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Dr. Martens exposes fashion’s squeezed middle

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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)

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Editing by Neil Unmack and Streisand Neto

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