Dr Martens' Price Increases Have Minimal Effect on Sales Thanks to Strong Brand Loyalty

Despite raising prices twice this year, Dr. Martens has actually seen improved sales in its key markets. The brand attributes this to the strength of its brand, which has helped mitigate the impact of the price increases. CEO Kenny Wilson notes that in EMEA, sales have not been impacted overall, and volume sales have actually risen in most important markets, including the UK. This success is credited to the performance of its "core icon" products.

Dr. Martens announced last November that they would be raising prices following a customer consultation that revealed "consumers around the world see that there is more value in the Dr Martens brand than we are currently charging," Wilson stated at the time.

In the six months leading up to the end of September, both revenue and profit were lower than the previous half year, largely due to decreased volume sales in the US. However, this was offset by an 11% rise in direct-to-consumer (DTC) sales worldwide.

The business continues to face challenges in the US due to the increasingly tough consumer environment. In June, Wilson acknowledged that its performance in the US had been weak, partly due to a shift in marketing focus away from their core boots. The company is now using its European marketing plan as the basis for its efforts in the US, with a goal of revitalizing the boots market.

During a call with investors today, CFO Jon Mortimore reaffirmed our commitment to making brand-first decisions, even in the challenging US trading environment. He emphasized our dedication to preserving the integrity of our brand.

Mortimore also discussed the ongoing restructuring of the leadership team and supply chain in the US, aimed at rebuilding the brand's equity. He highlighted our disciplined approach to marketing and continued investment in new product innovation. However, he acknowledged that seeing results will require patience.

Dr Martens recently appointed Ije Nwokorie as its first global chief brand officer. Nwokorie will begin the role in February and will report to Wilson. He will be responsible for managing global marketing, product, and strategy, and will play a key role in defining the brand's strategy, vision, and direction for future growth. Wilson has expressed that Nwokorie's main objective is to ensure that Dr Martens' marketing is clear and effective in its communication with customers.

Joined up approach

In October, Dr. Martens rolled out its worldwide ‘Made Strong’ initiative, which Mortimore referred to as the company's "significant branding moment and investment." According to him, the campaign "addresses both the logical and emotional truths about the Dr. Martens brand and its clientele" and aims to heighten brand recognition globally, attracting new customers to the brand.

Dr. Martens' commitment to marketing was highlighted by Mortimore, who reiterated the company's goal of increasing marketing spend by 50 basis points of revenue annually. Wilson emphasized the brand's focus on being a brand-first, digital-first business, but also stressed the need for marketing activities to reach both real-world and online platforms.

In Europe, this means there will be more investment in experiential and social media marketing for important product launches. Mortimore elaborated: "We have backed the Made Strong campaign in Europe through events, social media, and outdoor marketing, making up the majority of the campaign across the region." The opening of its second flagship London store was also supported by social media activity.

On the other hand, the new marketing team in the USA has concentrated on major cities, launching the Made Strong campaign with an event in New York City in mid-October. While the event had 1,200 attendees, it "most importantly" reached 22 million people on social media.

Dr Martens' revenue decreased by 5% to £396m, with profit before tax dropping to £26m in the half year ending 30 September, which was mainly due to a 9% decline in global pairs sold to 5.7 million.

During the same period, Direct-to-Consumer (DTC) revenue grew by 11%, now accounting for half of the group's revenues. In the UK, DTC growth increased by 8% year on year, and in Europe, DTC growth ranged from 19% in France to 22% in Germany. Italy stood out with DTC performance up by more than 60%. Additionally, in EMEA, the brand's wholesale business is "incredibly clean," with sales to consumers up and inventories down by 20%.

The brand’s forecast for the rest of the year has been negatively impacted by underperformance in the US. Wilson admitted that last year's poor performance was a result of insufficient marketing investment, but attributed the recent decline to overall weakness in the US boots market. Additionally, the brand was affected by unusually warm October weather, prompting a one-month delay in its main marketing spend for the season.

The disparity in performance was also clear in the online sector. Ecommerce saw a 5% growth, driven by a 19% increase in EMEA and an 18% increase in Asia Pacific. Despite these strong performances, America experienced a 10% decline in constant currency basis, as per Wilson.