Dr. Martens Plc · LSE:DOCS
Dr. Martens — H1 FY24 Earnings Presentation
49 slides from Dr. Martens's earnings presentation, Nov 30, 2023
Slide 1: FY24 First Half Results
DR. MARTENS PLC FY24 FIRST HALF RESULTS 30 NOVEMBER 2023
Slide 2: Agenda
AGENDA Key Messages Kenny Wilson, CEO Financial Review Jon Mortimore, CFO Business Review Kenny Wilson, CEO DR. MARTENS PLC FY24 FIRST HALF RESULTS 2
Slide 3: Good Strategic Progress; Challenging Backdrop
GOOD STRATEGIC PROGRESS; CHALLENGING BACKDROP USA consumer Continued good environment has Focused on controlling performance in become more difficult; the controllables EMEA and APAC we are taking action to meet this challenge DR. MARTENS PLC FY24 FIRST HALF RESULTS 3
Slide 4: Delivering Against Our Strategy
DELIVERING AGAINST OUR STRATEGY DTC up 11% CC with Transformed North Launched new brand Growth in EMEA mix up 7%pts to 50% America DC network platform, Made Strong wholesale revenue Opened 25 stores Unlocked value 14XX launch per account Successful rollout of through strong supply UK Authorised Repa
Slide 5: Current Trading and Guidance
CURRENT TRADING AND GUIDANCE Mixed trading second half to date EMEA and APAC full year expectations broadly unchanged Consumer backdrop in USA has become more challenging and improvement in performance will take longer than initially anticipated USA wholesale weaker with reduced visibility FY24 reve
Slide 6: Financial Review
FINANCIAL REVIEW Jon Mortimore, CFO
Slide 7: Summary Financials
SUMMARY FINANCIALS % change • Total pairs down 9%: strategic Constant decisions to reduce EMEA etailer £m H124 H123 Actual volumes, exit China distributor contract currency and decline in USA wholesale Pairs (m) 5.7 6.3 -9% • DTC pairs up 12% Revenue 395.8 418.6 -5% -3% • Revenue down 5%, 3% constan
Slide 8: DTC Up 11% (CC), Mix Now 50%
DTC UP 11% (CC), MIX NOW 50% % change • Ecommerce up 3%, 5% CC with Constant conversion up in all regions Revenue £m H124 H123 Actual currency • Retail revenue up 15%, 17% CC led by new and maturing stores Ecommerce 91.7 88.8 3% 5% • Wholesale down 17%, 15% CC Retail 104.7 91.0 15% 17% • Reduction o
Slide 9: H1 Revenue Down 5%, 3% CC
H1 REVENUE DOWN 5%, 3% CC £’m % +/- (11%) 4% 4% (2%) (5%) DR. MARTENS PLC FY24 FIRST HALF RESULTS 9
Slide 10: Gross Margin Up 2.8%, EBITDA Margin Down 1.6%
GROSS MARGIN UP2.8% EBITDA MARGIN DOWN 1.6% As expected, EBITDA impacted by USA inventory storage costs but Excellent progress on supply chain savings ahead of guidance due to supply chain savings Gross Margin % pts EBITDA Margin % pts H123 Price net Retail Space Supply Chain H124 H123 Price net Ret
Slide 11: EMEA & APAC in Line; Americas Wholesale Weaker
EMEA & APAC IN LINE; AMERICAS WHOLESALE WEAKER Revenue % change • EMEA: good DTC growth, up 21% Constant (20% CC) led by France, Italy and Revenue £m H124 H123 Actual currency Germany, with UK up 8% EMEA 194.2 179.0 9% 8% • APAC: DTC growth led by Japan with Americas 147.7 179.7 -18% -15% DTC revenu
Slide 12: EPS 1.9p Versus 4.5p H1 23
EPS 1.9P VERSUS 4.5P H1 23 Revenue £m H124 H123 % change • Increase in D&A due to annualisation of DC spend, IT projects and new stores EBITDA 77.6 88.8 -13% • Increased interest due to higher Depreciation & average cost of debt and lower average (37.9) (23.3) 63% amortisation cash FX gains/(losses)
Slide 13: Cash Flow Bridge
CASH FLOW BRIDGE • Working capital outflow reflects normal seasonal inventory build (£55.5m) together with increased current debtors (£28.5m) • Capex of £16.3m mainly IT spend (£7.4m) and new stores (£8.8m) Working Financing and RCF FY23 EBITDA Capex Tax Buyback Dividends FY24 H1 Capital leases draw
Slide 14: Higher Inventory Position
