Birkenstock said it delivered a strong fiscal first quarter, achieving the highest revenue level for the first quarter in the company’s history, according to comments by company CEO Oliver Reichert on a conference call with analysts. Reichert said the 26 percent growth for the quarter ended December 31 was driven by growing demand for Birkenstock products across all regions, channels, and categories, and results showed with increases in both average selling prices (ASP) and units.

Birkenstock Holding plc reported total revenue for the fiscal first quarter grew 22 percent to €302.9 million, compared to €248.5 million in the prior-year first quarter. Revenues grew 26 percent in constant-currency (CC) terms to €313.6 million.

“ASP benefited from the continued shift to premium products, a favorable channel mix towards DTC and sales price increases,” the CEO said. “Additionally, units sold also increased as additional production capacity became available in Germany and Portugal to fuel our supply capabilities to meet the growing demand in our products”

Reichart said the strength of the Birkenstock brand is evidenced by continued high levels of full-price validation across all points of distribution.

“We have observed that general consumer shopping has transitioned from shopping arbitrarily to intentional purchasing, where consumers are seeking the key brands and products they love,” Reichert suggested.

Perhaps looking ahead a bit to build on the recent gains for future growth, Reichart also noted that the company also successfully increased its production capacity as planned, penetrated largely untapped white space areas and maintained its strong profit formula.

“Accordingly, we remain highly confident in our ability to continue our strong performance through fiscal 2024 and beyond,” he said.

Reichart pointed out that the DTC channel was once again the fastest-growing channel for the Birkenstock brand.

DTC revenues increased 24 percent (+30 percent CC) to €160.7 million in the fiscal Q1 period, compared to €129.4 million in the prior-year corresponding period, resulting in a 53 percent share of revenue in the most recent quarter.

“Members of our fast-growing membership program are highly engaged and ready to expand their purchases of our brand,” Reichart suggested. “As the average U.S. Birkenstock consumer owns 3.6 pairs, this growing membership base of loyal fans is proving to be fertile ground for our expansion and is a key focus for us in fiscal year 2024.”

Turning to the other side of the business, Reichart noted that despite a challenging backdrop in the wholesale market, the B2B business achieved healthy revenue growth against the same period last year.

Wholesale, or B2B revenues, rose 19 percent (+22 percent CC) to €140.4 million in Q1, compared to €117.8 million in the prior-year fiscal Q1 period.

“Within our largest region, the Americas, consumer momentum and demand for our brand continued to increase,” the CEO said, turning to a regional review of the business.

The Americas region grew 14 percent (+19 percent CC) to €181.5 million in the fiscal Q1 period, compared to €159.8 million. Reichart said a larger driver of the growth was once again the DTC channel.

“As one would expect in a quarter driven more by sell-throughs than sell-in, DTC penetration increased even further,” he shared. “Notably, approximately half of our revenues were generated from members of our membership program, which we are working to further expand given the strong brand engagement and fandom of these consumers.”

In the B2B channel in the Americas, the CEO reminded everyone that BIRK had large shipments early in the fourth quarter of fiscal 2023 to capture the expected increase in demand around the holiday season.

“For the first quarter of ’24, most of our top-line growth was driven by greater penetration within our existing B2B channel,” he said. “Specifically, with the expansion of categories like closed-toe silhouettes with the vast majority of our shipment growth going to existing partners.”

He said that only a single-digit percentage of revenue in the Americas is attributed to new points of distribution, with a heightened focus on specialty retailers, including sports-specific, running retailers where the benefits of the Birkenstock footbed as a recovery product are finding strong end-use demand.

In Europe, Reichart said BIRK delivered “exceptional growth” in the fiscal first quarter, increasing 32 percent (+33 percent CC) to €80.1 million in Q1, compared to €60.5 million in the prior-year quarter.

“In the macroeconomic environment where consumers remained more subdued in their spending, Birkenstock continued to perform strongly,” he said.

He also reminded the audience that the reported revenue level in the fourth quarter of fiscal ’23 was still impacted by the company’s sales transformation initiatives, which he said have started to pay off in the first quarter.

“Our growth in Europe was broad-based across all our channels and geographies underpinned by very strong set-out performance during the holiday season,” Reichart said. “Notably, the sell-out of Birkenstock products with some key partners was up high double-digits versus first quarter fiscal 2023.”

In DTC, Europe revenue also “increased significantly” and supported the strong overall growth, Reichart shared.

