Shares of Birkenstock Holding PLC fell nearly 8% on Thursday after the sandal maker reported a surprise fourth-quarter loss amid “weak customer sentiment” and said it expected a slight decline in margins due to costs related to ramping up a new factory in Germany.
In its first earnings call since its IPO in early October, German footwear company BIRK announced,
She said she had room to raise prices to offset those expenses and what she called “some inflationary pressures” this year.
During the call, CEO Oliver Reichert suggested that Birkenstock customers would be flexible to any changes it makes to shoe prices. He said that margins would recover after the company's investments in the new factory located in the town of Passwouk, near the Polish border in northeastern Germany.
“So, we have enough room to increase prices and [help digest] “One-time costs through improvements to this plant and increased investment in our capacity,” he said.
“This will give us a completely different situation from 2025 onwards,” Reichert continued. “So, we expect this growth setup to be absorbed significantly through 2024. And then you will see a rapid recovery in margins and efficiency, and hopefully there will be less inflation as well.”
The new factory opened in September. On the call, Reichert said the facility, in addition to the renovation of another factory in Germany and another in Portugal, will give the company the opportunity to double its production capacity amid intense competition with other casual shoe brands. However, rising commodity prices over the past two years have reduced demand for shoes.
According to its IPO filing last year, the 250-year-old company has tried to capitalize on a variety of trends over the years — including health consciousness, a casual approach to clothing, the rise of modern feminism and the “rise of purpose.” – Conscious consumption driven. Demand remains strong, Reichert said on a call Thursday.
“The demand for purpose-driven brands has not stopped,” he said. “It's a small difference for luxury brands that are based on desire. I think they are a lot [more heavily] under pressure. We do not. “We see growth everywhere.”
Birkenstock's market debut was one of the largest IPOs for a deal of this size in recent years, according to Renaissance Capital. Still, shares are up 14% since the closing bell of the stock's first session on the New York Stock Exchange, even as it closed Thursday just 12 cents above the $46 bid price.
The company's results for the fourth quarter, which ended September 30, were mixed. Converted to U.S. dollars, Birkenstock reported a loss of 16 cents per share, compared with analysts' consensus forecast of a profit of 15 cents per share, according to FactSet data. Revenues of approximately $407 million beat consensus estimates of $385.6 million.
Executives said they expect “modest headwinds” to adjusted EBITDA margins during fiscal 2024, “due to planned incremental costs and lack of initial absorption at Pasewalk.”
However, Jefferies analysts on Thursday called Birkenstock's results “encouraging,” citing sales gains in North America, and downplaying the margin outlook. Analysts maintained their buy rating on the stock, saying the share price drop on Thursday represented a buying opportunity.
“We viewed the performance as encouraging, particularly the strength in revenues seen in the Americas [up 30% year over year]They said. “The company [full-year adjusted] The EBITDA outlook can be viewed as mixed. However, we believe [management] “He's likely to be cautious.”
In Birkenstock's earnings release, Reichert said the company's products weathered near-term market jitters.
“As a company with a unique business model and a proven engineered distribution model, we offer a product that has a purpose and resists short-term market trends or fads, because it serves a basic human need – to go the way nature intended.” He said.