HIGHER INVENTORY POSITION 30 Sept 2023 30 Sept 2022 • Minimal markdown risk: Inventory (£m) 314.5 261.4 • High margin product Turn (x)1 1.2x 1.3x • 4 out of 5 pairs are black • C.80% continuity product Weeks cover2 45 40 • Disciplined approach: we do not discount icon products TOP10 WHOLESALE CUSTOM
Slide 15: Business Review
BUSINESS REVIEW Kenny Wilson, CEO
Slide 16: Custodianship Remains Our Guiding Principle
CUSTODIANSHIP REMAINS OUR GUIDING PRINCIPLE DR. MARTENS PLC FY24 FIRST HALF RESULTS 16
Slide 17: "Made Strong" Launched Globally in Mid-October
“MADE STRONG” LAUNCHED GLOBALLY IN MID-OCTOBER NEWYORK LOS ANGELES TOKYO NEWYORK NEWYORK LONDON DR. MARTENS PLC FY24 FIRST HALF RESULTS 17
Slide 18: Increased Pace of Product Innovation
INCREASED PACE OF PRODUCT INNOVATION DR. MARTENS PLC FY24 FIRST HALF RESULTS 18
Slide 19: Collabs Driving Brand Energy: Supreme
COLLABS DRIVING BRAND ENERGY:SUPREME DR. MARTENS PLC FY24 FIRST HALF RESULTS 19
Slide 20: Collabs Driving Brand Energy: Born x Raised
COLLABS DRIVING BRAND ENERGY:BORN X RAISED 20
Slide 21: Collabs Driving Brand Energy: Marc Jacobs
COLLABS DRIVING BRAND ENERGY:MARC JACOBS DR. MARTENS PLC FY24 FIRST HALF RESULTS 21
Slide 22: Sandals Opportunity Remains Significant
SANDALS OPPORTUNITY REMAINS SIGNIFICANT DR. MARTENS PLC FY24 FIRST HALF RESULTS 22
Slide 23: Good EMEA Performance; USA Outlook Challenging
GOOD EMEA PERFORMANCE; USA OUTLOOK CHALLENGING EMEA AMERICAS APAC Strong DTC-led Most challenging consumer Japan driving strong growth performance environment China down as planned Conversion markets remain Shoes & sandals Streamlined Korea a growth engine performing; boots down business for future
Slide 24: USA: We Are Taking Action in a Tough Environment
USA: WE ARE TAKING ACTION IN A TOUGH ENVIRONMENT WHAT WE’VE DONE WHAT WE’RE SEEING WHAT WE’RE DOING Execution issues fixed Continuing weak consumer Staying disciplined – but continuing to invest in Changed 2/3 of management team Cautious wholesale marketing customer base Focussed our marketing spend
Slide 25: North America DC Network Transformed for the Future
NORTH AMERICA DC NETWORKTRANSFORMED FOR THE FUTURE LOS ANGELES AUTOMATION EXPANSION OF NEW JERSEY NEW TORONTO DC DR. MARTENS PLC FY24 FIRST HALF RESULTS 25
Slide 26: USA Continuing to Build Retail Footprint
USA CONTINUING TO BUILD RETAIL FOOTPRINT LOS CERRITOS, CA VICTORIA GARDENS, CA DR. MARTENS PLC FY24 FIRST HALF RESULTS 26
Slide 27: USA Marketing Focus on New York and Los Angeles
USA MARKETING FOCUS ON NEW YORK AND LOS ANGELES MADE STRONG EVENT, NEWYORK LOS ANGELES MADE STRONG EVENT, NEWYORK NEWYORK DR. MARTENS PLC FY24 FIRST HALF RESULTS 27
Slide 28: 14XX Launch
14XX LAUNCH DR. MARTENS PLC FY24 FIRST HALF RESULTS 28
Slide 29: 14XX – Driving Positive Brand PR
14XX – DRIVING POSITIVE BRAND PR DR. MARTENS PLC FY24 FIRST HALF RESULTS 29
Slide 30: USA – Nordstrom Glass Box, The Grove, Los Angeles
USA – NORDSTROM GLASS BOX,THE GROVE, LOS ANGELES DR. MARTENS PLC FY24 FIRST HALF RESULTS 30
Slide 31: EMEA Controlling the Brand at Retail
EMEA CONTROLLING THE BRAND AT RETAIL OXFORD ST FLORENCE DR. MARTENS PLC FY24 FIRST HALF RESULTS 31
Slide 32: EMEA Made Strong Across the Regions
EMEA MADE STRONG ACROSS THE REGIONS PARIS MILAN LONDON DR. MARTENS PLC FY24 FIRST HALF RESULTS 32
Slide 33: EMEA Stores Drive Ecommerce Sessions
EMEA STORES DRIVE ECOMMERCE MÜNSTER OBERHAUSEN SESSIONS Increase in Ecommerce sessions since store opening 21% MILAN VIA TORINO MILAN CORSO BUENOS AIRES 42% 33% 33% Münster, Germany Oberhausen, Germany Milan, Italy Oct-21 Dec-22 Milan Corso Buenos Aires, Jan-23 Milan Via Torino, Dec-21 DR. MARTENS P
Slide 34: Japan DTC an Engine of Growth
JAPAN DTC AN ENGINE OF GROWTH TSUKUBA YOKOHAMA DR. MARTENS PLC FY24 FIRST HALF RESULTS 34
Slide 35: Japan Made Strong Activation
