Dr. Martens Plc · LSE:DOCS
Dr. Martens — FY2023 Earnings Presentation
48 slides from Dr. Martens's earnings presentation, Jun 1, 2023
Slide 1: FY23 Results
DR. MARTENS PLC FY23 RESULTS 1ST JUNE 2023
Slide 2: Agenda
AGENDA Introduction and review of USA performance Kenny Wilson, CEO Financial review Jon Mortimore, CFO FY23 successes and looking to the future Kenny Wilson, CEO DR. MARTENS PLC FULL YEAR RESULTS FY23 2
Slide 3: Introduction and Review of USA Performance
INTRODUCTION AND REVIEW OF USA PERFORMANCE Kenny Wilson, CEO
Slide 4: Key Messages
KEY MESSAGES Execution issues Against a challenging backdrop we Brand-first DTC-led DOCS strategy is in USA will continue to adapt and invest to delivering results when support increasing scale and implemented well We understand what these underpin growth are and are fixing them The Dr. Martens bran
Slide 5: FY23 Reflections
FY23 REFLECTIONS WHAT WENT WELL AREAS TO ADDRESS • Brand remains strong with key metrics up or level • USA performance impacted by execution issues with 12m ago • LA DC move poorly managed; material • Strong performance in EMEA and Japan implications • Product strategy to grow boots, shoes and sanda
Slide 6: USA: Strong Brand, Weak Execution
USA: STRONG BRAND, WEAK EXECUTION USA LAST 24M PURCHASED UP 5%PTS TO 13%3 USA NET INTENT1 UP 4%PTS TO 17%3 USA FUTURE CONSIDERATION2 UP 1%PT TO 10%4 1. Net intent – “Do you see yourself buying the following brands of footwear? 2. Future consideration – “Would you consider purchasing any of the follo
Slide 7: USA: Strong Brand, Weak Execution
USA: STRONG BRAND, WEAK EXECUTION FY23 EXECUTION ISSUES WHAT WE’VE DONE TO ADDRESS LA DC move poorly managed; failure of Strengthened Americas Leadership team people and process New VP marketing refocusing marketing Marketing overly focused on shoes and plan; results expected from H2 sandals rather
Slide 8: LA DC and Learnings
LA DC AND LEARNINGS WHAT HAPPENED WHAT WE’VE DONE Inventory transferred into LA DC faster than Recovery plan implemented and planned LA DC operationally fixed Accepted requests to re-route direct Acceleration of New Jersey DC wholesale orders to the LA DC reconfiguration and enlargement Implementing
Slide 9: Financial Review
FINANCIAL REVIEW Jon Mortimore, CFO
Slide 10: Revenue £1bn Milestone but Investment Impacted Profit
REVENUE £1BN MILESTONE BUT INVESTMENT IMPACTED PROFIT FY23 vs FY22 % change • Pairs down 2%; decision to cease Constant supply to S.America and China, up 2% £m FY23 FY22 Actual excluding this currency • Revenue growth +10% Pairs (m) 13.8 14.1 (2)% • DTC led with revenue +16% Revenue 1,000.3 908.3 10
Slide 11: Higher Margin DTC Mix 52%
HIGHER MARGIN DTC MIX 52% FY23 vs FY22 % change • Retail revenue +30% led by traffic Constant recovery and new space Revenue £m FY23 FY22 Actual currency • 52 new stores opened including transfer of 14 franchise stores in Japan Ecommerce 279.0 262.4 6% 1% • Ecommerce; good EMEA and Japan offset by p
Slide 12: Revenue Up 10%, Up 4% CC
REVENUE UP 10%, UP 4% CC £m • Revenue up 10% as follows: YoY% Average price 5% Retail space 3% DTC Mix 1% Volume -3% Net full price -2% CC 4% FX 6% Reported 10% • Price benefit 1%pt lower than planned; all USA • Full price mix normalised at mid 80%; same as pre-pandemic FY20 1. FX represents transla
Slide 13: Gross Margin Bridge
