Down 85% since going public, could this FTSE 250 icon be a February bargain?
The FTSE 250 is home to a few iconic British brands and businesses. But being an icon never guarantees strong performance. And investors in Dr Martens (LSE:DOCS) have learned this firsthand, with the shoe maker seeing just over 85% of its market-cap get wiped out since joining the London Stock Exchange in 2021.
But with a new CEO at the helm, an ongoing strategic pivot, and an impressive heritage that remains intact, is this fashion stock getting ready for an impressive comeback?
What happened to Dr Martens?
Running a fashion enterprise is an exceptionally difficult task. Even more so during periods of economic uncertainty. With inflation driving up costs, consumer spending on discretionary footwear hasn’t exactly been strong. And with younger generations often preferring athleisure footwear, demand for Dr Martens’ clunkier, heavier boots has suffered.
The impact quickly emerged in its US wholesale channel, which was hit by a significant revenue slowdown as retailers simply stopped re-ordering new shoes. And what followed was an inventory glut that later resulted in heavy discounting, eroding the brand’s pricing power while simultaneously harming profit margins.
Several profit warnings later, and it’s no wonder the stock took a beating. But could that all be about to change?
Ripe for a turnaround
Ije Nwokorie only moved into the corner office at the start of 2025. And while his ‘Levers for Growth’ strategy has taken a bit of time, some measurable progress has finally started to emerge.
In the group’s interim results for its 2026 fiscal year (ending in March), operating profits flipped from a loss to positive territory year on year. Combining this with various cost-savings and self-help initiatives, the subsequent margin expansion has paved the way to a steady reduction in the group’s net debt position.
Looking at the latest analyst forecasts, this recovery trajectory seems to be accelerating. While full-year revenues are expected to remain flat, underlying profits before tax (PBT) are anticipated to surge to between £54m and £74m, up from £34.1m year-on-year.
In the words of management: “We are comfortable with market expectations for FY26 PBT, which will result in significant year-on-year PBT growth”.
What to watch
Seeing margins expand is obviously encouraging and definitely a step in the right direction. However, flat sales are nonetheless potentially concerning. If the group’s footwear continues struggling to resonate with newer fashion-focused consumers, the firm’s long-term recovery could become compromised.
At the same time, debt remains a significant problem. The firm has £395m of outstanding loans & equivalents on its balance sheet, versus a £96m cash position. And while wider margins are supporting superior cash generation, the group’s financial flexibility nonetheless remains constricted by its high leverage.
So where does that leave investors? Personally, I want to see more recovery progress before considering this FTSE 250 business for my portfolio. Yet there’s no denying that Nwokorie is making the right moves.
Dr Martens is definitely a business worth watching but, for now, I’m exploring other cheap stock market opportunities.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