JAPAN MADE STRONG ACTIVATION TOKYO MADE STRONG EVENT TOKYO MARKETING DR. MARTENS PLC FY24 FIRST HALF RESULTS 35
Slide 36: Investing to Drive Future Growth
INVESTING TO DRIVE FUTURE GROWTH AREA OF INVESTMENT PROGRESS TO DATE NEW JERSEY DC EXPANSION • COMPLETE, TOGETHER WITH LA FY24 INVESTMENT OUTLINED AUTOMATION AND CANADA DC RELOCATION AT THE FY23 RESULTS SUPPLY CHAIN SUPPLYAND DEMAND • PROJECT PLANNING SYSTEM UNDERWAY STRENGTHENING • ONGOING SUPPLYCH
Slide 37: Our Supply Chain Strategy
OUR SUPPLY CHAIN STRATEGY % = Supply chain costs under Dr. Martens direct control c.90% • FULLY OUTSOURCED PROCUREMENT MODEL c.70% • DR. MARTENS MANDATES & PROCURES • COST MANAGED AT FINISHED >90% MATERIALS PRODUCT LEVEL • DR. MARTENS PROCURES ALL LEATHER, • TIER 1 & TIER 2 OPEN BOOK • LIMITED DETAI
Slide 38: Consumer Connection Through Sustainability
CONSUMER CONNECTION THROUGH SUSTAINABILITY Repair UK Authorised Repair live October 2023 ReWair On track for go-live during 2024 Genix Nappa Product launch SS24 DR. MARTENS PLC FY24 FIRST HALF RESULTS 38
Slide 39: Conclusion
CONCLUSION Continued good USA backdrop has performance in deteriorated; focused EMEA and APAC on reigniting the boots market Iconic brand with significant growth opportunity ahead DR. MARTENS PLC FY24 FIRST HALF RESULTS 39
Slide 40: Q&A
Q&A
Slide 41: Appendix
APPENDIX • IR contact details • Guidance • Capital Allocation • FX rates • Quarterly revenue • Balance Sheet • Cautionary statement
Slide 42: Investor Relations Contact Details
INVESTOR RELATIONS CONTACT DETAILS BETHANY BARNES BETH CALLUM Director of Investor Relations Senior Investor Relations Analyst Bethany.Barnes@drmartens.com Beth.Callum@drmartens.com Mobile: +44 7825 187465 Phone: +44 20 3995 2644 DR. MARTENS PLC FY24 FIRST HALF RESULTS 42
Slide 43: FY24 Technical Guidance
FY24 TECHINCAL GUIDANCE • Net new own store openings of around 35 • Depreciation & amortisation around £70m • Net finance costs of c.£30m • Blended tax rate of c.26% • Capital expenditure of around £50m • Operating cash conversion around 80% of EBITDA DR. MARTENS PLC FY24 FIRST HALF RESULTS 43
Slide 44: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK INVESTMENT DIVIDEND EXCESS CASH To support scale and Proposed an interim dividend £50m share buyback underpin growth of 1.56p, held flat against H1 programme progressing well FY23 DR. MARTENS PLC FY24 FIRST HALF RESULTS 44
Slide 45: FX Translation Rates
FX TRANSLATION RATES £/$ £/€ £/¥ FY24 FY23 % change FY24 FY23 % change FY24 FY23 % change H1 1.26 1.22 3% 1.16 1.17 -1% 178 163 9% H2 1.19 1.14 163 FY 1.21 1.16 163 DR. MARTENS PLC FY24 FIRST HALF RESULTS 45
Slide 46: Quarterly Revenue by Channel & Region
QUARTERLY REVENUE BY CHANNEL & REGION Q124 Q224 H124 YoY Change Actual CC Actual CC Actual CC Total Revenue -11% -11% -2% 1% -5% -3% Revenue by channel Ecommerce 7% 7% - 4% 3% 5% Retail 27% 27% 6% 10% 15% 17% DTC 17% 17% 3% 7% 9% 11% Wholesale1 -41% -41% -5% -2% -17% -15% Revenue by region EMEA -1%
Slide 47: Balance Sheet
BALANCE SHEET 30 September 2023 31 March 2023 30 September 2022 Freeholds 7.4 7.4 6.8 Right-of-use assets 195.0 144.1 133.9 Other fixed assets 81.8 78.8 65.3 Working capital2 301.5 216.3 188.9 Other1 13.2 5.2 13.6 Operating net assets 598.9 451.8 408.5 Goodwill 240.7 240.7 240.7 Cash 45.7 157.5 133.
Slide 48: Cautionary Statement
CAUTIONARY STATEMENT Cautionary statement relating to forward-looking statements Announcements, presentations to investors, or other documents or reports filed with or furnished to the London Stock Exchange (LSE) and any other written information released, or oral statements made, to the public in t
Slide 49: drmartensplc.com
drmartensplc.com Dr. Martens plc drmartensofficial