Supply chain issues plague Dr Martens

Shares of UK shoe manufacturer Dr Martens slumped this week as the company issued a profit warning for the third quarter, citing supply chain problems.

Specifically, it said that warehouse issues at its new Los Angeles hub are set to hit revenues and push up costs, while revenue for FY 2024 is now being downgraded to mid to high single digits.

The bootmaker said it now expected to make underlying full-year profits of no more than £260m, £26m less than previously expected as it had been forced to open temporary warehouses in the US after becoming overwhelmed with stock, partly because deliveries had arrived more quickly than expected.

Dr Martens said it forecast up to £11m in additional supply chain costs to fix the bottlenecks and could lose up to £25m of wholesale sales as a result of the hold-ups in LA. The firm said warmer than usual weather in October and November also hit sales.

The company, based in Wollaston, Northamptonshire, expects the problems in the US and “a more uncertain economic environment” to hit the coming year’s sales as well.

‘’Dr Martens has been caught seriously on the back foot with operational problems at its new distribution centre in Los Angeles, piling yet more problems on the beleaguered bootmaker,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“The transfer of inventory to the new hub was faster than planned, causing a bottleneck of stock, and the chaos is set to reduce wholesale revenues by up to £25 million. It’s forced the company to take on new space and an extra shift of staff to sort out the problems which will also push up costs. This is another big migraine for the company, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth for the company.”