Dr Martens warns on hit from US ports squeeze despite profits jump

Dr Martens has posted a jump in profits but the iconic British shoemaker said delays at US ports and factory closures in Vietnam had held back sales and warned that disruption would continue into next year.

The company on Thursday said pre-tax profits rose 46 per cent year on year to £61.3m for the six months to the end of September. That was on the back of sales that were 16 per cent higher at £369.9m as Dr Martens benefited from stores reopening and rising ecommerce revenues.

Dr Martens said, however, that challenges in getting stock into the US, its largest market, meant it had missed out on £15m of wholesale revenues from the Americas in the most recent quarter.

Kenny Wilson, chief executive, said some retailers had suffered shortages in the run-up to Christmas as shipping congestion at US ports hampered distribution and expected the problems to continue into next year.

Shares fell almost 8.5 per cent to 366.8p in morning trade, below the 370p at which it floated on the London Stock Exchange in January.

The company said its “biggest operational challenge” in the first half of the year was the closure of three third-party factories due to a lockdown in Vietnam, which represented about a third of production capacity, and difficulties in booking containers and ships.

“Transit lead times from south-east Asia to all US ports, but specifically west coast ports like LA, have been more challenging,” Wilson said. The company said it benefited from a decision to enter the year with high stock levels, however.

Revenues in the Asia-Pacific region were down 2 per cent compared with the previous year, as state-of-emergency measures in its largest retail market, Japan, weighed on sales.

Gridlock at Los Angeles’ ports, where about 40 per cent of shipping containers imported to the US are handled and some ships have been waiting to dock for weeks, continues to hamper supply chains.

But Wilson said he had seen an “improving picture” in recent weeks after President Joe Biden announced in October that Los Angeles’ ports would operate 24 hours a day to clear the backlog.

The company said it was confident of meeting market expectations, with first-half online sales up 10 per cent up from the same period last year. Retail sales, including in the company’s 147 own stores, rebounded to 2 per cent above pre-Covid 19 levels.

The company will pay its first interim dividend at 1.22p per share in February 2022, a payout ratio of 25 per cent.

With costs rising, however, Wilson said that Dr Martens would increase prices in the US and Europe for the first time in two years to offset inflation.

“Everything is rising around the world: raw material costs are rising, transportation costs are rising,” he said. “Fundamentally, price increases are needed to cover that inflation.”

From July, the UK price of a pair of the company’s 1460 boots, first designed as durable boots for workers in 1960 but now ubiquitous fashion items, would rise from £149 to £159, he added.

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