This week proved to be another challenging day for British heritage brands, with Dr Martens revealing a plummet in annual profits largely due to dwindling demand from US shoppers.
The iconic boot maker said it doesn’t expect to see recovery in its US market until the autumn seasons of 2025 and revealed it would cut up £25m in costs to help counter declining sales.
America is one of the business’s biggest markets, but it has faced a number of challenges in the region, including the hangover from bottleneck issues in its Los Angeles warehouse.
In the country, revenue declined 24 per cent to £325m due to shoppers holding off on buying the pricey shoes and issues with wholesale.
Across the whole of the group, profit before tax fell by 42 per cent on last year’s figure to £97.2m, while revenue slipped 12 per cent to £887m. It is a hefty drop from last year when it broke the £1bn barrier for the first time.
Farewell party
Dr Martens – which went public three years ago in a £3.5bn float – is also in the slow process of bidding farewell to chief Kenny Wilson.
The Aberdonian will step down after six years next April and be replaced by the business’s chief brand officer, Ije Nwokorie.
Incoming chief Ije Nwokorie.
Creative, Nwokorie – who initially joined as a non-executive director- is currently shaking up the brands marketing efforts in his last run as CBO.
Dr Martens board said: “Under the direction of Ije Nwokorie, we are shifting our marketing efforts globally from storytelling focused on culture to a relentless focus on product marketing.
“Our AW24 marketing will lead and be dominated by boots and the marketing organisation has been reorganised to product-led marketing, centred around icons.”
The trading update put a ribbon on what has been a challenging year for the company, which was littered with profit warnings and calls from an activist investor to sell the company.
Jonathan DeMello, founder of JDM Retail, told City A.M. ‘Dr Martens’ results are very disappointing indeed – though not unexpected. Their profits have been impacted by a downturn in US wholesale performance, which led to their CEO deciding to step down a few months ago.
“As a brand they are reliant on the brand equity they have generated in order to stand out from the crowd – particularly via wholesale – but in the US they have significant competition for consumer ‘share of voice.’
“Their DTC strategy of branded physical stores – which as a channel now accounts for over 60 per cent of sales – should help build brand equity in the long term, alongside increased marketing specifically in the US.”
Pressure on UK luxury
The plight of Dr Martens mirrors that of other renowned British brands such as Burberry and Mulberry.
Unlike brands such as Hermes – which have outstripped rivals thanks to its recession-immune and Birkin Bag obsessed client base – Burberry’s accessibility has meant many of its customers are feeling the squeeze.
Shares in the tartan scarf maker have more than halved in the past year, leaving the stock price back near the lows plumbed during the early stages of the pandemic.
The business is currently undergoing a transformation which will focus on Burberry positioning itself as a ‘Modern British Luxury brand’.
Russ Mould, investment director at AJ Bell, said: Burberry’s shares trade at their lowest level in more than a decade, thanks to a string of profit warnings and earnings disappointments.
“The uncertain economic outlook in China is not helping here and the luxury goods industry overall is struggling to maintain the growth rates seen in the early part of this decade, especially as the combination of increased prices and the squeeze on consumers’ spending power from inflation may be pricing out more aspirational buyers of such products.”
He added: “Burberry’s shares are now valued at a huge discount relative to global peers such as Hermès, LMVH and Richemont and any sign of an upturn in trading could revive interest in the downtrodden shares.”
Trench coat inflation
Over 10 years ago, a trench coat at Burberry cost around £600, making it an accessible buy for the middle classes.
The coveted jacket now retails for upwards of a grand, leaving it out of reach and unjustifiable for many shoppers.
But that is not to say consumers won’t splurge. Parka brand Canada Goose has had little trouble shifting its £1,200 winter jackets, thanks to its appeal amongst young teenagers.
The same goes for Mulberry, the 50-year old UK designer best known for its handbags. Its full year revenue fell by four per cent in the full year due to “challenging” trading conditions for designers.
A recent study by wealth management firm Saltus showed 16.29 per cent of cash rich Brits had cut down on their personal spending due to financial pressures.
Mike Stimpson, partner at Saltus, said: “While this reduction is not limited entirely to personal spending on luxury items, it is inevitable that brands like Burberry feel the impact, although different businesses will clearly respond differently to these pressures.”