- Birkenstock beat holiday quarter revenue expectations, reporting a 22% year-on-year jump, as the German sandal company benefited from higher pricing and rising U.S. demand.
- The company swung to a loss during the quarter as it worked to expand its production capabilities.
- Birkenstock started trading on the New York Stock Exchange in October under the ticker “BIRK.”
Birkenstock on Thursday beat holiday quarter revenue expectations, reporting a 22% year-on-year jump, as the German sandal company benefited from higher pricing and rising U.S. demand.
As a newly public company, Birkenstock is still getting into a public reporting rhythm and only just released its fiscal 2023 results and 2024 guidance a little over a month ago. On Thursday, it said it stands by guidance issued then and still expects sales to be between 1.74 billion euros ($1.89 billion) and 1.76 billion euros ($1.91 billion), representing growth of 17% to 18%.
Here’s how the shoemaker did in its first fiscal quarter compared with what Wall Street was anticipating, 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.
The company reported a net loss of 7.15 million euros ($7.75 million) for the three-month period that ended December 31, 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 reported a profit of 17 million euros ($18.4 million) or 9 euro cents per share.
Sales rose to 302.9 million euros ($328.5 million), up 22% from 248.5 million euros ($269.4 million) a year earlier.
CEO Oliver Reichert has said the company deliberately engineers its distribution strategy so demand is higher than supply but its working to build out its production capabilities to narrow that gap. The chief executive said those investments, along with other efforts the company is undertaking to drive growth, is having a “planned” but “temporary” impact to profitability.
“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,” said Reichert. “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 inched down to 61% from 61.7% during the same period last year, with Birkenstock citing “unfavorable currency translation and the planned, temporary under-absorption from our ongoing capacity expansion.” The company said it continues to carefully track input costs and is mitigating inflationary pressures with “executed, selective price increases.”
Adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) rose 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 started trading on the New York Stock Exchange under the ticker “BIRK” in October, saw a muted debut when it first hit the public markets, with shares sliding more than 12% on its first day as a public company. Shares have since rebounded and are up more than 5% this year, as of the Wednesday close.
In January, the company reported its fiscal 2023 results and said it was the most successful year in the company’s nearly 250-year long history. Sales grew 20% and the retailer made strides in growing its direct-to-consumer business, which comes with better profits and more customer insights than relying on wholesale partners.
During the quarter, Birkenstock saw more gains in its direct channels and said DTC sales accounted for 53% of overall revenue.
As other retailers like Nike, Under Armour and Timberland-owner VF Corp contend with soft demand in North America, Birkenstock reported outsized strength in the region with sales up 21% during fiscal 2023. That momentum continued during its fiscal first quarter with sales up 14% in the region. In Europe, where demand in some parts has been softer than in North America, sales grew 32%, and in the Asia Pacific, Middle East and Africa region, revenue jumped 47%.
The recent growth comes several years after private equity powerhouse L Catterton acquired a majority stake in Birkenstock in 2021, ending nearly 250 years of family ownership that began when German cobbler Johann Adam Birkenstock founded the company in 1774.
Birkenstock’s new owners set off on an aggressive growth strategy that focused on growing direct-to-consumer sales, exiting certain wholesale partnerships and focusing on driving sales of items with higher price points. Within a few years, its sales nearly doubled and its market cap is now around $9.7 billion, double its 2021 valuation of $4.85 billion.
Since going public, Birkenstock has used some of its proceeds to pay down debt. In the fall, it made a number of debt payments that reduced its net leverage. As of the end of December, Birkenstock was levered at 2.6 times EBITDA.
Correction: Birkenstock reported a loss per share of 4 euro cents. Adjusting for one-time items, it reported a profit of 9 euro cents per share, matching Wall Street estimates according to LSEG. An earlier version of this story misstated those figures.
Source: Business - cnbc.com
