Proactive Investors - Dr Martens PLC (LON:DOCS) stock market rating is on something of a knife edge with analysts at Barclay’s keen for visibility over the boot maker’s direct-to-consumer sales channel.
A less than emphatic recent trading update leaves investors guessing in regards to the company’s prospects for the rest of the year.
Some retail market indicators, ‘brand heat’ measures, are moderately encouraging but demand in the United States could be key, suggests analysis from Barclay’s Richard Taylor.
“We believe there are a wide range of potential outcomes for financial performance, and believe that observing D2C trends, especially any signs of improvement in the US, will be critical to judge whether a recovery can be achieved, or whether forecasts are still too optimistic,” Barclays (LON:BARC) analyst Taylor said in a note.
Dr Martens in late May warned investors over its sales which it described as “very second half weighted”.
Analysis on the day of Dr Martens’ results for the 2024 financial year, released 30 May, described the numbers as “expectedly poor”, whilst flagging continued weak consumer demand in the United States as a key factor.
“Given the revenue decline, the company note that FY25 will be "very second-half weighted, particularly from a profit perspective", and we assume a loss before tax in H1 of £26m, before a rebound to PBT of £47m in H2 FY25, vs £50m in H2 FY24,” Talyor noted.
“This reflects a key target of "positive USA DTC growth in the second half". We note that this is a target, and there is uncertainty as to whether this will be achieved, but we believe is based on a variety of initiatives in the US.”
The Barclays analyst added: “We edge our Price Target (NYSE:TGT) higher to 85p (from 80p, compared to the current price of 82p) … We make this small change as the data we follow on the brand looks slightly better.
“The FY25 PE rating at our Price Target of 30x is a premium rating, albeit we note that this falls sharply to c16x in FY26, when some of the step-ups in costs from FY25 do not recur.
“That said, if the planned return to D2C growth in the US does not materialise, there could be downside risk to our H2 FY25 / FY26 forecasts.”
The investment bank has a ‘neutral’ rating for the footwear retail stock.