Research: Consumer
Dr. Martens (DOCS) recently hosted a teach-in, focusing on product and innovation. The event explored how DOCS aims to keep its brand and range appealing to consumers, and outlined its sustainability initiatives, with presentations from its leadership team. Successful turnaround of operational issues in North America and delivering consensus expectations could enable the valuation discount to peers to narrow.
Dr. Martens |
Brand at the heart of the story
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Retail |
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22 September 2023 |
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Dr. Martens (DOCS) recently hosted a teach-in, focusing on product and innovation. The event explored how DOCS aims to keep its brand and range appealing to consumers, and outlined its sustainability initiatives, with presentations from its leadership team. Successful turnaround of operational issues in North America and delivering consensus expectations could enable the valuation discount to peers to narrow.
Product innovation and brand appeal
The DOCS brand has global appeal with iconic footwear silhouettes. The group has invested in its product team to enable growth at scale and increase its go-to-market functions. The group has four ‘icons’ within its product range and innovation is always through a DOCS lens, whereby the team takes inspiration from its archives to refresh, renew or revolutionise products. A key aspect of driving brand awareness and relevance among a younger demographic is through partnerships and collaborations with globally recognisable influencers and organisations. The group then ensures marketing campaigns on social media and partnerships with high-end media platforms create further ‘brand heat’. DOCS’ consumer base is very diverse as well as loyal, with the brand consistently above peers for sentiment scores among UK consumers, which continues to be a driver for the group’s global growth prospects.
Bringing sustainability to the fore
Management presented DOCS’ sustainability strategy around ‘planet, product and people’. The group is looking to reduce its environmental impact through, among others, ensuring its leather is sourced from Leather Working Group certified tanneries as well as exploring alternative PVC products to use in its footwear. Commitment targets of 100% natural materials from regenerative agriculture by 2040 and removing fossil-fuel chemicals by 2035 are providing pathways for its sustainability initiatives. Management believes the second-hand market is a huge opportunity for the group and plans to launch a UK repair service and trial a second-hand re-wear site in the US.
Valuation: Value at current multiples
DOCS currently trades on discounts of 48% and 32% for EV/EBITDA and P/E, respectively, in FY24 to global luxury, global footwear and sportswear brands. A weak share price performance since IPO in early 2021 due to a combination of operational issues and wider market effects means its valuation, naturally, looks low relative to its historical trading multiples. Consensus expects further margin declines in FY24 before a recovery in FY25.
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Consensus estimates
Source: Refinitiv. Priced at 21 September 2023. |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Investment Companies
HgCapital Trust (HGT) delivered a 4.6% NAV TR in H123, with its performance continuing to be mostly driven by robust trading across its portfolio (with the associated increase in portfolio value in H123 of £203.8m, or 8.3% of end-2022 portfolio value) and a minor positive impact from multiples (£34.1m or 1.4%). Hg was cautious in terms of new platform investments in H123, but saw record high M&A activity across its portfolio, highlighting increasingly attractive pricing and a strong flow of opportunities for smaller bolt-on investments. HGT’s 60% coverage of outstanding investment commitments by its liquid resources makes the trust well positioned for a potential uptick in PE deal activity.