Investors are putting the boot into this FTSE 250 stock. But I reckon a recovery’s under way
The Dr Martens (LSE:DOCS) share price was the second-worst performer on the FTSE 250 yesterday (20 November), after the legendary boots, shoes and sandals maker reported its interim results for the 26 weeks ended 28 September (H1 26).
The reaction of investors was particularly disappointing given the groupâs recent share price performance. In April, it recorded a 52-week low of 43p, as President Trumpâs announcements on tariffs created uncertainty for the group with its Asian-focused manufacturing operation. Since then — and prior to the publication of the results — it had increased nearly 90%.
Yesterday, its share price closed at 74p, having fallen 9.5% over the course of the day. Sometimes itâs hard to believe that the group listed in January 2021 with an IPO price of 370p.
So what caused such a negative reaction? To be honest, I’m not really sure. Okay, the results weren’t amazing but I don’t think a near-10% fall’s warranted.
Crunching the numbers
The group reported a 0.8% drop in H1 26 revenue compared to the same period a year earlier. However, its adjusted loss before tax (LBT) improved by £7.2m to £9.4m. Historically, its performance has been heavily weighted to the second half of each financial year. A similar trend’s expected for FY26.
Significantly, the gross profit margin continues to rise. But at 65.3%, itâs now higher — or similar to some luxury brands. How much of this is attributable to price rises is unclear but the scope to continue charging more seems limited. In FY18, its margin was 53.4%.Â
Compared to a year earlier, inventory levels were £45.6m lower or, expressed another way, four weeksâ less stock is now being held. Net debt (including leases) fell from £348.7m to £302.3m over the same period.
The groupâs maintained its interim dividend at 0.85p a share.
Going to plan
Most importantly, the group says itâs trading in line with current expectations. Before yesterday, analysts were expecting an adjusted profit before tax for FY26 of £53m-£60m.
This excludes any estimated impact from tariffs. The companyâs now confirmed that these are likely to reduce earnings by âhigh single-digitâ millions, although around half of this is expected to be offset by mitigating actions including âtight cost control, flexible product sourcing, and targeted adjustments to our USA pricing policyâ.
To be honest, I thought the tariff impact would have been much bigger.
Green shoots
Delve a little deeper and thereâs more good news. The company says itâs increased the number of âpurchase occasionsâ (surely, purchases?) made by its customers, which has resulted in a 33% increase in footwear sales.
Across all lines, pairs sold increased by 1% to 4.7m. Also, revenue in America was up 6%.
This sounds positive to me and doesnât appear to justify yesterdayâs reaction of investors. Although itâs early days, I think thereâs enough evidence of a recovery to make the stock one to consider.
Time will tell if these green shoots continue to grow. And I acknowledge there are plenty of other opportunities available to investors who are looking to buy beaten-down stocks that might have turned the corner. However, Iâve always had a bit of a soft spot for Dr Martens. Thatâs why I hope it can recapture some of its former glories.
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James Beard 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.
