Dr. Martens is confident its direct-to-consumer strategy, alongside price increases and building a “scarcity mindset” amongst its consumer base will feed growth this year and beyond.
Claiming the footwear brand is “stronger than ever”, CEO Kenny Wilson, added that the business “always” wants demand to be greater than supply. The strategy appears to be working, with Dr. Martens selling 14.1 million pairs of boots, shoes and sandals in the year to 31 March, twice as many as it sold four years ago.
“We have done exactly what we said we’d do one year ago, despite all of the global challenges,” said Wilson, speaking to media this morning (1 June) as the company announced its financial results.
Dr. Martens reported an 18% rise in revenue year on year to £908.3m, which the brand says has been driven by its DTC strategy amid “unprecedented Covid-19 disruption” to its supply chain.
Adjusted pre-tax profits were up 43% to £214.3m in the year to March, compared to the same period in 2021. Success is in line with the high-teens growth guidance given when the brand made its stock market debut in January 2021.
In times of tight spending, consumers turn to brands they trust, icon brands.
Kenny Wilson, Dr. Martens
Direct-to-consumer continues to grow ahead of wholesale – in line with the brand’s strategy – and ecommerce revenue is up 11%. Retail revenue recovered “very strongly”, as UK and US customers returned to shopping in store. Full year retail revenue rose by 86% to £185.6m, compared to £99.7m in 2021 when the impact of Covid was more acute.
While the cost of living crisis has the potential to impact consumer spending habits, Wilson is confident Dr. Martens will weather the storm.
“In times of tight spending, consumers turn to brands they trust, icon brands,” said Wilson, pointing to the “durability” of a pair of Dr. Martens as an “investment purchase”.
At the same time, the brand is confident price increases of 6% globally on an annualised basis won’t have a negative impact on consumers. The brand carried out a pricing study across its priority markets last summer to calculate perceived value for money and elasticity of demand, which informed the increase. Dr. Martens anticipates no impact on demand as a result of the price hike.
The business points to “strong” demand from wholesales partners despite the price increases, with Dr. Martens’ wholesale order book already written for the autumn/winter 2022 season.
Wilson added that the brand “didn’t put through the full extent of price increases” it could have in order to maintain headroom. The plan is to carry out research again this summer to dictate 2023’s prices, with the brand having not implemented any price increases in the past two years.
Building ‘brand energy’
Driving brand equity is always the first priority when it comes to keeping the “iconic” product highly relevant and driving growth for the future, said Wilson.
Dr. Martens’ recent brand survey found awareness of 72%, up four points, and familiarity up six points to 47%. The company describes employees as acting like “brand custodians”, protecting and enhancing the brand for future generations.
This approach is detailed across the four pillars of the “fine-tuned” DOCS Strategy. Those pillars consist of direct-to-consumer first, organisational and operational excellence, consumer connection and supporting brand expansion with B2B.
To further DTC growth, Dr. Martens is increasing its own stores and expanding its digital platforms and omnichannel capabilities, as well as building a “profitable” resale, repair and end of life business model.
To drive consumer connection, the company is prioritising the innovation of its ‘icons’ range and improving marketing effectiveness by “harnessing insights and a digital-first mindset”.
The brand has committed to increasing its marketing investment, noting its strong social media presence, which rose 8% year on year. Wilson confirmed that the “vast majority” of the marketing spend goes on digital channels, with some money on out-of-home to build a “proximity effect” to stores.
The theory behind the digital spend is that many consumers buy their first Dr. Martens when they’re in the 15-25 age bracket.
“That demographic usually has mobile phone pinned in their hand,” Wilson added.
The brand plans to invest in processes and IT to “unlock value” and transform its use of technology, as well as driving loyalty with product innovation and “year round consumer relevance”. Dr. Martens also intends to partner with “fewer and better” B2B partners.
Speaking about the brand’s recent collaborations, Wilson explained the goal is to deliver “brand heat and brand energy”, with tie-ups being less about volume and more about the product scarcity factor. He says consumers should not expect to see a “massive increase” in collaborations.
Dr. Martens brought in its “first ever” CMO in April this year, Meg Johnson, following the departure of chief product and marketing officer Darren Campbell in December. While it is “early days” in her tenure, Wilson said Johnson is travelling and “soaking up” the organisation across its different markets.