An activist investor in boot brand Dr Martens, has urged the company to undergo a strategic review and possibly even sell the company.
New York based Marathon Partners Equity Management, LLC has argued the company’s stagnant growth and 83 per cent slide in share price since its IPO three years ago have not valued the company at its true worth.
The investment firm, which owns roughly five million shares of Dr Martens, wrote to the board last month and suggested the company would perform better as a private company or as part of a larger, multi-brand holding company.
“Maintaining Dr Martens as an independent publicly traded company is likely no longer in the best interests of shareholders,” Mario Cibelli, Marathon Partners’ managing member, said in a letter to the company’s board, first seen by Reuters.
“While the company has a current market value of about $1.1bn (£870m), its exceptionally strong brand could make it attractive to potential buyers who might be willing to spend at least $2bn (£1.5bn) to acquire the asset”, Cibelli added.
According to the letter, the managing director also praised chief executive Kenny Willison, describing him as “an open-minded and talented executive”.
Dr Martens was bought by private equity firm Permira in 2014 and then went public again in 2021.
Permira still owns roughly 38.5 per cent of Dr. Martens and Cibelli suggested the firm “support a strategic alternative process to maximize shareholder value for a company that has effectively become stranded and orphaned in the public markets.”
City A.M. understands Dr Martens’ board agrees the current share price doesn’t reflect the underlying value of the business.
It’s been a tough year for the brand as it has been battling bottleneck issues in its Los Angeles warehouse, which impacted its American wholesale channel from December.
Russ Mould, investment director at AJ Bell, told City A.M: “The potential for a turnaround is clear, though the lack of visibility on the US wholesale business may irritate shareholders. Mr Wilson has asserted that inventories here have returned to low levels but at the same time he admitted that it was far from clear when order intake would improve again.
“January’s third-quarter trading update revealed the extent of the challenge, as global wholesales fell 49 per cent year-on-year in the period against a five per cent slide in direct-to-consumer via its own shops and a nine per cent drop online.”
He added: “Much of Dr. Martens’ appeal still lies. There is growth potential aplenty in the EU and US and after the woes of the past twelve months there is scope to boost profit margins, too, while the balance sheet is not unduly stretched.”
City A.M has contacted Marathon for a comment;