After stomping onto the public markets in January, Dr Martens is on the cusp of joining the FTSE 100. For a brand synonymous with youthful rebellion, it’s all embarrassingly mainstream. Can it keep pleasing the City and the disaffected youth?
Ever since the 1960s, when The Who’s Pete Townshend strode across the stage in a pair of DMs, the brand has somehow managed to appeal to the masses without shedding its rebellious roots in the eyes of consumers.
Its £672 million of annual sales come from around the world. Rapid vaccine rollouts in America and the UK — Dr Martens’ two biggest markets — have helped and boss Kenny Wilson, who owns a stake worth about £55 million, is chasing growth in Asia.
After floating at £3.70 a share, its stock has risen by a third to £4.94, valuing it at £4.9 billion. The listing has been a big success for private equity owner Permira, which in 2014 bought Dr Martens for £300 million from the Griggs family, who founded the business in 1960. After raking in the bulk of the £1.3 billion raised in the listing, Permira retains a 43 per cent stake.
Permira, though, has a mixed past with consumer brands. Its huge expansion of New Look left the chain saddled with over 800 stores. Two years after buying the fashion retailer from Permira for £780 million, South African investor Brait wrote its value down to zero.
The float of Polish marketplace Allegro has gone a little more smoothly. After listing last October, its shares are trading about 35 per cent above the offer price.
Dr Martens’ underlying earnings leapt from £85 million to £185 million in the year to March 2020, with analysts from HSBC, one of nine banks that worked on the float, describing its 27 per cent ebitda margin as “surprisingly high”.
Dr Martens puts it down to a focus on selling direct to consumers via its 130 stores and website. One third of the 11 million pairs of boots shifted last year were sold through its own channels, and the company aims to lift this to 60 per cent or more.
For a brand with cachet, it is a credible strategy, but there are signs that cost cutting has left a few scuff marks. While most recent reviewers on Trustpilot laud the boot-maker’s customer service, a significant minority vent anger that their boots fell apart after 18 months.
Dr Martens has more growth ahead, but the jump in profits ahead of the float should act as a warning sign. Brands that focus on short-term profits tend to store up long-term problems.
Permira, which will be able to start selling down its stake in July, may not stick around to see how it pans out. Avoid.
