UK bootmaker Dr Martens warns on profit, shares slide more than 20%

UK's Dr Martens warns on profit after issues at U.S distribution centre
UK's Dr Martens warns on profit after issues at U.S distribution centre Copyright Thomson Reuters 2023
By Reuters
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By Yadarisa Shabong

- British bootmaker Dr Martens Plc issued a profit warning on Thursday, citing significant operational issues at its new distribution centre in the United States that sent its shares plunging by more than a fifth.

Those issues could reduce annual core profit by 16-25 million pounds ($20 million-$30 million) and have knock-on effects in the year after, it said in a statement.

It now expects EBITDA (earnings before interest, taxes, depreciation and amortisation) of 250-260 million pounds for the year ending in March, which compares with a figure of 263 million pounds in the previous year.

Dr Martens said the problems at its Los Angeles distribution centre were due to a "combination of people and process issues" including inventory arriving more quickly than anticipated. That has created a bottleneck which is limiting its capacity to meet wholesale demand and fourth-quarter shipment forecasts.

It said it has opened three temporary warehouses nearby to help resolve the issues.

"This is another big migraine for the company, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth," Hargreaves Lansdown analyst Susannah Streeter said in a note to clients.

The London-based company also revised down its annual revenue forecast to growth of 11%-13% on an actual currency basis, which compares with an earlier prediction for a jump in the high-teens.

In November, it had flagged a sharp hit to margins due to weaker-than-expected demand ahead of the key Christmas season and a strengthening dollar.

It shares slumped 21% in morning trade, at one point hitting a record low.

($1 = 0.8108 pounds)

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