The 54-year-old Internet celebrity Martin boots are about to be sold

Another influencer brand issued a "red flag".

Recently, Dr. Martens, the original manufacturer of Martin boots that was born in 1960 and has been around for 54 years, came with bad news: it may be for sale.

According to Reuters, Marathon Partners Equity Management, one of Dr. Martens' shareholders, urged Dr. Martens hired the banker and immediately initiated a strategic review, which has the potential to make a difference for Dr. Martens in preparation for the sale.

At this time, the sale was not groundless, and Dr. Martens's "crisis" was already on the horizon.

In July 2023, Dr. Martens was caught in the midst of a store closure in China. According to a number of media interviews, Dr. Martens Beijing Sanlitun, Raffles, Lufthansa Outlet and other stores have been withdrawn, and other stores have been cleared one after another. Not only Beijing, Dr. Martens is promoting the withdrawal of cabinets in Hangzhou, Shanghai, Liaoning, Chongqing, Jiangsu and other cities.

According to reports, in 2023, the brand will have 95 stores in 29 cities in China. As of press time, the data on its official website has not been updated, and the search results of Baidu Maps are: there are currently 2 stores in Beijing, 3 stores in Shanghai, and 1 store in Dalian.

The market value shrank by 83%, and shareholders "couldn't sit still".

Unlike ordinary companies that actively seek to sell, Dr. Martens' team did not take a say on the "sale", but investors urged the process to begin. Obviously, the shareholders have "can't sit still".

Since the brand was listed on the London Stock Exchange in 2021, the share price has fallen below £0.74 from £4.25 on the first day of listing, and has remained around £1 for nearly a year, with a market value loss of 83% from its high point.

This dismal share price performance has already made shareholders anxious.

"Although Dr. Martens has a market capitalization of only $1.1 billion, but its strong brand may attract potential buyers, who may be willing to spend at least $2 billion to acquire Dr. Brown. Martens。 Back on March 15, Mario Cibelli, the manager of Marathon Partners, told Paul Mason, chairman of the board of directors of Dr. Martens, that perhaps the brand should be more valuable.

It is reported that Marathon Partners is not one of the top 10 shareholders of Dr. Martens, but it holds 5 million shares of Dr. Martens is not a small amount. Cibelli told Paul Mason, "Maintain Dr. Martens as an independent, publicly traded company may no longer be in the best interests of shareholders. ”

Behind the sluggish stock price, it is directly related to Dr. Martens's performance.

According to the company's latest earnings report, brand sales fell 21% to £267 million in the third quarter of the 2024 financial year, with e-commerce sales down 9%, direct-to-consumer retail sales down 5% and wholesale sales down 49%. Revenue in the first three quarters of fiscal 2024 plunged 12%.

By region, revenue in Africa (EMEA) fell 2% in the first three quarters, 24% in the U.S. and 9% in Asia-Pacific, with revenue contributing 44%, 42% and 12%, respectively, in the previous fiscal year.

Kenny Wilson, CEO of Dr. Martens, said that the sluggish revenue was partly due to the impact of strategic decisions made by brands, including reducing supply to retailers in the Europe, Middle East and Africa (EMEA) region. On the other hand, it is dragged down by the US market, which is its largest market.

In fact, inflation in the United States continues to run rampant, and the American people are also facing a "consumption downgrade".

According to the Department of Labor, the consumer price index (CPI) in the United States rose by 3.7% year-on-year in September 2023, and the core CPI rose by 4.1% year-on-year.

Around the same time, CNBC conducted a survey of 4,400 U.S. consumers, and 92 percent said they were cutting back on spending. Nearly 80% of consumers cut back on spending on non-essential items, including entertainment, home appliances and clothing. Against the backdrop of increasing financial pressure on consumers, it is true that Martin boots of up to $100-$200 are no longer competitive.