GROSS MARGIN BRIDGE GROSS MARGIN % pts • Good DTC growth in EMEA and Japan offset by weak Americas • Margin benefit lower than expected • Price +5%, cost inflation +6% • Lower Americas boots sales • Full price mix normalisation reduced margin by 1%pt • LA DC container costs £6.6m • FX cost in margin
Slide 14: Continued Investment for Future Growth & Resilience
CONTINUED INVESTMENT FOR FUTURE GROWTH & RESILIENCE Investment in future growth: 2.5%pts EBITDA % pts • Continued investment; support increasing scale and underpin future growth • 2.5%pts of margin • Retail space negative due to headwinds of new store opex as revenue grows in year of opening, return
Slide 15: A Global Business
A GLOBAL BUSINESS Regional revenue share • Japan our high margin APAC growth engine 14% 13% • USA our biggest market 18% • Challenging consumer environment & poor execution of strategy in year • UK our second largest market • Home market; revenue up 12% 42% 43% 38% • Continental Europe driven by DTC
Slide 16: Americas Performance Was Disappointing
AMERICAS PERFORMANCE WAS DISAPPOINTING FY23 vs FY22 % change • Brand remains strong, performance Constant impacted by £m FY23 FY22 Actual currency • Challenging consumer environment from Q2 Revenue 428.2 382.7 12% (1)% • Poor execution of strategy • LA DC EBITDA 100.1 120.0 (17%) • Marketing focus E
Slide 17: EMEA: Strong DTC-Led Growth
EMEA: STRONG DTC-LED GROWTH FY23 vs FY22 % change • Revenue growth of 11% Constant • Driven by DTC up 20% Revenue £m FY23 FY22 Actual currency • DTC mix up 4%pts Revenue 443.0 398.5 11% 10% • Opened 13 new stores • Closed five, including three relocations EBITDA 146.1 143.8 2% • EBITDA margin down 3
Slide 18: Conversions: DTC Execution Underpinned Strong Growth
CONVERSIONS: DTC EXECUTION UNDERPINNED STRONG GROWTH FY23 DTC • Strong DTC-led growth in conversion +26% +80% +265% growth markets • DTC mix improvement • Germany up 8%pts to 42% • Italy up 11%pts to 33% • Spain up 24%pts to 50% +24%pts +11%pts +8%pts FY23 DTC Mix change Germany Italy Spain 17 6 4 N
Slide 19: APAC: Leading the Way in DTC Growth in FY24
APAC: LEADING THE WAY IN DTC GROWTH IN FY24 FY23 vs FY22 % change • FY23 was a year of investment in Constant Japan and reset in China £m FY23 FY22 Actual currency • Japan 39% of APAC revenue • DTC mix up 7%pts Revenue 129.1 127.1 2% (1)% • Transfer of 14 franchise stores in Q4 EBITDA 33.8 32.6 4% •
Slide 20: Profit Before Tax £159m, Down 26%
PROFIT BEFORE TAX £159M, DOWN 26% Revenue £m FY23 FY22 % change • D&A up due to new stores and IT & logistics investments EBITDA 245.0 263.0 (7%) • Impaired three stores in USA; local Depreciation & traffic profile shifted post Covid-19 (54.2) (36.9) (47)% amortisation • FX loss due to translation o
Slide 21: We Have Too Much Inventory; Cash Inflow in FY24
WE HAVE TOO MUCH INVENTORY; CASH INFLOW IN FY24 £m • Working capital outflow due to decision to invest in inventory • Compounded by weak trading and mistakes in USA • Capex 5.1% of revenue • New stores • Fit out costs in three new DC’s • IT projects • Operating cash conversion • FY23 20% • FY24 expe
Slide 22: Inventory and Leverage
INVENTORY AND LEVERAGE INVENTORY TOO HIGH: MINIMAL MARKDOWN RISK AVERAGE CASH LEVERAGE 1.1X Mar-23 Mar-22 £m Mar-23 Mar-22 Inventory (£m) 258 123 Bank Debt (297) (286) Cash 158 228 Stock turn 1.5x 2.7x Net bank debt (139) (58) Cover (weeks/historic) 35 19 Lease Liabilities (152) (113) • Inventory to
Slide 23: Capital Allocation in Action
