Q4 2025 Earnings Call Contradictions: Production Capacity Constraints, B2B/D2C Growth, and Inventory Management Strategies

Date of Call: December 18, 2025

Financials Results

• Revenue: EUR 526M in Q4; FY 2025 revenue EUR 2.1B, up 18% in constant currency (Q4 revenue +20% CC; reported growth was ~+15% with a 420 bps FX drag in Q4)
• EPS: Adjusted Q4 EPS EUR 0.51, up 76% from EUR 0.29 a year ago; FY adjusted EPS EUR 1.85, up 45% YoY
• Gross Margin: Q4 gross margin 58.1%, down 90 bps YoY; Q4 like-for-like (ex FX & tariffs) 60.3% (up 130 bps); FY gross margin 59.1%, up 30 bps YoY; FY like-for-like 59.7% (up 90 bps)

Guidance:

• Targeting 13%–15% constant-currency revenue growth for FY2026 (reported 10%–12% to EUR 2.30–2.35B given ~300–350 bps FX headwind)
• Expect ~10% unit growth in FY2026; guiding mid-teens top-line pace longer term
• Adjusted gross margin 57.0%–57.5% (includes ~100 bps FX and ~100 bps tariff pressure)
• Adjusted EBITDA ≥ EUR 700M (30%–30.5% margin; ex-FX/tariffs ~32%–32.5%)
• Adjusted EPS EUR 1.90–2.05 (includes ~EUR 0.15–0.20 FX pressure); tax rate 26%–28%
• CapEx EUR 110M–130M; planned share repurchases ~$200M; net leverage target 1.3–1.4x; ~40 new stores planned

Business Commentary:

* Financial Performance and Guidance: - Birkenstock reported EUR 2.1 billion in revenue for fiscal 2025, the highest in its history, with an 18% increase in constant currency. - For fiscal 2026, the company targets 13% to 15% constant currency revenue growth, reflecting a more conservative outlook compared to fiscal 2025. - The guidance is affected by significant currency and tariff pressures, particularly in the U.S.

• Channel Growth and Distribution Strategy:
• B2B channel grew 21% in constant currency for the full year, with B2B comprising 62% of total business at year-end, up from 60% the previous year.
• D2C grew 12% in constant currency, with plans to accelerate retail store rollout to 40 new stores in fiscal 2026.
• The shift towards B2B growth is driven by increased consumer demand for in-person shopping, particularly among younger demographics.

• Product Category and ASP Growth:
• Closed-toe shoes increased their share of revenue, contributing to the 500 basis points overall revenue growth, reaching 38% for the year.
• The ASP grew 5% in constant currency, supported by higher price points and premium product executions like closed-toe shoes.

• Growth in these categories is due to increased consumer appetite for newness and higher-priced products.

• Capacity and Production Constraints:

• Birkenstock is managing significant capacity constraints, which is the primary limitation to further growth, especially in high-demand products like clogs.
• Investments in production capacity, including new facilities in Portugal and Germany, are underway, with plans to increase production capacity by 10% annually.
• The current production capacity is limiting growth due to the high demand for premium and complex product executions.

Sentiment Analysis:

Overall Tone: Positive

• Management described FY25 as "the best year in our history," reporting revenue up 18% CC, gross margin +30 bps to 59.1% and adjusted EBITDA margin 31.8% (high end of target). They repeatedly stated demand is "very strong" across segments while acknowledging FX/tariff headwinds and capacity constraints that temper near-term guidance.

Q&A:

• Question from Matthew Boss (JPMorgan Chase & Co, Research Division): So Oliver, maybe relative to the 20% constant currency revenue growth in the fourth quarter and 18% for the year, which both exceeded your plan, you're targeting 13% to 15% constant currency growth for fiscal '26. What's driving the more conservative view for '26? Have you seen any slowdown in demand so far in the first quarter? And how should we think about this more moderate pace of growth within your long-term algorithm?
  Response: Demand remains strong; the guidance is conservative because production capacity is the binding constraint (clogs/closed-toe require materially more production minutes), so growth is being steered to mid-teens while capacity expansions ramp (major facility output expected '27).