Kenny Wilson has also mentioned, "The big problem we've had in the U.S. is that large wholesale customers have reduced orders for boots and other brands. He added that the timing of new orders is difficult to predict. Dr. Martens has always relied heavily on the wholesale business in the U.S. market, but under the continuous inflationary pressure, customers in this channel usually keep their inventory at low levels to prevent unsalable, so it has a direct impact on the channel's revenue.

Dr. Martens is not the only one who is "hurt" in this consumer environment, such as the recent news that the traditional department store giant Macy's (Macy's) is being invited to buy by a consortium with an unstoppable strong attitude, and PE has come up with 46 billion to buy it.

Dr. Martens also said last year that "the consumption environment in the United States is the most difficult (period) in the world", not only Martin boots, but also Victoria's Secret and other brands have also experienced varying degrees of decline, and the stock price is also in a downward state.

Based on weak sales in the U.S. market, Dr. Martens also expects a decline of nearly 10% in fiscal 2024. In the face of increasingly unoptimistic prospects, it is understandable that investors "can't sit still".

The originator of Martin boots that was brought to fire by "rock music".

Dr. Martens' Martin boots have also taken the world by storm, especially for rock stars. In the 1990s, the first generation of rock veteran Dou Wei wore Martin boots to China, and since then, Martin boots have become a permanent residence in the fashion circle.

The birth of Dr. Martens can be traced back to 1945 in Munich after the war. Klaus Maertens accidentally broke his foot while skiing. During his recovery, he invented a unique and comfortable air-cushioned insole, which replaced the traditional crusty insoles of the time, and took them to his college classmate, Dr. Brown, a medical device engineer. Herbert Funk asks for advice. The two hit it off and started mass production of the shoes, which resulted in significant sales.

However, someone else has made the shoes brand "Dr. Martens".

About 10 years after mass production, the duo began to promote their revolutionary footwear invention abroad through magazines. One day, one of the magazines carrying the news arrived in a small town called Wollaston in the middle of England, where it appeared in the hands of Bill, the third-generation successor of the Griggs family, who was known for the quality of their boots.

Bill was so intrigued by the shoes that he immediately contacted them and obtained an exclusive license. In the hands of Griggs, the shoe made a key change that has influenced us to this day: a more comfortable heel, a rounded but simple British upper, a distinctive yellow stitching along the edges, regular grooves in the sole, and a unique pattern on the sole – on April 1, 1960, the first pair of 8-hole Martin boots, the 1460, was introduced. This is also the case with Dr. Martens sells the best and most classic designs.

Traceback Dr. Martens's long life has given Martin boots the spiritual core of "rebellion" and "personality", and it is none other than rock lovers.

At the time, the shoe was born in an unprecedented wave of change in Europe, and was sought after by skinheads who were keen to show their style attitude.

Peter Townsend, guitarist of the band The Who, used the Martin boots as a symbol of his rebellious element, becoming the first to publicly promote Dr. Thompson. Martens' music personality. So Townsend and the first generation of skinheads changed the course of the brand's history, making this typical pair of cargo boots a necessity of contemporary subculture.

In 1990, rock 'n' roll completely changed the world of mainstream music and allowed Dr. Martens to go further in the world. As stated on its website, "If there is no music, Dr. Martens might just be a pair of ordinary work boots. It's the music that makes Dr. Martens broke free from the constraints of the brand and became his true self. ”

The popular Dr. Martens was listed on the London Stock Exchange in 2021 at a valuation of about 3.7 billion pounds (about 32.2 billion yuan), making it one of the largest IPOs in the UK after the pandemic.

However, since the turn of the millennium, Dr. Martens has been on a downward spiral. Although the brand's influence among celebrities and young people has not faded, the performance of the capital market is enough to reflect the weak growth of its brand. As of now, the market capitalization is only $1.164 billion.

However, Marathon Partners believes that the company's current share price does not match the brand value. Although Dr. Martens is currently in a downturn in performance and stock price, as a legendary brand that has been given a touch of pop culture, its brand value and more than 50 years of precipitation may attract potential buyers who are willing to spend at least $2 billion on the acquisition.

