50 slides from Dr. Martens's earnings presentation, Jun 1, 2022
Slide 1: Full Year Results FY22
FULL YEAR RESULTS FY22 1ST JUNE 2022
Slide 2: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO Full year review – Kenny Wilson, CEO
Slide 3: Conviction in Future Growth
CONVICTION IN FUTURE GROWTH DOCS strategy delivering strong results as we continue to build upon our track 1 record of volume-led and DTC-first growth Group revenue in line with IPO guidance and EBITDA slightly ahead of market 2 expectations 3 Dr. Martens brand is stronger than ever 4 Confident in y
Slide 4: Guardian (definition)
noun A person who is responsible for protecting or taking care of something or keeping it in great condition.
Slide 5: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO Full year review – Kenny Wilson, CEO
Slide 6: Financial Overview: A Strong FY22
FINANCIAL OVERVIEW: A STRONG FY22 Delivered on year one IPO growth targets; navigated challenging global supply 1 chain backdrop successfully 2 DOCS strategy is delivering strong results Good visibility for FY23: strong wholesale order book (85% written) and factory 3 prices fixed 4 Increased divide
Slide 7: Strong FY22 Results
STRONG FY22 RESULTS % change FY22 vs. FY22 vs. FY21 FY20 • Volume-led and DTC-first growth Actual Constant Actual (£m) FY22 FY211 FY20 currency currency currency • Gross margin expansion Pairs (m) 14.1 12.7 11.1 10% 27% driven by DTC mix Revenue 908.3 773.0 672.2 18% 22% 35% improvement Gross Margin
Slide 8: DTC-Led Growth
DTC-LED GROWTH % change FY22 vs. FY22 vs. FY21 • DTC revenue up 34%, with mix FY20 up 6pts to 49% Actual Constant Actual (£m) FY22 FY21 FY20 currency currency currency - Good ecommerce growth - Retail recovery led by UK Ecommerce 262.4 235.4 136.4 11% 14% 92% and USA Retail 185.6 99.7 165.2 86% 93%
Slide 9: Revenue Driven by Increased Volume and DTC Mix
REVENUE DRIVEN BY INCREASED VOLUME AND DTC MIX 7.8 19.1 58.2 908.3 (29.4) • Vast majority of revenue 79.6 growth due to increased pairs and DTC mix DTC - Pairs up 10% 773.0 448.0 - DTC mix up 6pts • Full price mix normalising DTC 335.1 back to c.90% • Accessories growth driven by Wholesale retail re
Slide 10: Gross Margin Up 2.8pts Due to DTC Mix
GROSS MARGIN UP 2.8PTS DUE TO DTC MIX 7.2 19.1 • Gross margin up 2.8pts to 58.2 0 578.8 63.7% led by DTC mix (2.0) (22.7) expansion 48.5 • Supply chain cost per pair increased only 1% CC due to - Duty efficiencies 470.5 - Fixed seasonal contracts 60.9% - 2.7% - (0.1%) 0.9% 0.3% (1.0%) 63.7% 10
Slide 11: DOCS Strategy Drove EBITDA Margin Improvement
DOCS STRATEGY DROVE EBITDA MARGIN IMPROVEMENT • EBITDA margin up 20 bps +2.8pts • Margin profile through the year driven by DTC 448.0 -0.9pts - Stronger H2 margins -0.5pts 29.0% • Increase in marketing in line 28.8% with strategy -1.2pts - H1 weighted ahead of peak • Typical seasonal profile with H2
