Birkenstock outpaces expectations but margin pressures remain a concern
2min read Birkenstock (BIRK) delivered fourth-quarter results that exceeded expectations, with revenue of €455.8 million, up 22% year-over-year, beating the consensus estimate of €439.7 million. Adjusted EPS came in at €0.29, surpassing the €0.26 expectation and nearly doubling from the prior year’s €0.14. Adjusted EBITDA reached €125 million, outpacing the forecast of €115.9 million, supported by robust revenue growth and operating expense leverage, though gross margin pressures weighed on profitability. Shares reacted positively premarket, reflecting investor optimism over the beat and the company's guidance for fiscal 2025.
Key Drivers and Metrics
Revenue growth was broad-based, with double-digit increases across all regions and channels. The Americas contributed €225.3 million (+20% YoY), Europe added €171.8 million (+20% YoY), and APMA (Asia-Pacific, Middle East, and Africa) stood out with a 37% YoY rise to €57.9 million. B2B revenue rose 26%, supported by product launches tied to Birkenstock's 250th-anniversary campaign, while direct-to-consumer (DTC) revenue climbed 18%. Despite the strong topline performance, gross profit margin declined to 59% from 65.4% last year, impacted by production capacity expansion, a greater mix of wholesale sales, and FX effects.
Guidance for Fiscal 2025
Birkenstock provided a fiscal 2025 outlook that aligns with long-term expectations, forecasting constant-currency revenue growth of 15%-17% and an adjusted EBITDA margin of 30.8%-31.3%. The company expects gross margins to trend toward 60% as recent investments in production capacity begin to yield efficiencies. This guidance is largely in line with consensus estimates, though some analysts expressed concerns that growth targets at the high end of the range might be challenging given current market conditions.
Strategic Initiatives
Birkenstock continues to expand its reach globally, adding 20 retail stores during fiscal 2024, bringing the total to 67. CEO Oliver Reichert highlighted efforts to diversify the product portfolio, with a focus on orthopedic and professional footwear, as well as closed-toe shoes. These initiatives, alongside the brand’s iconic sandals, position the company to capture a broader consumer base and sustain demand in key markets like the U.S. and Asia.
Profitability Pressures
Margins were a point of concern, with the gross margin declining by 640 basis points year-over-year due to temporary factors such as non-cash adjustments and increased wholesale penetration. However, operating expenses as a percentage of sales improved significantly, down 770 basis points, reflecting better cost management. Birkenstock remains confident that investments in production and pricing strategies will drive margin recovery in fiscal 2025.
Main Stories Driving the Brand
The company's ongoing expansion into new markets and categories, coupled with its anniversary-driven marketing campaigns, contributed to strong brand momentum. Birkenstock also emphasized its ability to balance profitability across wholesale and DTC channels, both of which remain highly profitable. Executives are optimistic about a strong holiday season and the company’s ability to sustain mid-to-high teens revenue growth over the medium to long term.
Market Reaction and Outlook
Despite robust results, some analysts expressed caution about the fiscal 2025 guidance, noting that it may be challenging to exceed expectations already baked into the stock. Birkenstock's share price has faced volatility since its IPO in late 2023, reflecting investor sensitivity to margin pressures. However, the company’s ability to consistently deliver on its growth targets and capitalize on global opportunities reinforces its potential as a premium lifestyle brand.
Conclusion
Birkenstock ended fiscal 2024 on a strong note, with revenue and earnings exceeding expectations and a solid outlook for fiscal 2025. While margin pressures remain a headwind, management’s focus on expanding production capacity, diversifying the product mix, and leveraging the brand’s heritage provides a strong foundation for sustained growth. The company's balanced approach to wholesale and DTC channels, along with its global market penetration, makes it well-positioned for long-term success despite near-term challenges.