Birkenstock Holding Ltd’s Q3 Earnings Call: Tariff Margin Pressures and Revised Middle East Impact Clash With Prior Guidance

Date of Call: Aug 13, 2026

Financials Results

• Revenue: EUR 720M, growth of 13% on a reported basis, 15% in constant currency
• EPS: EUR 0.74 per share, up 19% YOY
• Gross Margin: 59.2%, down 130 basis points YOY (down 70 bps excluding FX and tariffs)
• Operating Margin: Adjusted EBITDA margin of 33.7%, down 70 basis points YOY (up 60 bps excluding FX and tariffs)

Guidance:

• Revenue growth for Q4 expected within annual guidance range of 13%-15% in constant currency, with FX neutral.
• Full-year revenue growth raised to 15% (high end of 13%-15% range).
• Full-year adjusted EBITDA expected to be at least EUR 710M.
• Full-year adjusted gross margin expected to be 57%-57.5%.
• Full-year adjusted EBITDA margin expected to be 30.2%-30.5%, inclusive of ~200 bps pressure from FX and tariffs.
• Full-year adjusted EPS expected to be EUR 1.90-EUR 2.05, inclusive of ~15-20 euro cents FX pressure.
• Q4 and full-year adjusted gross margin and EBITDA margin guidance incorporates tariffs below prior expectations.
• CapEx expected in the range of EUR 110M-EUR 130M.
• Net leverage target for end of fiscal 2026 raised to 1.6-1.7x (from prior 1.3-1.4x, excluding ASR impact).

Business Commentary:

Revenue and EBITDA Growth:

• Birkenstock reported revenue of EUR 720 million for Q3, up 15% in constant currency, meeting the high end of their annual target.
• Adjusted EBITDA for the quarter was EUR 242 million, up 11% year-over-year.
• The growth was driven by strong demand across all segments, particularly in EMEA and APAC, and strategic investments in owned retail and digital channels.

APAC and EMEA Performance:

• APAC segment grew 23% in constant currency, with China showing over 50% growth.
• EMEA growth accelerated to 15%, driven by strong D2C demand and full-price realization of 93%.
• Growth in these regions was supported by new store openings and strong online performance, despite some impacts from the Middle East conflicts.

Product Mix and Silhouette Shift:

• Non-Boston closed-toe executions grew by over 50%, with specific silhouettes like Naples and Utti showing significant unit growth.
• The shift towards closed-toe silhouettes, although it created a margin drag, contributed to higher ASP and overall profitability.
• This shift was driven by consumer demand for year-round footwear and successful product innovations.

Currency and Tariff Impacts:

• The depreciation of the US dollar and other currencies led to an 180 basis points headwind on revenue growth.
• Adjusted gross profit margin was impacted by 70 basis points due to U.S. tariffs, but was offset by better capacity absorption.
• The company expects a blended tariff rate below 15% for Q4 following a recent agreement with the European Union.

Capital Allocation and Shareholder Returns:

• Birkenstock repurchased EUR 230 million in shares and refinanced senior notes at a 75 basis point lower rate.
• The company has an additional EUR 500 million available for share repurchases, subject to market conditions.
• These actions reflect the company's strategy to enhance shareholder value and optimize capital structure.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'We performed exceptionally well in Q3' and 'raised our guidance for revenue growth' and 'adjusted EBITDA'. They are 'super confident' in brand strength and APAC targets, and see 'strong global demand'. The tone highlights 'continued momentum' and being 'very confident about the momentum in the business'.

Q&A:

• Question from Matthew Boss (JPMorgan): Nice recovery in D2C growth this quarter. Can you speak to drivers of the improvement at D2C and what you’re seeing in B2B relative to D2C? Relative to the raised top-line guide for the year, could you talk to trends in the fourth quarter, and do you think there’s potential upside to your 15% top-line forecast for the year?
  Response: D2C outpaced B2B due to strong owned retail (50% growth) and accelerating online performance driven by product newness and marketing investments. Full-year guidance raised to 15% constant currency revenue growth, with confidence in momentum.

• Question from Laurent Vasilescu (BNP Paribas): Did you see any impacts from the conflict in the Middle East? Can you provide additional color on key drivers behind the acceleration in growth, and to what extent did favorable weather conditions contribute? And are you seeing any continuation of these trends into Q4 within EMEA?
  Response: EMEA growth accelerated largely driven by D2C demand, with impact from Middle East conflicts less pronounced than Q2 but expected to be slightly higher in Q4. Warm weather was favorable but trends improved ahead of that. Q4 is a larger quarter in the region.