CAPITAL ALLOCATION IN ACTION INVESTMENT DIVIDEND EXCESS CASH To support scale and underpin Final dividend per share Intention to commence £50m growth maintained, up 6% in year share buyback following approval at AGM Earnings payout ratio of 45% will return to 35% over time DR. MARTENS PLC FULL YEAR
Slide 24: FY24 Forward Look
FY24 FORWARD LOOK SUPPLY CHAIN COST INFLATION AND PRICE ORDERBOOK AND CURRENT TRADING • Supply chain costs fixed 6-9 months prior to season • Strong DTC momentum as we exited FY23 • AW23 fixed at 6%; as expected • Wholesale orderbook • SS24 now at c.2% • Typically write orders six months before a se
Slide 25: FY24 and Medium-Term Guidance
FY24 AND MEDIUM-TERM GUIDANCE FY24 H1 FY24 FY25 ONWARDS • Mid to high single digit revenue • Revenue broadly in line • FY25 high single digit revenue growth growth (cc) with FY23 (cc) • FY EBITDA margins to be 1-2% • H1 EBITDA margin 5-6% • Medium-term, double-digit revenue lower than FY23 lower tha
Slide 26: Business Review
BUSINESS REVIEW Kenny Wilson, CEO
Slide 27: What I'll Discuss Today
WHAT I’LL DISCUSS TODAY AREAS TO ADDRESS STRONG STRATEGIC EXECUTION LOOKING TO THE FUTURE • USA execution • Brand • Significant white space growth opportunity remains • LA DC and learnings • Product and innovation • Investments to support increasing • EMEA performance scale and underpin growth • Jap
Slide 28: The DOCS Strategy Framework
THE DOCS STRATEGY FRAMEWORK Our DOCS strategy is about selling more pairs of boots, shoes and sandals, to more people, through our own DTC, in our 7 priority markets: UK | USA | FRANCE | GERMANY | ITALY | JAPAN | CHINA Build brand equity Enable growth Acquire new Manage B2B and drive margin and unlo
Slide 29: Brand Remains Strong
BRAND REMAINS STRONG NO.1 FOR UNPROMPTED AWARENESS IN BOOTS GLOBALLY1 BRAND AWARENESS IN EMEA CONVERSION MARKETS UP YOY2 • GERMANY +4%PTS • ITALY +2%PTS • SPAIN +2%PTS UK NET INTENT UP 1%PT TO 19%1 JAPAN NET INTENT UP 6%PTS TO 13%1 1. Main Survey 2. January Pulse DR. MARTENS PLC FULL YEAR RESULTS FY
Slide 30: Rooted in Icon Products and Growing Beyond
ROOTED IN ICON PRODUCTS AND GROWING BEYOND CAGR 9% 50% 22% 20% 18% #1 IN BOOTS 23% 71% 21% 73% FY19 FY23 2019: #26 IN SANDALS 2022: #14 IN SANDALS Boots Shoes Sandals 2019: #10 IN SHOES 2022: #9 IN SHOES DR. MARTENS PLC FULL YEAR RESULTS FY23 30
Slide 31: Strong EMEA Performance
STRONG EMEA PERFORMANCE TORINO NL DC • Opened 13 new stores • Built out DC • Strong boots-focused • Continued infrastructure in NL and marketing via rationalisation of • Developing DTC UK ‘Unpolished’ and wholesale partners consumer database festival campaigns • Rolled out order • Reduced etailer vo
Slide 32: Japan Leading the Way in DTC
JAPAN LEADING THE WAY IN DTC JAPAN FRANCHISE STORES IKEBUKURO, TOKYO • Successful transfer of • Implemented Microsoft • Implemented staff • Closed etailer accounts 14 franchise stores D365 smart marketing • Elevated quality of programme • Opened four new stores • Improved availability of doors withi
Slide 33: Making Strides in Sustainability
MAKING STRIDES IN SUSTAINABILITY PLANET PRODUCT PEOPLE • Submitted science-based • Investment in and • Cost of living payments targets setting out plan to partnership with to support our people become Net-Zero by 2040 Gen Phoenix, producer of • Dr. Martens Foundation recycled leather • Sourced 91% o
Slide 34: Custodianship Remains Our Guiding Principle
