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Birkenstock raised its annual revenue and core profit forecasts on Thursday, betting on full-price selling and strong demand for its cork-based sandals and newer closed-toe styles, mainly at its own stores. This sent its shares up 14.3%.
Wholesale Retailers and Inventory Management:
Most wholesale retailers are still stocking up on popular Birkenstock products despite a wider effort to reduce inventory, despite tepid demand for discretionary items such as footwear.
Birkenstock CEO Oliver Reichert said the company was increasing shelf space at its wholesale partners, and critical retailers were buying more and pulling forward volumes to an earlier delivery date.
Growth in Direct-to-Consumer (DTC) Revenue:
The German sandal maker has also been expanding its stores, selling its products at full prices and largely above the average selling price at wholesale shops. That helped its second-quarter direct-to-consumer (DTC) revenue grow more than 30%, while wholesale revenue rose 19.2%.
“It was feared that the ‘Barbie’ boost would wane, but with the brand still an influencer favorite, the sandals have been on fashion wish lists, and demand is translating into a sales uplift,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Revised Fiscal 2024 Forecast:
Birkenstock expects fiscal 2024 revenue between 1.77 billion euros and 1.78 billion euros, up from a prior forecast of 1.74 billion euros to 1.76 billion euros.
It forecast annual adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of between 535 million euros and 545 million euros, up from 520 million euros to 530 million euros expected earlier.
However, Birkenstock’s quarterly adjusted EBITDA margin was down 470 basis points to 33.7%, pressured by its plans to expand globally and invest in production.
Investor Sentiment and Future Prospects:
“Investors are focused on the impact of this DTC expansion … if that is done successfully, it will reduce the volatility in the business, which traditionally comes with wholesale exposure, and they will have a stronger control over the brand,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.
Birkenstock’s second-quarter revenue rose 21.6% to 481.2 million euros ($520.23 million), compared with LSEG estimates of 466.1 million euros. Adjusted profit per share came in at 0.41 euros, beating estimates of 0.36 euros.
