By Eva Mathews and Helen Reid

(Reuters) -Dr Martens shares dropped more than 10% on Thursday after the British bootmaker warned investments would hit profit margins this financial year and the consumer backdrop in the United States “was the toughest in the world at the moment”.

The U.S. is the company’s second-largest market and weakness there contributed to a drop in core earnings of more than a quarter in the year ended March 31.

Dr Martens, whose pricey work boots have been fashionable since the 1960s, has been struggling with waning demand in the U.S. as consumers cut back on discretionary spending amid high inflation. It has also faced logistical problems at a recently opened distribution centre in Los Angeles that drove up costs.

“We think that the consumer backdrop in the United States is the toughest in the world at the moment,” CEO Kenny Wilson said in an interview, adding that looked set to continue.

“I think their consumer has been under pressure for a longer period of time … but this is also a sort of shared misery with everyone else,” Wilson added.

The company sees core profit (EBITDA) margins falling 1-2 percentage points this fiscal year as it plans to invest 50-55 million pounds over the coming years, including in new stores.

Profit before tax fell 26% to 159.4 million pounds ($198 million) in the year ended March 31.

“A series of profit warnings … has knocked investors’ confidence in the iconic British bootmaker – and its full year results are unlikely to inspire any immediate change in their perceptions,” said eToro analyst Mark Crouch.

One bright spot was that annual revenue crossed 1 billion pounds for the first time, helped by demand in Europe and Japan.

Direct-to-consumer sales also made up more than half of the total, in another first.

Dr Martens said price increases would help offset some of the cost pressures. It raised prices 6% last fiscal year.

Its shares were down 10% to 140.98 pence at 0850 GMT.

($1 = 0.7923 pounds)

(Reporting by Eva Mathews in Bengaluru and Helen Reid ; Editing by Sherry Jacob-Phillips and Mark Potter)

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