German sandal maker Birkenstock reported mixed results in its first earnings report since going public in 2023, sending its shares down over 10% amid concerns over rising costs and margin pressures.
Disappointing Margins Overshadow Strong Revenue Growth
Birkenstock beat revenue expectations in the fourth quarter, with sales up 20% to €199 million. However, earnings before interest, taxes, depreciation and amortization (EBITDA) margin dropped to 21% from 23% last year.
The company warned that rising production and logistics costs will continue to squeeze profitability in 2024. Birkenstock now expects full-year EBITDA margin between 21-22%, down from its long-term target of 25%.
“While we saw continued strong consumer demand, macroeconomic challenges put pressure on our profitability,” said CEO Oliver Reichert. “We remain confident in the strength of the Birkenstock brand and are taking pricing and cost measures to defend our margins.”
Share Price Tumbles Over 10%
Birkenstock completed its €4.7 billion IPO in September 2023, offering shares at €75 in one of Germany’s largest public listings last year. The stock had already fallen 15% from its debut before Thursday’s post-earnings selloff pushed it down another 10% to around €60 per share.
The disappointing margins seemed to catch investors by surprise given Birkenstock’s premium brand name and cult following. Questions remain over the company’s ability to pass on rising costs through higher prices without impacting volume growth.
“It was a reality check for the stock,” said Bankhaus Metzler analyst Jurgen Kolb. “The significant jump in their earnings outlook shows not everything is running so smoothly.”
Strategic Growth Initiatives Progressing
Birkenstock noted several achievements on key growth strategies, including further expanding in the North American and Chinese markets.
The company opened 79 new stores globally, including 30 in Asia, bringing its total retail footprint to over 950 company-owned and partner stores. Birkenstock also relaunched its e-commerce operations in China through a partnership with luxury retailer I.T Group.
Additionally, two new production facilities are under construction in Germany and Portugal to boost output capacity by over 20% by 2025.
“We added significant production capacity to fuel our future growth,” said CFO Markus Bensberg. “While macro conditions are volatile, our initiatives position us well for the long term.”
Outlook Remains Strong Despite Near-Term Pressures
Birkenstock reaffirmed its full-year guidance for 17-19% sales growth in 2024, which would surpass €1 billion for the first time. However, the company slightly reduced its 3-year outlook for annual sales growth to 14-17% from 15-20%.
“Birkenstock remains an exceptionally high-quality business with tremendous opportunities ahead,” noted Barclays analyst Nicolas Champ. “But margin pressures may last longer than expected. The stock could remain volatile until there’s evidence of successful price increases.”
While macroeconomic challenges have emerged, Birkenstock believes its iconic comfort-first sandals and shoes remain resonating with loyal and new customers alike. The company is progressing on its global expansion plans while navigating external cost headwinds.
“We are taking a prudently optimistic view given the uncertain environment,” Reichert stated. “Birkenstock has succeeded across economic cycles before. We are confident in our long-term growth potential.”
Birkenstock At A Glance
| Founded | 1774 |
|---|---|
| Headquarters | Neustadt (Wied), Germany |
| Market Cap | €7.2 billion |
| 2022 Revenue | €995 million |
| Stores | 950+ globally |
The above shows key details on Birkenstock’s history, size, and global presence. The company has over 250 years of shoemaking heritage but continues innovating and expanding as a public company.
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