Birkenstock falls as investors focus on profit warning in first post-IPO results

11:27 am Thursday, January 18th, 2024

By Ananya Mariam Rajesh and Helen Reid

(Reuters) -Birkenstock warned on Thursday annual earnings would come under pressure as the German footwear maker embarks on a global expansion, disappointing investors with its first results since its IPO and sending shares tumbling as much as 14%.

Executives on a call said the company planned to raise prices on its sandals and clogs this year after it had “underestimated the inflation effects” in fiscal 2023.

Birkenstock expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of about 30% for 2024, citing a “modest headwind” from costs tied to investments.

That compares with adjusted EBITDA margin of 32.4% for fiscal 2023, which was the first drop in four years.

The margin outlook for 2024 is “conservative,” executives said.

“The company is guiding to … a hurdle with respect to taking profitability down more than expected next year,” said Jason Benowitz, senior portfolio manager at CI Roosevelt.

So overall “these results were just not strong enough to sort of justify the current premium that was in the shares.”

The stock ended about 19% higher in 2023 after a weak market debut in October.

“The IPO price had already baked in a lot in terms of future upside, and until we see the company deliver as well as exceed those expectations it’s hard to see the share price move further,” said Swetha Ramachandran, who manages a global consumer brands portfolio at Artemis Fund Managers in London.

However, Birkenstock forecast 2024 revenue to be between 1.74 billion euros and 1.76 billion euros, above analysts’ expectations of 1.72 billion euros.

Demand for Birkenstock’s footwear, which retails for as much as $350 a pair, has remained resilient and the company has also benefited from efforts to boost sales through its own website and stores.

Unit growth was 6% in 2023 while average selling price increased 14% since fiscal 2022, driven by higher full-price sales.

Quarterly revenue beat expectations even as adjusted profit per share of 0.14 euros missed estimates of 0.17 euros.

($1 = 0.9187 euros)

(Reporting by Ananya Mariam Rajesh in Bengaluru and Helen Reid in London; Editing by Sriraj Kalluvila)