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FTSE 250 movers: Investors stick boot into Dr Martens over profit warning

By Frank Prenesti

Date: Thursday 24 Nov 2022

(Sharecast News) - FTSE 250: 19,571.34, up 0.36% at 1423 GMT.
Shares in Dr Martens slumped on Thursday as the famous UK shoe brand warned of lower core profit margins after interim profit fell on weaker direct-to-consumer sales in the second quarter and said it would raise prices to offset inflation.

The company, famed for its lace up boots now popular with celebrities, said pre-tax profit fell 5% to £57.9m. Revenue rose 13% to £418.6m, while the dividend was lifted 28% to 1.56p a share.

Core earnings margins for the full financial year will be between 100 basis points and 250 basis points lower than last year, it added. Shares in the company were down by 20% in early London trade.

Dr Martens said it would raise prices by 6% to cover cost inflation and said pricing headroom would increase further as the company continued to invest in its push to lift DTC sales.

Customers are facing rising household bills, with inflation surging to 11.1% - a 41 year high - forcing them to cut back on discretionary spending. A pair of Dr Martens can retail for almost £300.

"Since the end of H1, DTC trading has been variable on a week-to-week basis. Our peak trading weeks are ahead of us and last year they were impacted by Covid-19 restrictions in EMEA and poor availability in America and Japan," the company said.

"Wholesale has been strong in H2 so far, including the benefit of the £10m revenue shift in EMEA from September to October, and is underpinned by the orderbook."

Core earnings in the six months to September 30 were flat at £88m as the company continued to invest to drive growth through new stores, marketing and distribution centres.

DTC revenue rose 21% to £179.8m led by a strong performance from retail, which was up 38% to £91m driven by the accelerated new store opening programme and a consistent recovery in post Covid footfall across both Europe and the US, with a slightly slower recovery profile in Japan.

A net new 16 stores were opened during the half, taking the total number of Dr Martens own stores to 174.

Ecommerce grew 8% to £88.8m as consumers returned to physical shopping after the lifting of global Covid-19 restrictions. Online sales were also hit by lockdowns in Shanghai in the first quarter where the company's distribution centre is located.

Home REIT shares recovered after Wednesday's slump sparked by a critical report published by Delaware-based short-selling firm Viceroy. The sector was also boosted by a report stating the UK property market will be Europe's best performing in the next five years.

A debt funding gap of €24bn is estimated for the next three years in the UK, France and Germany, as re-financings of maturing loans are expected to face issues from the decline in capital values and lenders' reduced risk appetites, said property investor AEW.

"As in the post global financial crisis era, this presents an opportunity for equity and debt investors with capital to deploy," it added.

Despite low unemployment and a successfully managed rebound from Covid lockdowns, AEW's base case scenario assumes higher bond yields as well as a short and shallow recession in the fourth quarter of 2022 and most of 2023.

Reflecting the heightened uncertainty, AEW's downside scenario assumes a longer recession and higher-for-longer bond yields.

AEW expects 2022 full-year volumes in the European real estate market to land at €260bn, with €218bn invested in the first three quarters.

This follows the 2021 record of €350bn and reflects the effects on leveraged investors from the doubling in borrowing costs over the last 10 months.

In its relative value analysis, only five markets are considered attractive while 47 are classified as neutral out of the 168 market segments covered.

The UK is ranked most attractive out of 168 covered market segments for the second year in a row on a relative value basis over the next five years, with Benelux second, reflecting an above average share of attractive and neutral markets, AEW said.

Projected returns for all property across Europe during 2023-27 remain positive, although yield widening has pushed forecast returns to 4% a year across all 196 segments, down from 4.7% six months ago, largely due to higher government bond yields pushing up property yields and limiting capital value growth.

FTSE 250 - Risers

Bridgepoint Group (Reg S) (BPT) 216.20p 7.14%
TUI AG Reg Shs (DI) (TUI) 147.70p 4.75%
Hochschild Mining (HOC) 70.10p 4.39%
Home Reit (HOME) 64.90p 4.34%
Warehouse Reit (WHR) 115.60p 4.33%
ASOS (ASC) 679.00p 4.30%
Future (FUTR) 1,585.00p 4.28%
Supermarket Income Reit (SUPR) 108.00p 3.85%
Virgin Money UK (VMUK) 172.50p 3.51%
Hammerson (HMSO) 25.04p 3.00%

FTSE 250 - Fallers

Dr. Martens (DOCS) 217.00p -24.23%
Discoverie Group (DSCV) 809.00p -11.49%
Diversified Energy Company (DEC) 122.30p -3.47%
Petrofac Ltd. (PFC) 99.80p -2.82%
Coats Group (COA) 66.30p -2.50%
Kainos Group (KNOS) 1,698.00p -2.41%
3i Infrastructure (3IN) 321.50p -1.98%
Indivior (INDV) 1,684.00p -1.81%
Capricorn Energy (CNE) 245.20p -1.76%
ICG Enterprise Trust (ICGT) 1,130.00p -1.74%


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