Marathon Partners urges Dr Martens to buy back stock, detail expense cuts

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Marathon Partners urges Dr Martens: Reuters cites persons familiar with the situation as saying that the investment company Marathon Partners Equity Management is putting more pressure on the well-known British boot maker Dr. Martens to reveal specific plans for cutting costs and repurchasing shares.

 Approximately two months ago, Marathon Partners’ managing member Mario Cibelli voiced his concerns. Cibelli proposed that Dr. Martens consider a change in ownership following a strategic evaluation. His argument was that the company, renowned for its iconic boots since the 1960s, could reap significant benefits from such a transition.

 When Dr. Martens releases its earnings later this month, Cibelli reportedly told the company‘s leaders to give specific objectives, especially for cutting costs.

 Regarding Marathon Partners’ latest moves, Dr. Martens chose not to comment.

 Dr. Martens’ stock price plummeted to a historic low of 65.50 pence last month, following the company’s projection of a double-digit revenue decline in its crucial U.S. market for the year. This significant drop in stock price has led to an 81% decrease in Dr. Martens’ valuation since its IPO in 2021, underscoring the urgency of the current situation.

 Cibelli insists that the value of the company is unaffected by the drop in share price. He recommends that management start stock buybacks to take advantage of the current low share price.

 With Dr. Martens predicted to soon produce substantial free cash flow, this move could not come at a better time.

 Based on modest growth, cost-saving efforts, and the normalization of excess inventory levels, Cibelli predicts that Dr. Martens might generate around $750 million in free cash flow over the next three years.

 Cibelli claims that investors are still worried about the details of the cost-cutting initiative and how it will affect profitability.

 As one of the top 30 investors in Dr. Martens, Marathon Partners holds nearly 5 million shares. With a current market value of nearly $1 billion, Cibelli has speculated that Dr. Martens’ strong brand could make it an attractive takeover target, potentially drawing bids of $2 billion or more, a prospect that could pique the interest of many stakeholders.

 If Dr. Martens received a formal approach from a potential buyer in the United Kingdom, they would be obligated to publicly publicize it.

 It is worth mentioning that last year, Dr. Martens announced the appointment of Giles Wilson as its new chief financial officer. Wilson was recently welcomed to the position. The new term of Wilson will begin next month.

 It’s worth noting that Dr. Martens was listed publically again in 2021 after being acquired by private equity firm Permira in 2014. About 38.5% of Dr. Martens’ stake is still held by Permira.

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