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The past few months have presented challenges for iconic bootmaker Dr Martens. It started the year with a profit warning due to “significant operational issues” at its new distribution center in Los Angeles. Later, it downgraded its Ebitda forecasts from £255mn to £245mn.
North America has been particularly troublesome for the company, not only because shifting distribution from Portland to LA has become a logistical nightmare, but also because US consumers have been spending less than expected, especially on the brand’s famous boots.
The company recognizes that “fixing the issues” and “achieving good growth in America” is its main operational priority, but acknowledges that the process will not be easy. The first half of financial year 2024 is expected to see 5-6 percentage points lower Group Ebitda margins, followed by a rebound in the second half. A recent trading update confirmed that US sales are still declining.
Despite the challenges, Chief Executive Kenny Wilson used the opportunity of the weak share price to buy 308,948 shares for £400,000 on July 14. Wilson now owns £2.6mn of shares, equivalent to 0.19% of the company’s issued share capital.
Currently, Dr Martens has a forward price-to-earnings ratio of just 12.8, compared to a five-year average of 17.3. However, the company’s share price has yet to show signs of recovery.
In the oversubscribed IPO in January 2021, Dr Martens was valued at £3.7bn. However, due to margin pressure, weak consumer spending, and logistical issues, its market capitalization has now decreased to £1.4bn.
Storage exec unlocks capital
A director at Lok’n Store has sold £2mn worth of shares, reducing his stake in the company by over a third. This comes at a time when the company has recently completed two share placings.
The non-executive director, Charles Peal, sold 267,049 shares at £7.70 each, leaving him with 499,301 shares, equivalent to 1.5% of the company. The sale was attributed to personal tax planning, and Peal intends to reinvest the majority of the net proceeds into ordinary shares in the future.
This is the latest and largest sale made by Peal over the past couple of years, which has reduced his stake by nearly half. In July 2021, Peal owned 874,498 shares, representing 2.95% of the company.
In May this year, a group of other directors sold a combined 1.36mn shares for £11mn through a secondary placing to institutional investors. Chair Andrew Jacobs sold the majority of these shares, earning £10mn. Following this, Peal and his wife sold £800,000 worth of shares.
The company responded to increased demand for its shares by conducting a secondary placing, followed by an oversubscribed placing for retail investors, which raised £20.5mn. This was the first UK public real estate equity raise in over 12 months.
Analyst John Cahill from Stifel sees this as a positive sign for the sector, although not a major breakthrough. Real estate investment trusts and housebuilders experienced a boost in response to better-than-expected inflation data, leading some to believe that the end of the Bank of England’s rate-hiking cycle may be approaching.
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