Home Business Birkenstock (BIRK) results first quarter 2024

Birkenstock (BIRK) results first quarter 2024

by SuperiorInvest

Employee Mo Soto organizes a shelf at a Birkenstock store on October 10, 2023 in Venice, California.

Ethan Swope | fake images

Birkenstock Thursday beat expectations for Christmas quarter revenue, reporting a 22% year-over-year increase, as the German sandal company benefited from higher prices and growing U.S. demand.

As a newly public company, Birkenstock is still getting into a rhythm of public reporting and just released its fiscal 2023 results and 2024 guidance a little over a month ago. On Thursday, it said it maintains the forecasts issued then and still expects sales to be between 1.74 billion euros and 1.76 billion euros ($1.89 billion and $1.91 billion), representing growth of 17% to 18%.

The shoemaker, which began trading on the New York Stock Exchange under the symbol “BIRK” in October, had a quiet debut when it first hit the public markets, with shares falling more than 12% on its first day as a public company. . The stock has since recovered and is up more than 5% this year, as of Wednesday's close.

Birkenstock shares were trading more than 6% lower Thursday morning.

Here's how the shoemaker fared in its fiscal first quarter compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: 9 euro cents adjusted versus 9 euro cents expected
  • Revenue: 302.9 million euros compared to the expected 288.7 million euros.

The company reported a net loss of 7.15 million euros for the three months ended December 31, or a loss of 4 euro cents per share. A year earlier, it posted a loss of €9.19 million, or a loss of 5 euro cents per share. Excluding extraordinary items, Birkenstock made a profit of 17 million euros, or 9 euro cents per share.

Sales increased to 302.9 million euros, 22% more than the 248.5 million euros of the previous year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 12% year-on-year to €81 million, with an adjusted EBITDA margin of 26.9%, up from 29.1% a year earlier.

The retailer has made great strides in growing its direct-to-consumer business, which generates better profits and more customer insights than relying on wholesale partners.

CEO Oliver Reichert has said the company deliberately designs its distribution strategy so that demand outweighs supply, but is working to double its production capacity over the next three years to close that gap. The CEO said those investments, along with other efforts the company is making to drive growth, are having a “planned” but “temporary” impact on profitability.

The company's gross profit margin fell to 61% from 61.7% during the same period last year, with Birkenstock citing “unfavorable currency translation and planned temporary under-absorption of our ongoing capacity expansion.” The company said it continues to carefully monitor input costs and is mitigating inflationary pressures with “selective and executed price increases.”

In Europe, the company claimed to have had “two consecutive price adjustments” without “any sign of rejection.”

Consumers prefer closed styles

For the first time, closed-toe shoes, which include everything from slippers to clogs, accounted for a larger percentage of sales than sandals, executives said. Strong sales outside of traditional Birkenstock sandals have given the company a boost during the fall and winter months, when people don't buy open-toe shoes as often, and opens up an area of ​​additional growth for the retailer.

“Right now it's a broad-based closed footwear business, and I think it's pretty significant to say that this was the first time that non-sandal products were the largest percentage of our business,” said David Kahan, Birkenstock's president of the Americas. .

During the quarter, Birkenstock posted more profits in its direct channels and said DTC sales accounted for 53% of total revenue. While DTC is strong and a focus for the business, Birkenstock continues to see solid demand in its wholesale channels, even as other retailers face a slowdown in orders as department stores and other big box stores look to keep inventory levels low. control and fight. with uncertain demand.

Executives noted that wholesalers are not only increasing their orders for Birkenstock products, but are also increasingly opting for early delivery days to keep up with demand.

How other retailers like it Nike, under the armor and owner of Timberland VF Corp.. To address weak demand in North America, Birkenstock reported tremendous strength in the region with sales up 21% during fiscal 2023. That momentum continued during its fiscal first quarter with sales up 21%. 14% in the region. In Europe, where demand in some parts has been weaker than in North America, sales grew 32%, and in the Asia-Pacific, Middle East and Africa region, revenue rose 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 shoemaker Johann Adam Birkenstock founded the company in 1774.

Birkenstock's new owners embarked on an aggressive growth strategy that focused on increasing DTC sales, exiting certain wholesale partnerships, and focusing on driving sales of higher-priced items. In just a few years, its sales have nearly doubled and its market capitalization is now around $9.7 billion, double its 2021 valuation of $4.85 billion.

Since going public, Birkenstock has used some of its revenue to pay down debt. In the fall, he made a series of debt payments that reduced his net leverage. At the end of December, Birkenstock was leveraged at 2.6 times EBITDA.

Correction: Birkenstock reported a loss per share of 4 euro cents. Adjusting for extraordinary items, it earned a profit of 9 euro cents per share, matching Wall Street estimates according to LSEG. An earlier version of this story misstated those figures.

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