The famous German sandal brand reported record sales for the third quarter ended June. But its performance fell short of Wall Street’s expectations, and the company’s shares were immediately punished.
The stock market is sometimes eternally dissatisfied.
Birkenstock, the flagship brand of Generation Z, may have achieved historic sales in its third quarter 2023-24, which closed at the end of June, but the market still didn’t think it was good enough.
Its share price fell by more than 12% to $50.9 on the very day the results were published, August 29, as performance fell short of the market’s even more optimistic forecasts.
Promising outlook
Nevertheless, the outlook is still very promising for the sandal brand, majority-owned since 2021 by L Catterton and Financière Agache, the holding company of the Arnault family, and listed on Wall Street in October 2023.
As a reminder, the IPO price of Birkenstock shares was $46. After a poor start, it ended 2023 up by around 19%.
Historic sales
“We recorded the highest quarterly sales in our company’s history, thanks to strong and growing demand in all product areas, sales channels and categories,” enthused Oliver Reichert, Managing Director of the Birkenstock Group.
He emphasized that these financial results “once again confirm the robustness of” the brand’s “business strategy” and its “success in achieving the growth and profitability targets” presented to investors “during the IPO and subsequent presentations for the secondary share offering”.
More concretely, Birkenstock sales grew by 19% at constant exchange ratesto 564.8 million euros in the third quarter of 2023-24. Yes, but… this handsome sales growth was slightly below analysts’ consensus forecasts of $566.15 million…
Yes, but…
All channels performed well for the sandal brand, with wholesale billings up 23% and retail sales up 14% at constant exchange rates. Yes, but… the latter are not as high as analysts had expected.
In the retail channel, however, the company continued to flourish both online and in the field.
With strong growth in e-commerce, it now boasts a remarkable digital penetration of 40%. This has not prevented the company from continuing to open new physical stores.
On the earnings front, the company announced quarterly profits of $0.40 per share. Analysts were expecting an average of $0.52.
Increased production capacity
Birkenstock’s third-quarter gross profit margin fell by 2.2 points to 59.5%. However, this decline is mainly attributable to temporary investments to increase production capacity in Pasewalk, Germany, and Arouca, Portugal.
Proof that Birkenstock still has a lot left in the tank, and believes that its future will continue to flourish.
Lastly, the adjusted EBITDA margin came in at 33%, just short of the forecast margin of 32.9%.
Geographically, the APMA region (Asia-Pacific, Middle East, Africa), boosted in particular by Japan and Australia, saw the fastest growth. But Europe and the Americas also performed well, as price increases on the old continent had no impact on consumer demand. Analysts did, however, note a slowdown in growth in the Americas.
Fine performance in the first nine months
Looking at the first nine months, sales rose by 21% to 1,348.93 million euros, compared with 1,117.37 million euros a year ago. Net income rose by 35% to 139.14 million euros from 103.31 million euros.
Finally, basic earnings per share from continuing operations reached 0.74 euros, compared with 0.57 euros the previous year.
Birkenstock is looking to the future with optimism, thanks to sustained demand.
The company expects total sales growth of 19% as is, and 20% taking currency fluctuations into account, for the 2023-2024 fiscal year (ending September).
Lastly, it confirmed its medium- and long-term profitability targets, i.e. a gross margin close to 60% and an adjusted EBITDA margin in excess of 30%.
First French store
This should reassure financial analysts for the long term, notes the financial press.
In any case, Birkenstock continues to forge ahead.
In France, Birkenstock inaugurated its first directly-operated store in Paris, in the trendy Marais district, on July 20 (i.e., in the last quarter of its 2023-24 fiscal year).
The brand had already had stores in France in the past, but these had been closed a few years ago and opened by its distributor rather than directly.
The brand, which now spans the globe, also has other branches in Europe, North America and Asia, including Spain, the Netherlands, the United States, Canada, Dubai and Singapore…
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Featured Photo: © Birkenstock
