Dr. Martens (LON:DOCS) stock plunged at the open on Thursday to a new all-time low, after the bootmaker was forced to cut its forecasts once again in response to problems in North America.
Dr. Martens said a variety of operational problems had created a bottleneck at its new distribution center in Los Angeles, leaving U.S. sales well below expectations in the third quarter of its fiscal year. As a result, it now expects revenue to grow by around only 12%, rather than the “high teens” percentage it had forecast at the start of the year.
Likewise, it now expects earnings before interest, taxes, depreciation, and amortization to be between £250-260 million (£1 = $1.2315), reflecting a hit of between £16-25M to EBITDA from the problems in Los Angeles. The problems are likely to continue into the new fiscal year starting in April, but “should normalize” by October, it said.
Analysts had expected full-year EBITDA to be around £285M.
Ironically, the bottleneck at LA was caused by the easing of others elsewhere: inbound shipping times shortened significantly during the quarter, resulting in inventory arriving more quickly than anticipated. However, U.S. wholesalers reacting to signs of a consumer slowdown were unable to take the new inventory as quickly as the company had thought. A planned transfer of inventory from a distribution center in Portland also went faster than expected, leading to shoes piling up in LA instead.
Dr. Martens had already signaled in November that its direct-to-consumer business had been suffering as demand weakened but had nonetheless plowed ahead with heavy investment spending and raised its interim dividend.
In the three months through December, sales slowed further. Group revenue rose only 3% in constant currencies from a year earlier, but it was the wholesale business, rather than DTC, which fared worst, with sales actually down 1%.
Dr. Martens’ stock fell as much as 28% initially but had recovered a little by 03:55 ET (08:55 GMT) to trade down “only” 21.2%.