Renowned rebel bootmaker Dr. Martens, according to Marathon Partners’ Mario Cibelli in an exclusive interview with Axios, is poised for prosperity under the stewardship of a multi-brand owner such as Deckers or a luxury holding company.
Why it’s significant: The activist investor is advocating for a strategic reassessment, anticipating it will culminate in the company’s eventual sale.
In Cibelli’s words: “A multi-brand owner might possess a keener understanding of the global markets where this brand could flourish or expand more rapidly.”
Such an owner would wield greater bargaining power with suppliers, he suggests. Another logical contender could be a robust single-brand entity like newly listed Birkenstock. “Undoubtedly, being part of a larger entity would enhance profitability,” Cibelli asserts.
However, he cautions: “Not every potential buyer may be prepared to make an offer when a company decides to initiate a process.”
Ideally, an auction would attract a diverse mix of “semi-strategic” financial contenders like L Catterton or private entities known for their brand acquisitions, which could galvanize strategic players into action more swiftly, Cibelli notes. Background check: Permira acquired Dr. Martens in 2014 for $485 million before launching it into the public sphere in 2021 with a valuation of £3.7 billion. Permira still retains approximately 38.5% of shares.
The company’s stock has since experienced a steep decline of about 75%, attributed by Cibelli’s letter to “dwindling earnings, revised projections, and shifting market dynamics” affecting small publicly traded firms. In figures: The company’s current market capitalization hovers around $1.1 billion.
Dr. Martens reported an EBITDA of $276 million for the trailing 12 months ending in September 2023, translating to a current EV-to-EBITDA ratio of 6.3x.
“In terms of profitable footwear companies with considerable scale, we haven’t encountered one with a lower valuation than Dr. Martens,” Cibelli remarks, suggesting the business is worth at least $2 billion.
Dr. Martens’ valuation is approximately half the median multiple of peers like Deckers, Crocs, Skechers, On Holding, Steve Madden, Birkenstock, and Wolverine World Wide. What’s on the horizon: A potential sale isn’t the sole option under consideration if a strategic review is undertaken.
The board might opt to streamline expenses to safeguard profits, repurchase additional shares, boost dividends, or conceivably pursue acquisitions—although Cibelli believes the latter is improbable.