• Question from Lorraine Hutchinson (Bank of America): Pricing over inflation was not a contributor to gross margin this quarter as it has been for the past few. Were you more promotional, and how should we think about your ability to pass inflation through with pricing when customers are a little more price sensitive? Are you seeing any signs of consumer pushback on pricing?
  Response: Pricing decisions aim to pass through inflation and protect gross margin (30 bps benefit this quarter). Industry-wide markdown activity is higher, but Birkenstock maintains superior full-price realization and gross margin, with selective discounting focused on managing excess stock.

• Question from Christina Kutta (Equity Research Analyst): You have provided helpful color that the shift toward closed toe silhouettes created, I think, a roughly 40-basis point pressure on gross margin. Can you help us quantify that further? What is the difference in gross margin between closed toe and open toe? Secondly, maybe if you could provide more color on the components of growth this quarter, just across ASPs and volume.
  Response: Closed-toe products require more labor and production minutes, impacting gross margin. ASP/volume growth was in line with the one-third, two-thirds target, reflecting continued build-out of production capacity.

• Question from Carson (Evercore ISI): Can you walk us through the tax rate? It’s coming in above the original guidance of 27%-28%. Is this 30%-31% the new baseline for taxes? I would have expected more upside to EPS for the year given the strong EBITDA outlook and share repurchase. Why aren’t we seeing the flow-through to EPS? Related to that, what’s the normalized finance cost on a quarterly basis with the new debt issued?
  Response: 30%-31% tax rate is elevated due to non-deductible, non-recurring expenses from refinancing and ASR; baseline is high 20s. EPS impacted by higher tax rate (about EUR 0.08 per share impact). Normalized finance costs should be around EUR 25M per quarter, with interest expense higher by ~EUR 4.5M due to new debt.

• Question from Simeon Siegel (Guggenheim Securities): Can you just speak to the spread between inventory and sales? How are you thinking about the composition of your inventory now, maybe how’s the change in units versus EUR, and how are you thinking about the go-forward inventory levels? Then just to clarify on the Australia timing shift, did sales shift earlier into 2Q or later into 4Q, and is that change now behind us?
  Response: Inventory increase largely due to FX, capitalized tariffs, and Australia business consolidation/timing shift. Over 70% of finished goods inventory is contracted and core evergreen products. Australia timing shift related to revenue recognition now aligned with local market cadence.

• Question from Adrien Duverger (Goldman Sachs): Could you please comment a bit more on the performance in the U.S.? More specifically, how is the order book performing? Could you please comment maybe on the sell-in versus sell-outs at your wholesale partners? Also, are you confident that there is no buildup of inventory anywhere in your wholesale channel?
  Response: U.S. B2B sees strong youth-led demand with sell-through up 20%+ YOY. No wholesale inventory buildup; gross margin remains strong, indicating no markdown impact. Back-to-school demand remains very strong.

• Question from Edouard Aubin (Morgan Stanley): Could you just update us on your plan to continue to grow in China? Then just on production capacity, because Oliver mentioned your sustained CapEx investment. When will you start to be thinking about building new factories, or with the existing capacity, what could be potentially the number of pairs you could be producing every year?
  Response: China business up 50% in Q3; growth plan continues via new stores, local activations, and events. Production capacity build-out on track for 10% unit growth, with manufacturing network (including Wittichenau, Arouca) progressing according to plan.

• Question from Mark Altschwager (Baird): How do you anticipate executing the additional buyback program going forward? Relatedly, net leverage 1.8x today, guiding to 1.6x-1.7x by year-end. Do you have a target leverage ratio or what is the leverage level you’re going to run in order to complete the buyback program?
  Response: Plan to use significant cash for additional buybacks, preferably as part of larger transactions to avoid reducing public float. No specific leverage target; options kept open to allocate capital in shareholders' best interest.

• Question from Dana Telsey (Telsey Advisory Group): What was the growth in the sandals category? The go forward, how do you think about product innovation and newness, whether in sandals or closed-toe and pricing?
  Response: Sandal business up mid-high single digits in constant currency YOY. Innovation continues in both categories, with closed-toe creating four-season demand. New collaborations (e.g., Repetto) capture global trends like ballerinas.

