Hello, everyone, and welcome to the Dr. Martens Q3 trading update. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Ije Nwokorie, CEO, to begin. Please go ahead.
Good morning, everyone, and thank you for joining Giles Wilson and I on the call this morning. You've hopefully all read the statement. In a moment, we'll open up to your questions, but before we do, let me give you a brief update on our strategic progress to date. This year, my first in the role, is a year of pivot, and what do I mean by that? I mean making the necessary changes to set us up for sustained, profitable growth. As I've said each time I've spoken to you, these changes can involve hard decisions, such as returning to a disciplined approach to promotions and incurring the top-line headwind as a result. It means simplifying our operating model and ways of working to ensure our people and processes are truly consumer first and contribute to making this the world's most desired premium footwear brand.
It means the hard work, optimizing each market for the right distribution, so our wholesale partners and our DTC offering complement each other instead of acting in competition. It means reducing reliance on off-price deals, particularly in Americas Wholesale, which, if you remember, was a top-line benefit in FY 2025. And it means starting to assemble a lineup of fantastic distribution partners in new markets, such as LatAm and UAE, where it doesn't make sense for us to have a DTC presence, but where there is still untapped demand for our brand. Those are some of the things that this pivot is about. Our Q3 figures demonstrate the progress we're making. I'd call out Americas, where on a two-year stack basis, our growth rate has accelerated by almost 20 percentage points. This growth was across both retail, through great in-store execution, and wholesale, particularly with our largest partners.
Wholesale across the group performed well, and Q3 is the first quarter in over three years where we've achieved wholesale growth in all three regions. You will recall me talking about the importance of wholesale growth in this, in this strategy. APAC saw a strong full price revenue performance, and again, I'd call out the important market of South Korea as a standout market for us. E-commerce was the channel particularly impacted by our planned reduction in promotions and clearance, and you'll see that across all three regions. EMEA also continued to experience a challenging consumer backdrop, which I'm sure you've heard from other companies. And coupled with our disciplined approach to promotions, this has impacted our DTC results in EMEA.
It is worth highlighting, however, that overall EMEA pairs were slightly up in the period, so we're continuing to get pairs on feet as well as grow our bags and accessory business. We will deliver all four of our strategic objectives this year. What are they? Reducing reliance on discounted pairs in Americas Wholesale, driving pairs growth in those new product families I've told you about, Buwick, Zebzag, Lowell, opening in new markets through our capital light structure, and simplifying our operating model so we better serve our consumers. As we talked about in November, the primary financial metrics we're focused on this year are quality of our revenues, profit before tax, and cash, and on all three, we're performing in line with our plans and happy with our progress.
We remain on track to deliver significant year-on-year growth in PBT through a combination of healthy margin and good quality revenue and strong cost control. We're in year one of a multi-year strategy at Dr. Martens, changing from a channel-first mindset to a consumer-first mindset, so there remains much work to do. While we're pleased with progress, we continue to be laser focused on execution. You'll hear me talk about that again and again. With that, I'll open it up for questions. So, Nadia, over to you.
Great. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. When preparing to ask your question, please ensure to unmute yourself locally. The first question goes to Kate Calvert of Investec. Kate, please go ahead.
Morning, everyone. A couple from me. The first question is, could you talk about the sell-through rate in the U.S. wholesale, and sort of more generally, the quality of the stock in both wholesale and DTC at the end of the period? Are you sort of pretty happy with where you are? And my second question is just on the U.S. price increases for spring/summer, which you're putting through to offset tariffs. Can you talk about how these are being put through? What sort of level of increase has gone through in the end, and are there any early indications on how they've been received? Thanks very much.
Yes, Kate, as you know, this is just a Q3 trading update. We're happy with sell-through rates. It's the reason why the order books are healthy because as partners sell through, they place future orders, and as their confidence in the form. So we're happy with sell-through rates. I'm not going to give you any specific figures, but the health of the order book is the ultimate signal that that is in a good place. And in terms of quality of stock, we're also really happy with what we have and with what our partners have. There is some in-season orders that our partners place, but it really is the order book, the forward-looking order book for autumn/winter 2026 and spring/summer 2027 that gives us the confidence in the order book.
So they have the right levels of stock, inventories are significantly down, and more importantly, they have a broader assortment of products than what they probably had 12, 18 months ago. On U.S. price, it's still early days. We're still in the third week here, but we have no reason, no evidence to be worried about that. Those price increases were different from different products. I can't kind of give you a specific increase by individual products.
But in terms of how the consumer is reacting to that, it's early days, but we've seen nothing to worry of, to worry about. The most important point is to again mention that while this is, this is to mitigate tariffs, this is really the first price increase we've taken in three years in America. So we are not expecting any negative consumer reaction, but we will continue to track how that performs in the marketplace.
Just to say that that's in the marketplace, so wholesale customers, you might have now taken that increase through, so we haven't. It's not we're getting a pushback from our wholesale partners.
