Dr. Martens exposes fashion’s squeezed middle

LONDON, Nov 24 (Reuters Breakingviews) – Dr. Martens (DOCS.L) revealed a weak spot in Britain’s already ailing retail sector. On Thursday, the business which Permira listed last year said it grew revenue by 7% in the six months ending September, compared with a year earlier, missing analyst forecasts. It also warned that it will have to spend more to hit its existing revenue target of “high teens” percent growth for the full year. That means its EBITDA margin will be 1 percentage point to 2.5 percentage points lower than last year’s 29%. The company’s shares fell 20% on the news, and are nearly 40% below its 370 pence IPO price.

Dr. Martens straddles the high street and luxury retail sectors. The company’s boots fetch nearly 220 pounds, which may prove a hard sell at a time when inflation is at a 41-year high in the UK. Chief Executive Kenny Wilson revealed growth in its direct-to-consumer offering was also slower than expected in the first half. Worryingly, it’s carrying twice as much stock as last year, which could force writedowns if consumers favour cheaper brands over the key Christmas trading period. If those challenges are passing, the share price slump could be an opportunity for 36% shareholder Permira to step back in. (By Aimee Donnellan)

Follow @Breakingviews on Twitter

Capital Calls – More concise insights on global finance:

A divided Fed hides behind fuzzy language read more

Foxconn is stuck between rock and hard place read more

ABB takes valid detour around hairy IPO markets read more

Italy’s Meloni will dodge EU collision on budget read more

Messy money manager merger goes from bad to worse read more

Editing by Neil Unmack and Streisand Neto

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.