. Martens said price increases would help offset some of the cost pressures. It raised prices by 6% last fiscal year.
Shares fell 10% to 140.98 pence at 0850 GMT.
($1 = 0.7923 pounds)
Reporting by Eva Mathews in Bengaluru and Helen Reid; Edited by Sherry Jacob-Phillips and Mark Potter