Dr Martens announces cost-cutting plans after slump in demand from US customers

Dr Martens has announced a swathe of cost-cutting plans, after the bootmaker’s bottom line was hit by a slump demand in the US last year.

The London-listed firm hopes to save up to £25 million in the coming financial year, after profit before tax fell 43% to £97 million for the year ending 31 March 2024. Overall revenues dropped 12.3% to £877.1m.

The company said the cost cuts would come from “organisational efficiency and design, better procurement and operational streamlining”.

Dr Martens has been struggling to drive demand among US consumers, its biggest market, in recent years.

In Thursday’s results statement it put that down to weak consumer spending as a whole in the region, describing the boots segment as “particularly challenging”.

Revenue on the continent fell by a quarter (24%) this year, mainly driven by falling sales in its wholesale business.

One cost-cutting measure is to buy less stock in the US, it said, describing inventory backlogs as being at an “elevated” level. It also plans to invest further in marketing in the region to stimulate demand and return to DTC growth in the second half the new financial year.

Elsewhere EMEA revenue was down 3%, with 12% growth in DTC offset by wholesale decline, which it said was driven predominantly by the planned strategic decision to reduce volumes into EMEA etailers.

APAC revenue was broadly flat (down 7% or up 1% on a constant currency basis) driven by good growth in Japan.

The company also reported strong growth in shoes and sandals, with DTC pairs in both categories growing over 20% year-on-year.

Outgoing CEO Kenny Wilson said: "Our FY24 results were as expected and reflect continued weak USA consumer demand. This particularly impacted our USA wholesale business and offset our Group DTC performance, where pairs grew by 7%. We have achieved robust performances in EMEA and APAC, and our supply chain strategy continues to deliver good savings.

"We are clear that we need to drive demand in the USA to return to growth in FY26 onwards and are executing a detailed plan to achieve this, with refocused and increased USA marketing investment in the year ahead. We are also announcing a cost action plan across the Group, targeting savings of £20m to £25m. I am confident that the actions we are taking as we enter this year of transition will put us in good shape for the years ahead.” 

Wilson has previously announced he would be standing down from his role at the end of this financial year and will be replaced by Ije Nwokorie who has been Chief Brand Officer at Dr. Martens since February 2024.

Commenting on the results, Julie Palmer, Partner at Begbies Traynor said: “The iconic shoe-maker has had a torrid year and the scale of the challenge that the new CEO faces has been laid bare by the company’s results this morning.

"Over the last 12 months, pre-tax profits have nearly halved and demand in the US has collapsed, something that will be particularly concerning for investors who are already losing confidence.

“What’s particularly alarming in the United States is how sales have fallen by a quarter in a country where the brand awareness remains so strong. That suggests customers aren’t returning for new boots, something the CEO is clearly looking to address as part of the revamped strategy.

“For a brand that champions the durability of its famous boots, reinvigorating sales across Dr Martens’ global empire will take time, especially when consumers struggle to justify replacing a pair of shoes that are designed to last for decades.

“In the meantime, Dr Martens management is doing all the right things and focusing on what it can control – costs. This morning’s announcement of a group-wide cost cutting programme will hope to remove tens of millions of costs from the business, so it’s more streamlined and better positioned in a few years’ time.

“For the time being, the fortunes of this cobbler remain in the balance, but if it can successfully execute the operational turnaround and the US starts to show some signs of recovery, the retailer should be able to put its front foot forward in periods to come.”