Dr Martins
Dr Martens: is 2026 the real turnaround or just one good year? Dr Martens lost £3 billion in value in three years. This year, profit jumped 61%.
ALL BREAKDOWNSTHE BREAKDOWN
8/13/20265 min read
Dr Martens: is 2026 the real turnaround or just one good year?
Dr Martens lost £3 billion in value in three years.
This year, profit jumped 61%.
Revenue still fell.
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THE SETUP
In January 2021, the private equity firm Permira floated Dr Martens on the stock market at the top of its price range, valuing the whole company at £3.7 billion. That number was based on performance. Revenue had tripled since Permira bought the business in 2014 and the shares were priced on the bet that growth would keep going at the same pace.
It didn't. Over the next three years Dr Martens issued five profit warnings and the shares fell 85%, wiping out roughly £3 billion of that valuation. Two problems were clearly at work. In the US, Dr Martens had its own distribution centre trouble getting boots onto shelves on time. Kenny Wilson, the CEO at the time, admitted on a January 2023 investor call that it came down to “a people and process failure.” At the same time, the company leaned harder on discounting to US wholesale customers, just to keep the sales numbers up.
Whether demand for the boots themselves was also fading is harder to understand from outside. What's documented and admitted by the company itself, is the warehouse failure and the discounting. Those two things alone go a long way to explaining a £3 billion collapse and Dr Martens never once blamed changing fashion trends.
Now Dr Martens says it has fixed it. It calls the plan Levers for Growth and splits it into three years: stabilise, pivot, scale. Last year was stabilise. This year, just reported, was pivot. This April started scale.
Here's the problem. Adjusted profit, the figure once you strip out one-off costs, came in at £55 million, up 61%. Reported profit, the number that includes those one-off costs, was only £32.7 million, a full £22 million lower. Total revenue was still down 2.9%, to £764.9 million.
A company can't be recovering and shrinking at the same time.
In this case it sort of can. Here's why.
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THE PLAYBOOK
1. Fewer discounts, fewer boots
Off-price pairs, boots and shoes sold cheap to US wholesale customers just to shift volume, fell 31% this year. That's a big part of why group revenue fell 2.9%, although its’s not the complete story. Boots overall were down 8% too.
Dr Martens chose to walk away from a chunk of low-margin sales. Those sales barely made any profit anyway, so losing them is a trade most businesses would happily make.
At the same time, shoes grew 19% and now make up 31% of group revenue, up from 26% last year. Three newer product lines, called Lowell, Buzz and Zebzag, went from barely existing to 9% of all pairs sold.
Can Dr Martens cut its dependence on boots without cutting what makes Dr Martens valuable in the first place?
Shoes growing 19% sounds like great news. Boots falling 8% sounds like bad news, especially since boots are what Dr Martens is famous for.
There's one clue that helps more than either headline number. In the US, the classic 1460 boot started selling at full price again in the last three months of the year, with no discount needed. That doesn't prove the boot business is back for good. But it's the clearest sign so far that people still want to pay full price for the actual boot, not just buy it when it's cheap.
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Takeaway: Takeaway: When a business deliberately cuts weak, low-profit sales, revenue drops before things improve. Look only at the top line and you'll think the business is getting worse, right when it's actually getting healthier.
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2. Two numbers, one headline
This is the £22 million question. Adjusted profit was £55 million. Reported profit was £32.7 million. The gap is one-off costs: restructuring, the cost of changing leadership and clearing out years of built-up stock. Those costs happened. Companies coming out of a crisis strip them out of the “adjusted” number because they're a genuine one-off cost.
Both £55 million and £32.7 million are real numbers. A legitimate adjustment and a chosen headline aren't the same decision. One is accounting. The other is which number investors hear first and reported profit missed what analysts were expecting by 12.6%.
So, if the turnaround is real, why is revenue still falling and profit still short of forecasts? Because the business is doing two things at once: fixing itself and picking the flattering number to lead with.
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Takeaway: If a company reports two profit numbers, the bigger one is usually the one management wants you to remember. Before getting excited about it, find out what's been stripped out to get there, and why the smaller number exists at all.
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3. What broke in America and what's changed since
Back in January 2023, Kenny Wilson, the CEO at the time, admitted America had a warehouse problem. Boots weren't getting to US shops on time, right when the US was meant to be Dr Martens' biggest growth market. That one problem caused one of the five profit warnings.
Three years on, is it actually fixed? No single number proves it. But a few different ones all point in the same direction. Dr Martens now keeps more money from every boot it sells, its US website and stores are selling more at full price, the classic 1460 boot is selling at full price again in America and the company owes less money than it did.
None of that guarantees the warehouse problem is completely fixed. But when several different numbers improve at the same time, it's harder to write off as luck.
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Takeaway: Don't judge a turnaround by the headline profit number alone. Check the numbers underneath it too, like margin, debt and full-price sales. If those are all improving together, the turnaround is more likely to be real.
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ONE MORE THING
Dr Martens said next year is the big test. FY27 is the “scale” phase, the one after stabilise and pivot. At its AGM on 15 July, the company said trading since April was in line with expectations, left guidance unchanged and called demand from US wholesale customers “particularly encouraging.”
For this to count as a turnaround and not just a good year, three things need to happen:
The gap between adjusted and reported profit needs to close, not just get explained away again.
Boots need to actually grow, not merely stop shrinking.
The “one-off” costs need to stop occurring every year. Restructuring, leadership transition and inventory clean-up costs that repeat year after year aren't one-off anymore. That’s just what it costs to run the business.
One good year proves the plan can work. A second one proves it wasn't luck.
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THE PAPER TRAIL
Dr. Martens plc — IPO Prospectus
Read time: 15 minutes
The document behind the £3.7bn number. It confirms the 370p IPO price, £3.7bn market value and more than £1.25bn of proceeds for selling shareholders.
https://www.drmartensplc.com/application/files/9116/1191/9428/Dr._Martens_plc_-_Prospectus.pdf
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Dr Martens Chief to Exit as Shares Hit Record Low After Profit Warning
Read time: 2 minutes
The public-market low point. The fifth profit warning in three years sent the shares down a third to 62p, while the company warned profit could fall to only a third of the previous year’s £159m. Kenny Wilson’s departure in the same announcement.
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FY26 Results Presentation
Read time: 18 minutes
The primary document for judging the recovery. It contains the 61% adjusted-profit rise, the 10.4% EBIT margin, stronger US full-price sales and the reduction in off-price selling.
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