- Dr Martens shares have still slumped by over 80% from their IPO price
Dr Martens shares could rise by around half during the next financial year, according to a leading European broker.
Berenberg predicts the bootmaker’s shares could reach 102 pence, compared to its closing share price of 67p on Wednesday, due to strong signs of a turnaround.
It pointed to the group’s third-quarter results, which showed its turnover rose by 3 per cent at constant currency rates in the three months ending 29 December, after falling significantly in the previous six months.
Growth was partly achieved with a rebound in the firm’s direct-to-consumer sales in the United States, where consumer demand has lagged in recent times amid inflation and economic uncertainty.
Berenberg also noted that Dr Martens had pivoted its advertising strategy away from a ‘brand-storytelling approach’ and towards highlighting products, had cut operating costs, and enhanced its balance sheet.
The final factor was achieved through a refinancing deal that comprised a £250million term loan and a £126.5million revolving credit facility, as well as reducing inventory levels.
Prediction: Dr Martens shares could rise by around half during the next financial year, according to a leading European broker
Dr Martens accumulated excess inventory following its flotation on the London Stock Exchange in 2021, amid more cautious behaviour by wholesale customers, especially in the US.
Excess stock volumes, supply chain problems and operational issues at its Los Angeles distribution centre forced the group to open temporary warehouses during 2022, contributing to lower annual profits.
Yet Berenberg said the London-based company has ‘clear growth potential,’ citing its strong level of brand awareness, considerable gross margin of about 65 per cent, and positive free cash flow generation.
The broker’s analysts remarked: ‘Dr Martens has distinctive products and high brand awareness in the key markets in which it trades around the world.
‘However, its market shares are very low in most of its markets, and the brand has no exposure at all in some large and attractive markets around the world, such as the Middle East, India and South Africa.
‘We believe the company should be able to continue its emerging recovery trend and pursue growth over the years to come.’
Dr Martens shares rose 3.9 per cent to 69.8p by mid-Thursday afternoon, but have still slumped by over 80 per cent from their initial public offering price of 370p.
Dr Martens was founded in 1947 by Klaus Maertens and Herbert Funck when the former created a boot to help heal from a broken foot.
The brand has since been widely adopted by various youth subcultures, ranging from mods to punks, goths, grunge and Britpop.
Initially very popular among police officers and factory workers, the firm’s shoes have been worn by celebrities, including singer Dua Lipa, David Beckham and models Gigi Hadid and Kendall Jenner.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
This article was originally published by a www.dailymail.co.uk . Read the Original article here. .