Contradiction Point 1

Financial Impact of Tariffs

Contradiction on the timeline and quantification of tariff impacts on gross margin.

Christina Kutta (Equity Research Analyst) - Christina Kutta (Equity Research Analyst)

2026Q3: Tariff history: <10% (pre-April 2025) → 25% (April 2025) → ~15% (July 2025 EU agreement) → ~20% (current, post-U.S. Supreme Court ruling). If structure holds, additional margin pressure in Q4 is possible... - Ivica Krolo(CFO)

Can you quantify the impact of the shift toward closed toe silhouettes on gross margin and clarify the difference in gross margin between closed toe and open toe? - Michael Binetti (Evercore)

2026Q2: Adjusted gross margin was 54.6%, down 310 bps. Bridge: negative impacts (FX 230 bps, tariffs 90 bps, channel shift 30 bps);... Looking ahead: Q3 FX ~60 bps drag, tariffs ~100 bps drag; Q4 FX neutral, tariffs ~50 bps drag. - Ivica Krolo(CFO)

Contradiction Point 2

EMEA Growth and Middle East Conflict Impact

Contradiction on quantifying the Middle East conflict's impact on EMEA growth.

Laurent Vasilescu (BNP Paribas) - Laurent Vasilescu (BNP Paribas)

2026Q3: The impact from the Middle East conflict was less pronounced in Q3 than Q2 and was mitigated by adjustments and strong domestic demand... The total H2 impact is now expected to be high single-digit millions (below previous EUR 10-12M estimate). - Ivica Miličević(CFO)

What were the key drivers behind the acceleration in EMEA growth, and did the conflict in the Middle East have any impact? - Laurent Vasilescu (BNP Paribas)

2026Q2: For H2, ongoing direct impact in the war-impacted region is expected; indirect risk (consumer sentiment) is hard to predict... Identified additional €10–12M revenue risk in EMEA... - Nico Bouyakhf(President, EMEA)

Contradiction Point 3

Wholesale Sell-Through Performance and Demand Indicators

Contradiction in reporting full-price sell-through rates and order book fulfillment levels.

Adrien Duverger (Goldman Sachs) - Adrien Duverger (Goldman Sachs)

2026Q3: Sell-through at key partners in youth and sporting goods channels was up >20% year-over-year in Q3. - Ivica Miličević(CFO)

Could you provide more details on U.S. performance, including the order book's status, the sell-in versus sell-outs at wholesale partners, and your confidence regarding inventory levels in the wholesale channel? - Matthew Boss (JPMorgan)

2026Q1: Full-price sell-through exceeds 90% across all channels. Order book for 2026 and beyond is strong, with 70–80% of wholesale demand fulfilled, leaving 20–30% unfulfilled. - Oliver Reichert(CEO)

Contradiction Point 4

Inventory Growth and Composition Disclosure

Inconsistency in disclosing year-over-year inventory growth metrics.

Simeon Siegel (Guggenheim Securities) - Simeon Siegel (Guggenheim Securities)

2026Q3: Over 70% of finished goods inventory is contracted... The increase in the stock-to-sales ratio is largely due to FX and capitalized tariffs (~50%) and the Australia business consolidation and timing shift (~50%). - Ivica Miličević(CFO)

What is the new tax rate baseline, why isn't EPS reflecting expected upside from strong EBITDA and share repurchases, and what are the normalized quarterly finance costs with the new debt? - Simeon Siegel (Guggenheim Securities)

2026Q1: Inventory growth in units is not disclosed and will not be provided in the future. - Ivica Krolo(CFO)

Contradiction Point 5

Growth Outlook and Channel Performance

Contradictory statements on whether B2B continues to outpace D2C growth.

Matthew Boss (JPMorgan) - Matthew Boss (JPMorgan)

2026Q3: D2C outpaced B2B due to investments in owned retail (50% growth) and digital. - Oliver Reichert(CEO)

Can you discuss the drivers behind the D2C recovery, how B2B performance compares to D2C, and the trends in Q4 contributing to the raised top-line guidance, including potential upside to the 15% annual forecast? - Randal Konik (Jefferies LLC)

2025Q4: The trend of B2B outpacing D2C growth is expected to continue due to strong in-person shopping among youth. - Ivica Krolo(CFO)