Though shares of Birkenstock dropped 10% following the footwear brand’s first earnings announcement since becoming publicly traded, analysts expect it to bounce back.
Birkenstock’s revenue for the fiscal year ending on Sept. 30, 2023, showed revenue increase 20% to 1.5 billion euros, or about $1.6 billion at current exchange rates. At the same time, its net profit fell almost 60% to 75 million euros. For the fourth quarter, it reported a loss of 28.3 million euros.
These kinds of results aren’t unexpected, said Simeon Siegel, analyst for BMO Capital Markets.
“Although the stock market may have suggested a problem, BIRK posted industry leading growth at impressive Gross Margins,” Siegel said in an email to Fashion Dive. “We continue to see whitespace ahead for the brand.”
The Germany-based company also issued a profit warning, saying it expects “a modest headwind to adjusted EBITDA margins due to planned ramp-up costs and an initial under-absorption in Pasewalk,” its new plant in Pasewalk, Germany, which is part of its larger global expansion plan.
On a call with investors following the earnings, Oliver Reichert, CEO and director of Birkenstock Holding, said the company has room to increase pricing to help digest “the one-off costs through this factory improvements and further investment in our capacity.” He said the company had underestimated inflation effects.
For the company’s 2024 fiscal year, it expects the added capacity from the new Pasewalk plant will help fulfill future demand. It expects revenue for the year to range between 1.74 billion and 1.76 billion euros.
“Being a public company can carry certain nuances that don’t exist while companies are private,” Siegel said. “But, at the end of the day, results are the true arbiter of success and results are what win out in the end.”
By press time, shares of BIRK were trading at $45.72, below the IPO price of $46, but above its initial starting trade price at $41
Michael Prendergast, managing director in the consumer and retail group of Alvarez and Marsal, said the market overreacted following the announcement, and the stock would bounce back over time.
“Birkenstock should maintain its strong position in the market,” Prendergast said in an email to Fashion Dive. “Terrific product, terrific brand, solid results all point to success for the future. The brand is in a very strong position from a lifecycle standpoint, and they should continue to be strong.”
Some of Birkenstock’s footwear competitors are set to announce financial results next month. Crocs is expected to report on Feb. 14, and Deckers, holding company of Hoka and Ugg, will report on Feb. 1.