Slide 12: EMEA and Americas the Key Growth Drivers
EMEA AND AMERICAS THE KEY GROWTH DRIVERS APAC • Americas had strongest APAC 127.1 14% mix growth led by DTC (5%) CC APAC 141.6 • EMEA also delivered good performance, particularly in AMERICAS 382.7 H2, benefitting from AMERICAS AMERICAS conversion markets 42% mix 295.8 +33% CC • APAC impacted by Cov
Slide 13: EMEA: Strong H2
EMEA: STRONG H2 % change FY22 vs. FY21 • Growth accelerated in H2, up FY22 vs. FY21 31% (£m) FY22 FY21 Constant Actual currency currency • DTC-led growth Revenue 398.5 335.6 19% 23% - Good retail recovery - Steady ecommerce EBITDA 143.8 115.3 25% 38% growth EBITDA Margin 36.1% 34.4% +1.7pts • Store
Slide 14: Conversions: Increasing Importance and Higher Growth
CONVERSIONS: INCREASING IMPORTANCE AND HIGHER GROWTH % of EMEA revenue generated by conversion markets Italy: 62% revenue • Italy growth accelerated, up growth 62% in the year Iberia: 38% revenue growth - Up 122% in H2 37% Germany: • Good growth in Germany 56% revenue growth following 56% growth in
Slide 15: Americas: Very Strong DTC Performance
AMERICAS: VERY STRONG DTC PERFORMANCE • Very strong DTC growth % change - Good ecommerce - Particularly strong FY22 vs. FY21 FY22 vs. FY21 retail recovery (£m) FY22 FY21 Constant Actual currency currency • Store openings in ‘white Revenue 382.7 295.8 29% 33% space’ cities and states - Now have 4 sto
Slide 16: APAC: Most Impacted by Covid-19 Restrictions
APAC: MOST IMPACTED BY COVID-19 RESTRICTIONS % change • Japan: largest market - Revenue up high-single digit FY22 vs. FY21 FY22 vs. FY21 (£m) FY22 FY21 Actual currency Constant currency CC - Very encouraging performance when Revenue 127.1 141.6 -10% -5% restrictions lifted EBITDA 32.6 39.7 -18% -9%
Slide 17: Underlying EPS Up 21%
UNDERLYING EPS1,4 UP 21% (£m) FY22 FY211 % change • Underlying1,4 EPS up 21% EBITDA1,2 263.0 222.9 18% • Tax rate 15.4% Depreciation & amortisation3 (36.9) (34.9) 6% FX gains 3.2 3.8 -16% • Tax rate of 19.5% excluding prior year tax deduction (IPO Finance expense - Financing (15.0) (13.1) 15% bonus
Slide 18: Doubled Cash in the Year
DOUBLED CASH IN THE YEAR £m • DOCS strategy is highly cash generative • Doubled cash in the year to £228.0m • Operating cash conversion3 79% Wholesale 57% Wholesale 55% 1Working capital is net of share-based payments of £5.2m 2Exceptional items relates to payments in relation to FY21 IPO, and is sho
Slide 19: Capital Allocation Philosophy
CAPITAL ALLOCATION PHILOSOPHY DOCS IS HIGHLY CASH GENERATIVE WE WILL HAVE EXCESS CASH PROGRESSIVE DIVIDEND POLICY WHEN AVERAGE GEARING FIRST PRIORITY IS INVESTMENT (INCLUDING LEASES) IS OF 25% TO 35% OF EARNINGS – INTO THE BUSINESS CONSISTENTLY LESS THAN 1X, NOW AT 30% AND THEN WILL CONSIDER FURTHER
Slide 20: High Level of Supply Chain Visibility
