(Reuters) – Dr Martens flagged lower profit margins for 2024 fiscal year after the British bootmaker posted a slump in its annual profit on Thursday, citing higher investments to tackle supply chain and operational snags.
The British company, whose pricey work boots have been fashionable since the 1960s, has been struggling with waning demand especially in the United States, which is its second-largest market by revenue, as consumers cut back on luxury spending on the back of still-high inflation.
Dr Martens has also seen its costs mount due to problems at its Los Angeles distribution centre, which opened last year. The company said it was due to a “combination of people and process issues”.
“The operational issues experienced during FY23 have demonstrated that continuing to invest in our infrastructure and capabilities to support our increasing scale and underpin our long-term growth is the right thing to do,” the company said in a statement, adding that it still expects price increases to cover supply chain cost inflation.
Dr Martens expects full-year EBITDA margin to be 1-2 percentage points lower than the reported year.
For the year ended March 31, profit before tax fell 26% to 159.4 million pounds ($198.04 million).
“In America, against the backdrop of a challenging consumer environment, we made operational mistakes, such as the move to our LA Distribution Centre, and how we executed our marketing campaigns and e-commerce trading,” Chief Executive Officer Kenny Wilson said.
“We are fixing the issues in America, including a significant strengthening of the team there, and returning America to good growth is our number one operational priority.”
($1 = 0.7923 pounds)
(Reporting by Eva Mathews in Bengaluru; Editing by Sherry Jacob-Phillips)