• Question from Laurent Vasilescu (BNP Paribas, Research Division): Ivica, I wanted to dig a bit more on the margin outlook for 2026 and the impact from FX and tariffs. Can you walk us through in more detail how FX flows through the P&L? Similarly, you took pricing in July to mitigate the tariff impact. Why are you seeing so much margin pressure for tariffs in 2026? And what more can be done to offset some of this? And then I've got a quick follow-up.
  Response: FX will be a ~300–350 bps revenue headwind (~€70M) with ~90% flowing to gross profit and ~67% to adj. EBITDA; incremental tariffs ~100 bps gross/EBITDA pressure; price increases offset absolute dollar impact but not margin%; further mitigation via production/logistics efficiencies and APAC growth will take time.

• Question from Randal Konik (Jefferies LLC, Research Division): How do you think about channel growth in 2026? Do you think B2B will continue to outpace D2C by such a wide margin as it did? And then what are you trying to do to drive continued faster growth in the D2C channel?
  Response: Trend of faster B2B growth is expected to continue (Gen Z and in-person multi-brand shopping favors wholesale); both channels grow double-digit; company will expand own retail (stores) and loyalty to accelerate D2C but cannot force channel mix.

• Question from Lorraine Maikis (BofA Securities, Research Division): The growth in EMEA accelerated nicely. What are you seeing in terms of consumer demand in the EU in particular? And any comments on first quarter trends there?
  Response: EMEA demand accelerated with strong adoption of newness and closed-toe; Q1 tracking well and in line with guidance; primary constraint remains production capacity—company targets ~10% unit capacity increase to address this.

• Question from Michael Binetti (Evercore Inc.): On the EBITDA margin guidance, could you help us unpack it a little more? You gave us 100 bps drag from FX, 100 bps drag from tariffs. How should we think about absorption, channel shift, and like‑for‑like pricing contributions?
  Response: Bridge: capacity absorption contributes ~+60 bps, channel shift (B2B mix) is ~-50 bps, external FX/tariff drag ~-200 bps total; like‑for‑like pricing is not fully embedded so guidance is conservative.

• Question from Michael Binetti (Evercore Inc.): What is the unit growth capacity if you weren't trying to control scarcity? And how much does the Australia roll‑up add to revenues this year?
  Response: Capacity potential depends on product mix (clogs use far more production minutes so unit output varies by article); Australia acquisition is immaterial to 2026 P&L near term but enables longer-term D2C upside by cutting out the middleman.

• Question from Dana Telsey (Telsey Advisory Group LLC): Was there any difference in performance between e‑com and physical stores? Where will the 2026 store openings be located and sizes? And how are you thinking about pricing for 2026 across categories?
  Response: Retail outperformed digital and new stores (100–150 sqm) perform above expectations; plan ~40 openings (city/key markets like Milan, Mumbai, Singapore examples); pricing is reviewed seasonally and executed surgically by style to pass input-cost inflation while maintaining aligned global pricing.

• Question from Adrien Duverger (Goldman Sachs Group, Inc., Research Division): Comment on performance of newer products, appetite for premium executions and closed‑toe share now at 38%—expectations long term?
  Response: New closed‑toe and non‑Boston silhouettes are being rapidly adopted (closed‑toe grew ~500 bps to 38%); closed‑toe will continue to outgrow open‑toe and drive ASP/mix uplift.

• Question from Mark Altschwager (Robert W. Baird & Co., Research Division): On sustaining mid‑teens growth, how confident are you about scaling capacity (labor, suppliers) and how is EVA/Pasewalk contributing?
  Response: Company is expanding preproduction in Portugal, acquired a Dresden facility for final assembly (online '27) and Pasewalk expansion; EVA is capped (~20% share) and Pasewalk will support elevated EVA and premium executions—capacity buildouts are underway but workforce and ramp take time.

• Question from Samuel Poser (Williams Trading, LLC, Research Division): Can you give specifics on Q1 and the timing of capacity increases across Pasewalk, Goerlitz and Portugal—will capacity increase into H2 FY26?
  Response: Q1 top line will be well above guidance (top-line comment only); margins not preannounced; meaningful capacity gains are mid‑term—optimizations in '26 but major output increases await new facility outputs and machine/workforce ramping.

• Question from Paul Lejuez (Citigroup Inc., Research Division): How do pairs/unit growth and distribution plans look by region and are you restricting distribution in certain regions given capacity constraints?
  Response: APAC is being steered to grow ~2x other regions (has highest ASP); company may allocate more product to APAC but is not demand-constraining—distribution remains engineered and capacity determines allocation rather than demand shortfall.