Okay, perfect. Thanks so much.
Thank you.
The next question go to John Stevenson of Peel Hunt. John, please go ahead.
Great. Morning, guys. Two questions from me, please. First one, just on the EMEA. I mean, it seems like obviously EMEA has been undermined, I guess, to a degree, by discounting within the wholesale channel. I mean, how do you deal with that, and does that change your thinking in terms of channel mix going forward? And second question, is just on the order book for autumn/winter 2026, which I guess we're in the sort of build for at the moment. Can you talk about how that's going, both in terms of, I suppose, overall size of the order book and also the quality of the order book? We talked about in the past, obviously, the sort of mix of product that's going in there.
Yeah, I'll answer the second question first, and it's very similar to what I just said to Kate about the overall order book. We're happy with the quality of the order book. It's a healthy order book because our partners are buying a spectrum of products, so they're backing our core products but also backing our new stories, and as I've talked to you previously, we can go into more depth in the full year, how we really work closely with them over multiple seasons as opposed to just give them a portfolio of products to place an order on. So, we're really happy with the diversity and the spectrum of assortment that are buying, and that's definitely the case in EMEA.
As you've seen, EMEA wholesale is in growth, and so that's a really healthy relationship there. And it may be, and I wanted to answer that first because the second question, Q3 it was promotional in EMEA and the consumer, generally speaking, across categories, not just in our sector, was looking for deals, and wholesale has a really good role to play for us in that. We've never said that this business shouldn't have promotion.
It is right to reward the consumer with a deal, and particularly in that, as you approach sort of Black Friday, Cyber Monday, that whole period leading up to Christmas, the consumer, rightly so, and all of us do it, looks for a deal, and it is important that our wholesale partners, who have a spectrum of brands to think about, can offer the consumer a deal. I think what we, what we do is to make sure that in our DTC offering, that we don't have to stretch as much as the wholesale partner, partners do.
I talked to you how we need to think about DTC less in competition with wholesale and much more as working in complement, and there are times when I'm really happy for wholesale to offer the consumer a discount, a promotion, and that that's how the consumer will get that product from us, and our wholesale, and our DTC will remain more full price, more with some of our DTC exclusive offerings. So I'll give you an example.
We did really well with our collaborations in Q3, whether that was something like Wednesday or the Marc Jacobs. Those are not available in wholesale. They're only sold in DTC at full price, and so that's the way we think about the marketplace. Every different channel has a role to play, and so I'm not critical of our wholesale partners who offered some discounts. I just want to make sure that in DTC, we don't think that we have to play the same game.
Okay, great. No, thank you.
The next question goes to Anne Critchlow of Berenberg. Anne, please go ahead.
Thanks. Good morning, everybody. I've got two questions, please. The first one is about the return on advertising spend. I'm just wondering if you've been able to size up the effectiveness of your new marketing approach at this point. And then the second question, just about availability. So did you order too lightly in any particular product areas or for any particular regions? I mean, could you have sold more, perhaps, in DTC? Thank you.
So return on advertising spend, I think probably, it's a good question. We're constantly reviewing it. We've got much better data through our customer data platform, so we can start to see how. o we're much more targeted about the way we're doing that type of advertising. I think in terms of the bigger campaigns, we obviously have the big campaign. We have a big campaign or one or two a year. We saw real interest from the rain boots. That particularly was one that generated a lot of interest and a lot of discussion around the product. But how you measure the exact returns is more, I suppose, you see through footfall.
But I think the other bit, I think I would say, is that we are trying to be much more targeted and understand how we work through the e-commerce machine, I think as you see. Yeah. In terms of the second question, which I think is more about lines, I mean, it's like all things we've had a couple, we had a couple of really good products this year. We talked about it at the half year, the Chesney boots. We talked about the fact that actually that sold through really, really quickly, and we saw that with the Dunnet Flower sandal. And yes, it would be lovely to have some more of that with pent-up demand, and it's great because it generates that interest. Generally, stock availability is pretty good. The US particularly has been challenged.
If any area that we would say we've seen two or three really good products that have gone really well. So Chesney was a good one. We saw it with Dunnet, and we've also seen it with the Mary Jane. And our aim is to make sure we keep stocks here. But yeah, ultimately, we're pleased with our overall, I suppose, overall levels of inventory. It's always nice to have a product that gets me scarcity as well.
Great, thank you very much. The next question goes to Adrien Duverger of Goldman Sachs. Adrien, please go ahead.
Hey, good morning. Thank you very much for taking my questions. I'll have two, please. So the first one would be on the U.S. market and specifically the U.S. footwear market. How would you characterize the market backdrop and the performance specifically of the boots category? How would you, you know, qualify the competitive environment? How do you think it's evolving, and how would you describe Docs' relative market share? And my second question would be on the different cost initiatives. How have they tracked relative to your expectations? And in the event of a softer environment in Q4 and into next year, what further scope would there be for cost rationalization? Thank you very much.