HIGH LEVEL OF SUPPLY CHAIN VISIBILITY CONTINUED FACTORIES ALL OPEN AND DIVERSIFICATION AND C. 95% OF COSTS FIXED OPERATING AT 90-95% CAPACITY DUTY EFFICIENCY LEAD TIMES STEADILY IMPROVING AW20 AW21 AW22 COST MIX1 Vietnam (s) 30% 35% c.30% Leather 35% FACTORY PRICES FIXED 6-9 MONTHS Vietnam (n) 12% 1
Slide 21: Wholesale Orderbook Now 85% Locked In
WHOLESALE ORDERBOOK NOW 85% LOCKED IN • Volume-led, DTC-first strategy, with price to fund inflation Typical build of orderbook through a financial year • AW22 price rises of £10/€10/$20 (boots) - Effective from July 2022 - Wholesale orderbook • Wholesale order book build commences already sold in s
Slide 22: FY22 Trading Profile
FY22 TRADING PROFILE SS AW SS Q1 (April – June) Q2 (July – September) Q3 (October – December) Q4 (January – March) 44% 30% 34% 28% 25% 25% 23% 24% 18% 19% 16% 14% % of FY22 DTC % of FY22 % of FY22 Total % of FY22 DTC % of FY22 % of FY22 Total % of FY22 DTC % of FY22 % of FY22 Total % of FY22 DTC % o
Slide 23: Guidance
GUIDANCE H1 FY23 FY23 BEYOND FY23 High-teens revenue growth High-teens revenue growth Mid-teens revenue growth benefitting from AW22 price Typical margin profile given DTC increases, with volume Ecommerce of at least 40% mix relative weighting: H1 EBITDA expectation unchanged margin lower by 200bps
Slide 24: Agenda
AGENDA Introduction – Kenny Wilson, CEO Financials – Jon Mortimore, CFO Full year review – Kenny Wilson, CEO
Slide 25: Conviction in Future Growth
CONVICTION IN FUTURE GROWTH DOCS strategy delivering strong results as we continue to build upon our track 1 record of volume-led and DTC-first growth Group revenue in line with IPO guidance and EBITDA slightly ahead of market 2 expectations 3 Dr. Martens brand is stronger than ever 4 Confident in y
Slide 26: Our DOCS Strategy
OUR DOCS STRATEGY OUR GOAL IS TO HAVE THE WORLD WEAR DMs WHEN THEY HAVE THEIR MOMENT OF REBELLIOUS SELF-EXPRESSION GOALS OUR DOCS STRATEGY IS ABOUT SELLING MORE PAIRS OF BOOTS, SHOES AND SANDALS, TO MORE CONSUMERS, THROUGH OUR OWN CHANNELS, IN OUR 7 PRIORITY MARKETS. D O C S ORGANISATIONAL CONSUMER
Slide 27: Brand Is Stronger Than Ever
BRAND IS STRONGER THAN EVER GLOBAL GLOBAL LAST 24M AWARENESS FAMILIARITY PURCHASED +4PTS TO 72% +6PTS TO 47% +2PTS TO 8% 27
Slide 28: Vast Untapped Opportunity for Growth
DR. MARTENS HAS VAST UNTAPPED OPPORTUNITY FOR GROWTH Pairs / Capita (‘000s) FY20 FY22 32 31 GLOBAL BRAND AWARENESS UP 6PTS OVER LAST 2 YEARS 17 15 12 BRAND 8 7 AWARENESS IN 7 7 5 4 44 EACH OF 7 4 <1 <1 PRIORITY UK USA Germany Italy France Japan China MARKETS >55% (Converted (Converted (Franchise FY1
Slide 29: Product Strategy: Led by Iconic, Timeless Products
C PRODUCT STRATEGY: LED BY ICONIC, TIMELESS PRODUCTS 1460 COLLABORATIONS AND MADE IN ENGLAND 1% 2976 51% revenue 1461 revenue1 36% revenue 6% revenue2 SINCLAIR AUDRICK JADON SANDALS QUAD NEOTERIC 6% revenue COMBS TARIK 4% revenue 3% revenue 1 Revenue of collaborations and Made In England is included