• Question from Janine Hoffman Stichter (BTIG, LLC, Research Division): On B2B expansion and the long‑term opportunity to add ~5,000 doors, what is the timeline and near‑term contribution given capacity limits?
  Response: B2B expansion will be highly disciplined—growth to date came mostly from existing doors via deeper assortment; selected new doors (sport/outdoors) will be added carefully while preserving full‑price realization and healthy stock-to-sales.

Contradiction Point 1

Production Capacity Constraints and Growth Expectations

It involves the company's ability to meet demand due to production constraints, which directly impacts revenue projections and investor expectations.

Why the conservative outlook for 2026 growth (13%-15% constant currency target), and have you observed any Q1 demand slowdown so far? - Matthew Boss (JPMorgan)

2025Q4: Strong demand for the brand continues in all regions. The key constraint is production capacity, particularly for Clog styles that require more production minutes. - Oliver Reichert(CEO & Director)

Can you discuss current demand trends and visibility regarding the Q4 acceleration to high teens constant currency growth? Excluding foreign exchange, can you comment on the sustainability of the over 61% gross margin and 35% EBITDA this quarter? - Matthew Robert Boss (JPMorgan)

2025Q3: Demand was exceptional, but we struggled with capacity. We are not seeing any slowdown in consumer demand. Our focus is on improving efficiency and capacity. - Oliver Reichert(CEO & Director)

Contradiction Point 2

B2B and DTC Channel Growth Dynamics

It highlights differing expectations for growth in the B2B and D2C channels, which are crucial for understanding the company's growth strategy and market distribution.

How do you project channel growth in 2026? Will B2B outpace D2C? - Randal Konik (Jefferies)

2025Q4: B2B growth is expected to continue faster due to in-person shopping by younger demographics, but both channels are growing double digits. - Ivica Krolo(CFO)

Should we prioritize B2B over DTC growth next fiscal year? Can you provide insight into closed-toe growth outside Boston? - Randal J. Konik (Jefferies)

2025Q3: B2B growth will likely outpace DTC due to consumer behavior favoring in-person shopping. - Ivica Krolo(CFO)

Contradiction Point 3

Inventory Management

It involves changes in inventory management strategies and the balance between demand and supply, which can impact company operations and financial performance.

How does FX impact the P&L, and why is there increased margin pressure from tariffs in 2026? - Laurent Vasilescu (BNP Paribas)

2025Q4: We have optimized inventory levels, ensuring that we have enough stock to support D2C growth and maintain a balance. More than 75% of our inventory is allocated or timeless products. - Oliver Reichert(CEO)

What are current inventory levels on a SKU basis, especially for popular SKUs like the Boston, and how comfortable are you with channel inventory levels? - Edward Yruma (Piper Sandler)

2023Q4: Inventory compared to revenue decreased from 36% to 30%, and more than 75% is allocated or timeless products. We are optimizing inventory levels, ensuring we have enough stock to support D2C growth and maintain a balance. - David Kahan(President, Americas)

Contradiction Point 4

Production Capacity and Demand

It reflects differing views on the company's production capacity constraints and their impact on demand, which are crucial for understanding the company's growth potential and consumer behavior.

Why is the 2026 growth target set at 13%-15% (constant currency) considered conservative? Have you observed any demand slowdown in Q1? - Matthew Boss (JPMorgan)

2025Q4: The key constraint is production capacity, particularly for Clog styles that require more production minutes. - Oliver Reichert(CEO & Director)

What are your tariff mitigation strategies and their demand impact? - Mark Altschwager (Baird)

2025Q2: Tariff impacts will be fully offset through global pricing and efficiencies in our vertically integrated supply chain. No impact on consumer demand, further supported by strong brand equity. - Ivica Krolo(CFO)

Contradiction Point 5

Capacity Expansion and Production Impact

It involves the effects of capacity expansion on production and financial outlook, which are crucial for investor expectations and company operations.

Why is the 2026 growth target of 13% to 15% in constant currency considered conservative, and have you observed any demand slowdown in Q1 so far? - Matthew Boss (JPMorgan)

2025Q4: The key constraint is production capacity, particularly for Clog styles that require more production minutes. The B2B channel is expected to continue outpacing D2C due to demand from younger demographics, but overall growth is limited by production capacity. - Oliver Reichert(CEO)

Can you provide an update on the new factory in Pasewalk and its impact on capacity? - Louise Singlehurst (Goldman Sachs)

2023Q4: The new factory in Pasewalk will double capacity, but there will be a short-term negative impact on margins due to one-off costs. We're confident in managing inflation and are pricing to offset these costs. - Oliver Reichert(CEO)