Thanks, Adrien. I'll take the first question, and Giles will talk to you a bit about about costs. The, as you can imagine, and as you've probably heard from lots of other people, there is a bifurcation happening in the consumer market in the States, and a lot of it is, to be honest, playing to our benefit. There is a I think it's called the K shape. There is a consumer who is really squeezed at the bottom, that sort of sub-$100 price point, that consumer has been squeezed, and we see in the footwear market that that's a tighter space.
In the space, in the premium space, we participate, and we've seen the customer react really well, particularly to new product, to more of our more elevated products. So that's continued to do well. When you speak about boots specifically, while we are in decline, I just want to point out a couple of things that give us, that we're quite excited and pleased about. One is, again, our discipline of not chasing promotions is part of what we are now confident. If you remember where we were 18 months ago with inventory, there was a significant amount of promotional boots in the marketplace, which was part of what we're confident. We're not doing that this year.
When I look at some of the, either the newer products that we've brought in, and we've talked about some of them, the Chesney High, the Buwick High, the Rain Boot, those products have done really well. When I look at our products, the boots that we've done through our collaborations, those have done incredibly well to the point of actually generating scarcity. So we're confident that we can, in time, turn boots into positive growth. We see enough green shoots in full price boots to be confident about that, and we just have to get through this pivot piece of moving away from discount. But overall, we feel good about that.
As a category, there is limited insight that you can take from that because often consumers are not buying, are not just going into the market to look for a boot; they're looking for a certain kind of boot. And so, when I think about it as a category, yes, it has been in decline. That decline is flattening, and our own business shows that there are enough green shoots to turn boots into positive. I'll let Giles talk about costs.
Yeah, I mean, I think obviously we did the big cost action program last year. We've definitely seen the benefits of that coming through. And there is always opportunity to manage costs. I think the bigger thing I would say is the cultural shift in the focus on cost has been, is a real change year on year. And as you look forward, you know, there's always opportunities to focus on being, you know, more diligent about how we procure. We continue to see good work done in the supply chain, and continue to work with our suppliers on those, particularly as we gain some cost and things like some of the tariffs. But no, I'm comfortable with the way that we're managing costs, and you will see that in the full year, you will see the benefit of cost year-on-year coming through.
The discipline here at all times that you can expect from us is, with a high growth margin business, to manage through the P&L. And so you'll continue to see us talk about that and work that through, to make sure that we are constantly delivering a profitable business. That's the focus, that's a big part of the pivot, and continue to expect that from us.
Thank you, Adrien. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. The next question goes to Alison Lygo of Deutsche Bank. Alison, please go ahead.
Thank you. Good morning, team. Apologies, I got cut off earlier, so sorry if this did get asked in the meantime. But two from me, if that's okay. Just wondering if you could share any color on how retail stores kind of performed across the different markets and maybe what that shape looked like. And then, the second one, just coming back again on that, the wholesale and the more promotionally driven product that was going through the partners there. Any kind of color you can share in terms of the sell-out and what lines that's really coming through? Is it, is it, is it more focused into the boots? Is it more in shoes? Yeah, anything you could share there would be interesting. Thank you.
Thanks, Alison. I'll take the second question, which I'm gonna be fairly short on, and then Jas can talk about color on the retail stores. As we've said, shoes have done really well, and that's across the board, across channels, across markets. And the sell-out in those is really good. When I look at the order book, though, you begin to see a bigger mix, and so like us, our partners are excited about the wider spectrum of product. But if you're asking about Q3 performance, and it's a trading update, so I'm not gonna go into too much detail on that.
But obviously, shoes, we are really pleased with the performance of shoes. We're really pleased with the performance that we're beginning to see the turnaround in boots, and as we move into the spring season, we're excited about our sandals offering. So it's a broad spectrum of success that we're beginning to see and again, still early days, but shoes is the silhouette that is performing the best.
Retail, it is definitely different by region. I think it's actually clear we've seen good performance in our US retail. We've seen good performance in our APAC retail, particularly in South Korea, which we referenced, solid performance in Japan. EMEA has been the drag on retail generally. That's, you know, been driven by both promotional activities. Obviously, they have more in stores here in this part of the world, and just generally the consumer backdrop. But EMEA has been the drag on the overall retail, but a good overall performance, I mean, actually a really strong performance in Japan and the US.
That's great. Thanks, guys.
Thank you. We have no further questions. I'll hand back to Ije for any closing comments.
Thank you, everybody, so much for your time this morning and engagement. If you have any questions later on today, please do reach out to Bethany Barnes. I look forward to seeing you all in May when we present our full FY26 results and give you a fuller update on our strategic progress. Thank you so much, and enjoy the rest of your day. Bye-bye.
Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.