Dr. Martens stock jumps after boot maker says U.S. sales will remain challenged

Shares of Dr. Martens fell sharply Tuesday after the boot maker issued a cautious 2025 outlook that hinted at continued weakness in the U.S. wholesale market.

Ahead of its official full-year earnings report on May 30, the British footwear company shared its "prudent" outlook for 2025 The company expects U.S. wholesale revenues to fall by double digits in 2025 compared to the previous year, a decline that it says will affect pre-tax profits by about 20 million euros. While it is possible that wholesale sales will improve as a result of reordering during the season, Dr. Martenfeld said this is not guaranteed. With this challenge in mind, the brand is also investing in additional warehousing facilities to preserve its products in the U.S., its largest market.

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In conjunction with the business update, Dr. Marten announced that his Matron Executive Officer, Kenny Wilson, will be stepping down and will be replaced by Matron Brand Officer, Ije Nwokorie.

Dr. Maarten said that FY2024 is on track. Direct sales achieved high single-digit growth in the fourth quarter, driven by growth in the EMEA and Asia Pacific regions. Wholesale sales were also in line with expectations.

As of early Tuesday afternoon, Dr. Martens shares were down more than 30%.

Wilson said in a statement that the company is "focused on an action plan to reignite demand for boots," particularly in the U.S., which has been a challenge for the brand throughout fiscal 2024. Wilson added that the company's wholesale business in the U.S. may improve where consumers have confidence in the market, but he doesn't expect that to happen in the next fiscal year.

In total, Dr. Marten expects revenues in fiscal 2025 to be down by single digits from the previous fiscal year. The company also said it will not be able to offset cost increases in 2025 because it will invest more in talent and will not raise prices, although it still hopes to cut costs wherever possible.

"We have built an operating cost base to cope with the expansion of our business, however with the reduction in revenues we are now seeing a significant deleveraging of the earnings side of the noodle," Wilson said." Against this backdrop, we will maximize our cost efficiency. We also have a number of investment programs underway that will bear fruit in the coming years. We continue to believe in our DTC strategy of prioritization and considerable growth potential. Our brand remains strong and we have an impressive product line. All of this allows us to look forward to the transition year ahead with confidence.

Marathon Partners Equity Management, LLC, a New York-based investment firm that owns more than 5 million shares of Dr. Marten's common stock, sent a letter to Dr. Marten's Chairman, Paul Mason, and the Board of Directors earlier this month urging the company to begin evaluating "business alternatives with the goal of maximizing shareholder value The letter states that this includes potential business alternatives to maximize shareholder value. This includes a potential sale of the business, the letter reads.

Since going public in 2021, Dr. Marten's stock price has declined by nearly 83%.Given the company's stagnant earnings progress and investor apathy, Marathon believes that Dr. Marten's tenure as a publicly traded company is no longer serving its shareholders in the best possible way.

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