Slide 30: Product Strategy: Icons and Innovation
C PRODUCT STRATEGY: ICONS AND INNOVATION 1460 1461 2976 30
Slide 31: Sandals: Huge Category Growth Opportunity
C SANDALS: HUGE CATEGORY GROWTH OPPORTUNITY
Slide 32: Compelling Marketing Campaigns
C COMPELLING MARKETING CAMPAIGNS WINTERWAIR CAMPAIGN North America Digital Marketing London – Carnaby Street Chicago – State Street South Korea - Lotteworldmall UNPOLISHED ICONS CAMPAIGN London – Neale Street New York – Herald Square Takeover 32 Japan - Kumamoto Hong Kong Digital Marketing
Slide 33: Consumer-Led Pricing Approach
C CONSUMER-LED PRICING APPROACH FURTHER HEADROOM REPEATING IN-DEPTH BEYOND AW22 PRICE WE HAVE ICONIC PRODUCTS PRICING ANALYSIS THIS INCREASES DUE TO BRAND WHICH ARE DURABLE, HIGH SUMMER – WILL INFORM STRENGTH AND VALUE FOR QUALITY AND TIMELESS THOUGHTS FOR AW23 MONEY PERCEPTION 33
Slide 34: Growth by Region
GROWTH BY REGION EMEA AMERICAS APAC CONVERSION MARKETS SIGNIFICANT STRONG BRAND HEALTH IN THE PRIMARY GROWTH OPPORTUNITY TO DRIVE JAPAN WITH SIGNIFICANT ACCELERATOR DTC FURTHER, GROWTH OPPORTUNITY: UNDERPINNED BY STRONG E.G. FRANCHISE STORE UK GROWING IN LINE WITH WHOLESALE TRANSFER EMEA, ONGOING RA
Slide 35: Successful Italy Conversion
S SUCCESSFUL ITALY CONVERSION: H2 REVENUE MORE THAN DOUBLED ROME ITALY BRAND AWARENESS +6PTS AND FAMILIARITY +7PTS YOY PRODUCT RANGE EXPANSION: VERONA PRODUCT ASSORTMENT TRIPLED MILAN QUALITY WHOLESALE 35
Slide 36: USA State by State Approach: Texas
D USA STATE BY STATE APPROACH: TEXAS HOUSTON TEXAS BRAND FAMILIARITY +9PTS AND EVER PURCHASED +10PTS OVER LAST SIX MONTHS TEXAS POPULATION: 29 MILLION Percentage increase in ecommerce sessions DALLAS Opened Aug 2020 one year post stores opening Opened Dec 2020 SAN ANTONIO 88% 56% Dallas Houston AUST
Slide 37: Japan: Significant Growth Opportunity
D JAPAN: SIGNIFICANT GROWTH OPPORTUNITY TOKYO STRONG BRAND HEALTH AND ENCOURAGING RETAIL RECOVERY FRANCHISE STORES TRANSFER AT END FY23 (APPROX. HALF OF 31 STORES) POST TRANSFER JAPAN WILL BE AT C.75% DTC QUALITY WHOLESALE YOKOHAMA Japan website HARAJUKU 37
Slide 38: Continued Investment in Sustainability
C CONTINUED INVESTMENT IN SUSTAINABILITY CREATED DETAILED ROADMAPS TO ACHIEVE LONG-TERM COMMITMENTS LOOKING AT MATERIALS OF THE FUTURE LAUNCH OF REPAIR AND RESALE TRIAL 38
Slide 39: Conviction in Future Growth
CONVICTION IN FUTURE GROWTH OUR BRAND THE DOCS VAST UNTAPPED IS STRONGER STRATEGY IS OPPORTUNITY FOR THAN EVER DELIVERING GROWTH GOOD VISIBILITY OF FY23 39
Slide 40: Appendix
APPENDIX • IR CONTACT DETAILS • FY23 GUIDANCE • DOCS STRATEGY • QUARTERLY REVENUE BY CHANNEL • QUARTERLY REVENUE BY REGION • H1 / H2 EBITDA MARGIN PROFILE • FX TRANSLATION • OPERATING CASH FLOW AND CAPEX • CASH FLOW PROFILE • BALANCE SHEET
Slide 41: Investor Relations Contact Details
