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Dr. Martens CEO: Price Hikes Have ‘No Impact on Demand’

Dr. Martens CEO Kenny Wilson said the boots manufacturer and seller was “stronger than ever” after concluding its first year as a public company, seeing fourth-quarter sales spike 29 percent to 231.4 million pounds ($289 million).

For the full-year, sales jumped 18 percent to 908.3 million pounds ($1.13 billion) on net income of 181.2 million pounds ($226.4 million).

In a Nutshell: The success throughout 2021 came despite three months of factory closures across Southern Vietnam, which accounts for 30 percent of Dr. Martens’ production, and a near doubling of shipping times from the Asia-Pacific region to the U.S.

Now, all the company’s factories are open and operating at an average of 90 percent capacity, in line with the footwear seller’s planning assumptions, Wilson said in a review of the quarterly results.

“We had decided to enter [last year] with higher levels of continuity product than normal, given the uncertain environment, and this decision proved incredibly valuable as it enabled us to fulfill some of the product shortfall due to the factory closures,” Wilson said. “We prioritized inventory toward our own DTC channels, particularly during the peak Q3 trading period, delaying some wholesale orders into Q4. We also worked flexibly, sourcing increased product from other factories wherever possible.”

Wilson said Dr. Martens benefited from moving to product dual sourcing wherever possible to diversify the supply chain. As of the autumn/winter season, 22 percent of Tier 1 production comes from Northern Vietnam, while another 22 percent is from Laos. Only 10 percent of the company’s global production comes out of China.

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And with inflation escalating, Dr. Martens has increased prices 8 percent on average since last fall, with the wholesale order book written to reflect the changes. The company implemented the hikes after conducting a consumer pricing study in the summer of 2021 to calculate perceived value for money and elasticity of demand.

“We anticipate no impact on demand as a result of these changes,” Wilson said. “The pricing study showed that, even with the price changes, consumers believe that our products represent compelling value for money given our durability and quality. We expect our pricing headroom to increase further as we continue to invest in the brand and our product proposition. We will repeat the pricing study in summer 2022.”

And after opening 24 new stores over the past year to bring Dr. Martens to 158 locations, the retailer expects to open 25 to 35 stores in the coming fiscal year, more than the 20 to 25 it originally planned in the U.S.

The footwear company complemented its growth by entering into the repair and resale market, partnering with secondhand fashion marketplace Depop and The Boot Repair Company to form the Resouled program. Dr. Martens launched the program as part of its commitment to helping wearers maximize the life of their footwear by 2025.

With Resouled, wearers can now send their used Dr. Martens shoes to the experts at The Boot Repair Company to be repolished, or given new laces, soles, heel loops and insoles.

After repair, boots and shoes are deep cleaned, sanitized and refreshed using Micro-Fresh before being listed on the Depop marketplace at nearly 80 percent of the price for a new pair.

Wilson told The Guardian in an interview that refurbished or secondhand boots could contribute to 15 percent of Dr. Martens’ total sales in 10 years time. 

Net Sales: For the fourth quarter, Dr. Martens saw sales increase 29 percent in the first quarter to 231.4 million pounds ($289 million).

The footwear seller broke out most of its financial metrics for the full year, where sales saw an 18 percent bump to 908.3 million pounds ($1.13 billion) from last year’s 773 million pounds ($964.6 million). Sales were up 22 percent on a constant-currency basis.

DTC revenue, which includes Dr. Martens’ owned e-commerce and brick-and-mortar channels, is up 34 percent to 448 million pounds ($559.6 million), up from last year’s 335.1 million pounds ($419.6 million).

Retail revenue, accounting for sales at the brand’s stores, soared 86 percent to 185.6 million pounds ($231.6 million) from 99.7 million pounds ($124.4 million) in the year-ago period.

E-commerce revenue was up 11 percent to 262.4 million pounds ($327.5 million) from the year prior’s 235.4 million pounds ($293.8 million). Online sales now represent 29 percent of group revenue.

Wholesale revenue had the slowest jump at 5 percent to 460.3 million pounds ($574.4 million), from 2020’s 437.9 million pounds ($546.5 million).

Net Earnings: Net income after tax was 181.2 million pounds ($226.3 million) in the full year, compared to 34.7 million ($43.4 million) in 2021, when the company incurred 80.5 million pounds ($100.5 million) of IPO-related costs.

Earnings per share (EPS) totaled 18.1 pence (24 cents), skyrocketing 417 percent from the 3.5 pence (4 cents) EPS in the year prior. Adjusted EPS was 17.4 pence (22 cents), up 21 percent from 14.4 pence (18 cents).

CEO’s Take: “For fiscal year 2023, we now expect high-teens revenue growth, with the upgrade to guidance the result of the price increases which take effect from A/W 2022 and our expectations for volume growth remaining unchanged,” Wilson said. “In line with our strategic operating model, we continue to expect price to offset inflation. Factory prices for fiscal year 2023 are now locked in, with a 6 percent increase year-on-year (for both A/W 2022 and S/S 2023), and we have good visibility over other operating cost lines. Our wholesale order book is strong, and already confirmed at 85 percent of our full year expectation. DTC trading since the start of the new financial year has continued in line with our expectations.”