18.3 billion "self-help plan"

In order to reverse the decline of the business, Dr. Martens has already started a series of "self-help" actions.

The first is a series of personnel changes. Dr. Martens appointed Giles Wilson as CFO to succeed outgoing Jon Mortimore to improve the financial performance of the brand's wholesale and retail channels. It is reported that since the appointment was announced, Giles Wilson has purchased nearly 60,000 shares of Dr. Wilson on the open market. Martens stock.

In November 2023, the company also appointed Apple director lje Nwokorie as its first CBO, and he set a target of 2 billion pounds (about 18.3 billion yuan) in revenue for the next stage.

This was followed by a strategic realignment. The brand plans to increase its marketing and e-commerce channels in the U.S. market. At the same time, in the context of slowing consumption and increasing demand for second-hand goods, Dr. Martens launched the "Rewear" service to encourage repurchase by replacing old shoes. According to Wilson, in the first month after the launch of Rewear, 500-1,000 repairs were completed, and the feedback was good. However, it is unclear whether this service will bring about a substantial change to the troubled Dr. Martens.

To achieve the goal of 18.3 billion, the team obviously needs to rack their brains. Regionally, in particular, Dr. Martens is clearly overly reliant on the U.S. market and neglects the growth of the Chinese market.

In fact, Dr. Martens has been building a factory in China since 2003, and nearly a third of the world's production comes from China, but sales in China seem "careless".

Dr. Martens only belatedly entered China 11 years ago, and before that, domestic fans had to satisfy their hunger through copycats and parallel goods. In the following years, in addition to laying out offline channels, Dr. Martens also landed on online channels such as Tmall, JD.com, and WeChat Mini Program, and gradually opened up his popularity. The "highlight moment" in the Chinese market was around 2020, and the financial report showed that in fiscal year 2020, Dr. Martens's revenue in the Chinese market increased by 46% year-on-year.

However, Dr. Martens' rapid growth in the Chinese market did not last long. In the first half of fiscal year 2023, Dr. Martens' revenue from the Chinese market accounted for only 1% of the global market. In the first quarter of fiscal year 2023, due to the impact of the epidemic, its revenue in the Chinese market was directly displayed as 0. In 2022, it achieved global sales of 900 million pounds (8.3 billion yuan+).

This set of data shows that although Dr. Martens brought Martin boots to fire, he faced the embarrassment of being unrecognized in the "main palace" in China. It is enough to see that Dr. Martens's brand recognition is not satisfactory.

In the face of this sluggish performance, Dr. Martens' strategy is to take back the operation rights of the previous stores and gradually switch to direct sales to create a better reputation. As a result, Dr. Martens began to withdraw stores on a large scale in the second half of last year.

From this point of view, the team's judgment of the reasons for the downturn in the Chinese market is obviously not accurate enough.

Indeed, there are also Chinese professionals who have come forward and said that it is more beneficial to the perspective of brand control and brand image to direct sales, but from the perspective of developing the market and being familiar with local resources, the agent model is more advantageous.

"As far as Dr. Martens is concerned, it is not the best solution to take it back now and do direct marketing. Although this brand has accumulated a lot of loyal consumers over the decades, as a fashion consumer brand, whether it is from the research and development innovation of single products, or from the horizontal fullness of the industry, including the number of SKUs, product extension, etc., there is actually a lack of it. ”

Although Dr. Martens plans to launch the Genix Nappa series of shoes made from recycled leather in the first half of this year to develop a sustainable business. It also sounds like a hard time to spark in the Chinese market.

Now, the shareholders are trying to rush it to sell, which may bring a twist to the troubled Dr. Martens. Cibelli also said, "Strategic buyers can further scale operations and create new synergies. ”

Whether the sale can proceed is debatable, but it is certain that Dr. Martens has come to the point where he must change.