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From skinheads to the stock market: how Dr. Martens became mainstream

A brand accepted by punk and skinheads as a symbol of youthful rebellion, Dr. Martens doesn’t seem to fit the mainstream stock market most naturally.

But 60 years after the thick lace-up boots were first sold, the UK company is preparing to go to the London Stock Exchange earlier this year. Its valuation could range from £ 3bn to £ 4bn, according to three people who were briefed on the process.

That’s about 20 times the company’s bottom line, and 10 times more than Permira, a private-equity fund backer who paid Dr. Martens £ 300m seven years ago. It also sealed the revival of a business that was on the verge of bankruptcy 20 years ago, and family-owned manufacturers have accumulated tens of millions of annual losses.

“This business wasn’t previously managed as an iconic brand,” said Kenny Wilson, CEO for three years.

Wilson asserts that the recent issue is not about the brand. He blamed the previous loss of the “manufacturing mindset” of the Griggs family, who founded Dr. Martens in 1901 (Bill Griggs launched the famous boots in 1960).

“This doesn’t mean it sounds arrogant, but if you’ve been there before, it’s easier to run a large global business,” said Wilson, who previously worked for Levi’s and Caskidson.

The machinist prepares the upper and sole of the Dr Martens boots © Dr Martens

He claimed that Dr. Martens was around the corner when the Griggs family sold its majority stake to Permira in 2014.

Dr. Martens increased sales during the pandemic. Sales for the nine months to December 2020 increased 14% year-over-year as online sales helped mitigate the impact of store closures. In the year to March 2020, the business generated £ 101m in pre-tax profit and revenue increased 48% to £ 672m.

A compelling recovery from the early days of private-equity fund ownership, with the company severing vendor ties and saying that discounts “did not fully support” the strategy, resulting in a sudden end to significant sales growth. Did. Example.

“Many decisions [at that time] I was spending money out of the company, “said a person near the company.

Dr. Martens performance under Permira

David Sudens, who completed his 12-year term as CEO of Dr. Martens shortly after the acquisition of Permira, said the Griggs family trusted private-equity funds to grow their brands and expand their store network. Told. “The results speak for themselves,” he added.

One of Permira’s goals was to bring Dr. Martens back to its roots by refocusing on the “original” range of 10 classic-style leather boots. Almost two-thirds of sales are now from the collection, compared to just one-third when Permira invested.

“When Permira acquired the company [it] It’s become a business of fishermen’s sandals and sturdy boots, “said Wilson, explaining how dangerous it is for Levi’s celebrity product-centric brands to deviate significantly from their origins. ..

Northern Soul Dancer in Dr. Martens at Wigan Casino in the Mid-1970s © PYMCA / Johnston Press

Dr. Martens returned to profitability under Permira’s ownership, but that period was not without problems. In recent years, brands have been complaining that the quality of their shoes is different than before.

Wilson dismissed “rumors” about the quality of Dr. Martens boots and said the company has been using the same leather supplier for the past 20 years. However, there are no plans to reintroduce the lifetime warranty, which was abolished three years ago due to low demand for more expensive boots.

Wilson said the idea that private-equity groups boosted corporate profits through cost savings doesn’t apply in this case. “All of this about private-equity funds not investing in business doesn’t apply to Dr. Martens.”

Permira used relatively low debt to buy Dr. Martens, which had a net debt of £ 65m at the end of March. The company spent £ 60m in 2019 and another £ 35m in 2020 to pay dividends.

The company plans to list 25% to 40% of the company and issue new shares to sell existing shares without raising additional funding.

According to Peter Morris’ analysis, if a Permira executive group sells all of its shares at a valuation of £ 4 billion, the deal will bring £ 545 million to a pool of funds for bonus payments known as “Carry Interest.” Will be added. Associate scholar at Saïd Business School, Oxford University.

Buoyancy coincides with the time when both destructive attitudes and thick boots are in fashion again.

The brand expects increased sales in both the US and China © Dr Martens

The company plans to use it to expand sales in the United States and China. Last year, we sold 12 pairs of boots per 1,000 people in the United States and one pair of boots per 1,000 people in China, compared to 31 pairs per 1,000 people in the UK.

However, Neil Sanders, managing director of the retail division of Global Data consultancy, which has been following Dr. Martens since the late 1990s, warned that the resurgence should not be taken for granted.

“One of the problems with iconic brands is that they are very popular and then go through a period of a bit less cool,” Saunders said. “It’s part of the natural fashion cycle,” he added.

From skinheads to the stock market: how Dr. Martens became mainstream

Source link From skinheads to the stock market: how Dr. Martens became mainstream

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