CUSTODIANSHIP REMAINS OUR GUIDING PRINCIPLE DR. MARTENS PLC FULL YEAR RESULTS FY23 34
Slide 35: Incremental Investments to Support Scale & Underpin Growth
INCREMENTAL INVESTMENTS TO SUPPORT SCALE & UNDERPIN GROWTH SUPPLY CHAIN ECOMMERCE PRODUCT AND MARKETING Expansion of our DC network with New Order management system in USA, the Product life cycle system giving detailed Jersey DC earlier than initially planned foundation to omnichannel capability vis
Slide 36: Incremental Investments to Support Scale & Underpin Growth
INCREMENTAL INVESTMENTS TO SUPPORT SCALE & UNDERPIN GROWTH FY24 FY25 • Bring forward targeted IT projects 5 4 Supply Chain Supply Chain 5 • Expansion of Supply Chain £26m Ecommerce £13m Ecommerce capability to support 5 increased scale 16 Product & Product & Marketing 4 Marketing • Strengthening tea
Slide 37: Significant Growth Opportunity Remains
SIGNIFICANT GROWTH OPPORTUNITY REMAINS Pairs / Capita ('000s) 36 FY20 32 31 FY22 FY23 17 18 15 14 12 10 8 8 7 7 7 5 4 4 4 3 2 0 0 0 0 UK USA Germany Italy France Japan China Spain (Converted FY19) (Converted FY22) (Converted FY22) * Germany impacted by reduced volume to etailers in FY23 DR. MARTENS
Slide 38: Summary
SUMMARY USA: strong brand, weak Strong EMEA and Japan Making investments execution performances to support our increasing scale and underpin future Improving USA Strong Brand growth performance is the number Exciting product innovation one organisational priority pipeline AMBITION TO BECOME £2BN FOO
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Slide 40: Appendix
APPENDIX • IR contact details • Guidance • FX rates • Quarterly revenue • Opex • Balance Sheet • Cautionary statement
Slide 41: 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 FULL YEAR RESULTS FY23 41
Slide 42: FY24 Guidance: Detail
FY24 GUIDANCE: DETAIL • Mid to high single digit revenue growth, constant currency basis • EBITDA margins to be 1-2% lower than FY23 • Net new own store openings to be 25-35 • Depreciation & amortisation to be £65-70m • Net finance costs of c.£25m • Blended tax rate of c.26% • Capital expenditure of
Slide 43: FX Translation Rates
FX TRANSLATION RATES $/£ €/£ FY23 FY22 % change FY23 FY22 % change H1 1.22 1.39 (12)% 1.17 1.17 - H2 1.19 1.34 (11)% 1.14 1.19 (5)% FY 1.21 1.37 (12)% 1.16 1.18 (7)% DR. MARTENS PLC FULL YEAR RESULTS FY23 43
Slide 44: Quarterly Revenue by Channel & Region
QUARTERLY REVENUE BY CHANNEL & REGION Q123 Q223 Q323 Q423 Group Revenue £154.1m £264.5m £335.9m £245.8m Actual YoY change 5% 19% 9% 6% Constant currency YoY change (1)% 11% 3% - Revenue by region EMEA YoY change 6% 7% 8% 26% Americas YoY change 10% 31% 16% (5)% APAC YoY change (14)% 28% (4)% (5)% Re
Slide 45: Before LA DC, Investment Up 11% CC
BEFORE LA DC, INVESTMENT UP 11% CC Opex up 18%, 13% cc as follows: Constant YoY% Currency Retail space 7% 5% Marketing 2% 2% DC’s/Logistics 4% 3% Other (IT/People) 2% 1% Before LA DC 16% 11% LA DC 2% 2% Total 18% 13% DR. MARTENS PLC FULL YEAR RESULTS FY23 45
Slide 46: Balance Sheet
BALANCE SHEET 31 March 2023 31 March 2022 Freeholds 7.4 6.1 Right-of-use assets 144.1 105.5 Other fixed assets 78.8 53.6 Working capital and other 211.5 78.5 Deferred tax 10.0 9.6 Operating net assets 451.8 253.3 Goodwill 240.7 240.7 Cash 157.5 228.0 Bank Debt (293.4) (280.9) Lease Liabilities (152.
Slide 47: 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 48: drmartensplc.com
drmartensplc.com Dr. Martens plc drmartensofficial