Birkenstock, Newly Public, Surpasses Revenue Expectations with Higher Pricing and Increased U.S. Demand

Birkenstock on Thursday surpassed holiday quarter revenue expectations, revealing a 22% year-on-year surge, as the German sandal company profited from increased pricing and escalating U.S. demand.

As a recent public entity, Birkenstock is still adapting to a public reporting routine and only recently disclosed its fiscal 2023 results and 2024 guidance a little over a month ago. On Thursday, it affirmed the previously issued guidance and anticipates sales to range between 1.74 billion euros ($1.89 billion) and 1.76 billion euros ($1.91 billion), indicating growth of 17% to 18%.

Here’s how the shoemaker performed in its inaugural fiscal quarter compared to the projections of Wall Street, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: 9 euro cents adjusted vs. 9 euro cents expected
  • Revenue: 302.9 million euros vs. 288.7 million euros expected.

During the three months ending December 31, the company reported a net loss of 7.15 million euros ($7.75 million) or a loss of 4 euro cents per share. A year earlier, it reported a loss of 9.19 million euros ($9.96 million) or a loss of 5 euro cents per share. Excluding one-time items, Birkenstock disclosed a profit of 17 million euros ($18.4 million) or 9 euro cents per share.

CEO of Birkenstock
CEO Reichert emphasizes an engineered distribution strategy, aiming for sustained demand exceeding supply.

Sales escalated to 302.9 million euros ($328.5 million), marking a 22% increase from 248.5 million euros ($269.4 million) a year earlier. CEO Oliver Reichert emphasized the deliberate engineering of the company’s distribution strategy to ensure demand exceeds supply, albeit efforts are underway to enhance production capabilities to narrow that gap.

Reichert noted that these investments, coupled with other growth initiatives, are impacting profitability as planned, albeit temporarily. “Our results for the first quarter of 2024 once again demonstrate the resilience of our business model and the strong sustained demand for our products. Given our engineered distribution model, demand continues to outpace supply in all regions, channels, and categories,” Reichert stated.

“In the medium-term, we are confident we will continue to deliver our objectives of a gross profit margin over 60% and an adjusted EBITDA margin in the low thirties percent.” The company’s gross profit margin slightly decreased to 61% from 61.7% during the same period last year, with Birkenstock attributing this to “unfavorable currency translation and the planned, temporary under-absorption from our ongoing capacity expansion.”

The company emphasized its vigilant monitoring of input costs and its strategy to mitigate inflationary pressures with “executed selective price increases.” Adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) surged 12% year-on-year to 81 million euros, with an adjusted EBITDA margin of 26.9%, down from 29.1% a year earlier.

The newly public shoemaker, which commenced trading on the New York Stock Exchange under the ticker “BIRK” in October, experienced a subdued debut in the public markets, with shares declining over 12% on its first day. However, shares have since rebounded, showing an increase of more than 5% this year as of the Wednesday close. In January, the company disclosed its fiscal 2023 results, marking it as the most successful year in its nearly 250-year history.

Sales surged 20%, and the retailer made significant progress in expanding its direct-to-consumer business, which offers better profits and deeper customer insights compared to wholesale partnerships. During the quarter, Birkenstock observed further growth in its direct channels, with DTC sales constituting 53% of overall revenue.

Fiscal 2023 marks Birkenstock's most successful year,
Fiscal 2023 marks Birkenstock’s most successful year, achieving 20% sales growth and expanding DTC business.

While other retailers like Nike, Under Armour, and VF Corp, owner of Timberland, faced soft demand in North America, Birkenstock reported remarkable strength in the region, with sales climbing 21% during fiscal 2023. This momentum persisted into its fiscal first quarter, with sales increasing by 14% in the region. In Europe, where demand in some areas lagged behind North America, sales surged by 32%, and in the Asia Pacific, Middle East, and Africa region, revenue leaped by 47%.

This recent growth follows several years after private equity firm L Catterton acquired a majority stake in Birkenstock in 2021, concluding nearly 250 years of family ownership since German cobbler Johann Adam Birkenstock founded the company in 1774.

Under its new ownership, Birkenstock pursued an aggressive growth strategy focusing on expanding direct-to-consumer sales, discontinuing certain wholesale partnerships, and emphasizing the sales of higher-priced items. Within a few years, its sales nearly doubled, and its market capitalization now stands at around $9.7 billion, doubling its 2021 valuation of $4.85 billion.

Since going public, Birkenstock has utilized some of its proceeds to reduce debt. Last fall, it made several debt payments, thereby reducing its net leverage. As of the end of December, Birkenstock’s leverage stood at 2.6 times EBITDA.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x