INVESTOR RELATIONS CONTACT DETAILS Bethany Barnes Mark Blythman Director of Investor Relations Interim Director of Investor Relations (Maternity Cover) Bethany.Barnes@drmartens.com Mark.Blythman@drmartens.com Mobile: +44 7825 187465 Mobile: +44 7570 871207 Sunena Dhuna Investor Relations Manager Sun
Slide 42: FY23 Guidance
FY23 GUIDANCE • High-teens revenue growth • FY EBITDA margins to be broadly level with FY22 • New own store openings of 25 to 35 stores, with the majority of the increase due to the accelerated store rollout in the USA • Depreciation and amortisation of £50m to £53m, including the impact of IFRS16 •
Slide 43: Our DOCS Strategy
OUR DOCS STRATEGY OUR GOAL IS TO HAVE THE WORLD WEAR DMs WHEN THEY HAVE THEIR MOMENT OF REBELLIOUS SELF-EXPRESSION OUR DOCS STRATEGY IS ABOUT SELLING MORE PAIRS OF BOOTS, SHOES AND SANDALS, TO MORE CONSUMERS, THROUGH OUR OWN CHANNELS, IN OUR 7 GOALS PRIORITY MARKETS. D O C S DIRECT-TO-CONSUMER ORGAN
Slide 44: Quarterly Revenue Performance by Channel
QUARTERLY REVENUE PERFORMANCE BY CHANNEL Q1 Q2 H1 Q3 Q4 H2 Group Revenue £147.3m £222.6m £369.9m £307.0m £231.4m £538.4m % change YOY +52% +1% +16% +11% +29% +18% % change YOY CC +64% +6% +24% +15% +29% +21% % change LY-1 +31% +43% +38% +21% +54% +33% Revenue by channel Ecommerce : % change YOY +11%
Slide 45: Quarterly Revenue Performance by Region
QUARTERLY REVENUE PERFORMANCE BY REGION Q1 Q2 H1 Q3 Q4 H2 Group Revenue £147.3m £222.6m £369.9m £307.0m £231.4m £538.4m % change YOY +52% +1% +16% +11% +29% +18% % change YOY CC +64% +6% +24% +15% +29% +21% % change LY-1 +31% +43% +38% +21% +54% +33% Revenue by region EMEA : % change YOY +30% -5% +5
Slide 46: H2 EBITDA Margins Higher than H1
H2 EBITDA MARGINS HIGHER THAN H1 +2.9pts +8.4pts +4.4pts 32.4% 29.2% 30.0% 28.8% 29.0% 27.4% 27.1% 24.8% 24.0% H1 H2 FY H1 H2 FY H1 H2 FY FY20 FY21 FY22 46
Slide 47: FX Translation
FX TRANSLATION £/$ £/EUR • We are naturally hedged on £/$ from a cash perspective FY22 FY21 % FY22 FY21 % as US revenue broadly equals COGS, which are H1 1.39 1.26 10% 1.17 1.12 4% invoiced in USD H2 1.34 1.35 -1% 1.19 1.13 5% FY 1.37 1.31 5% 1.18 1.12 5% Wholesale 57% Wholesale 55% 47
Slide 48: Operating Cash Flow and Capex
OPERATING CASH FLOW AND CAPEX (£M) FY22 FY211 EBITDA2 263.0 222.9 • In FY22 the increase in Change in working capital (35.1) 27.8 working capital was mainly Share-based payments 5.2 0.7 increased inventories post Covid-19 and higher trade Capex (25.0) (17.3) debtors due to much Operating cash flow2
Slide 49: Cash Flow Profile
CASH FLOW PROFILE Cumulative Cashflow April March CASH OUTFLOW DUE TO FACTORY PAYMENTS CASH INFLOW 49
Slide 50: Balance Sheet
BALANCE SHEET (£M) 31 MARCH 2022 31 MARCH 20211 Freeholds 6.1 6.1 Right-of-use assets 105.5 77.4 Other fixed assets 53.6 45.4 Working capital 78.5 25.5 Deferred tax 9.6 7.4 Operating net assets 253.3 161.8 Goodwill 240.7 240.7 Cash 228.0 113.6 Bank debt2 (280.9) (281.6) Lease liabilities (112.9) (84