“The first quarter of fiscal ‘24 also marked the start of our ambitious store opening plan in which we aim to double our fleet in Europe over the coming three years,” Reichart noted. “After closing many legacy stores over the past two years, we are pleased to see the recently opened Cologne pop-up is among our top-performing European stores, delivering the highest ASP from day one.”

In the wholesale business in Europe, Reichart said the brand is increasing shelf space and continues to be one of the top-performing brands for their retail partners in Europe.

“Key retailers are increasing their purchases and shifting their volumes towards earlier delivery dates. This is resulting in an even higher revenue growth for the B2B with nearly all of this growth coming from existing distribution partners,” he said.

APMA was said to be the company’s fastest-growing segment in the first quarter, surging 47 percent (+51 percent CC) to €39.5 million from €26.9 million in the prior-year comparable period.

“Growth in the region was largely driven by our DTC channel, with the digital portion of the channel nearly doubling versus last year,” Reichart detailed. “We also saw a healthy increase in B2B in the first quarter of fiscal ’24, which was driven by an expansion of our mono-brand partner store environment with 10 newly opened stores.”

He said that similar to the other regions, closed-toe silhouettes, including clogs, played a decisive role in the quarter’s success, contributing more than half of the total revenue in the APMA region.

Company CFO Erik Massmann walked the call participants through the rest of the financial details of the quarter, noting that first quarter gross margin declined 70 basis points to 61.0 percent of sales, compared to 61.7 percent of sales in the prior-year quarter. Gross profit was €184.9 million in the fiscal first quarter, compared to €153.3 million in the prior-year period.

“While we successfully recovered inflation by increasing sales prices and optimizing our channel and product mix, a slight margin compression was mainly caused by our ongoing capacity expansion and an unfavorable currency translation,” Massmann noted.

Adjusted selling and distribution expenditures were €103 million, representing 34 percent of revenue in fiscal Q1, said to be “generally in line” with the first quarter of fiscal 2023.

“As a reminder, our first quarter is typically the quarter with the highest DTC share. And, therefore, generally shows the highest selling and distribution spend as a percentage of revenue,” he detailed.

Adjusted general and administration expenses were €24 million, 7.9 percent of revenue, in fiscal Q1, up 110 basis points compared to the prior-year first quarter. Massmann said the increase is largely driven by public company costs, which they did not incur before their IPO.

First quarter adjusted EBITDA of €81 million was up 12 percent versus the prior-year quarter, resulting in an adjusted EBITDA margin of 26.9 percent. The decrease versus the prior-year margin was said to be largely driven by the effects of ongoing capacity expansion, incremental SG&A expenses and an unfavorable currency translation.

Operating profit was €35.6 million in Q1, compared to €14.2 million in the fiscal 2023 Q1 period.

Net financing costs took a bite out of the bottom line, rising to €36.1 million from €25.1 in the prior-year period. Income tax (expense) benefit was a €6.7 million expense in fiscal Q1 related to one-time share-based compensation expenses and certain other non-deductible expenses, compared to a €1.7 million benefit in the prior-year Q1 period.

Massmann said these results accumulated in fully diluted Adjusted earnings per share of €0.09 compared to Adjusted earnings per share of €0.15 in the first quarter of fiscal 2023.

Resulting net income (loss) for the fiscal 2024 first quarter was a loss of €7.2 million, or a loss of €0.04 per diluted share, compared to a loss of €9.2 million, or a loss of €0.05 per diluted share in the prior-year first quarter.

Inventories at quarter-end were valued at €644.4 million, compared to the prior year-end value of €595.1 million on September 30, 2023.

“In the first quarter of fiscal 2024, we built up inventory to prepare for the upcoming spring-summer 2024 wholesale shipments, while improving our inventory-to-sales ratio compared to first quarter fiscal 2023,” the CFO shared. “This buildup is a regular pattern we generally observed in the first quarter of each fiscal year.”

The company had €169.4 million in cash and cash equivalents at quarter-end, compared to €171.1 million on December 31, 2022.

“The decrease compared to year-end fiscal ’23 is fully in line with our expectations and as a result of the typical seasonality of our business and our deleveraging progress,” Massmann noted.

As a component of this line item, the company reported that IPO proceeds received in the quarter, net of transaction costs, were €449.3 million.

“Additionally, we continue to deleverage using our IPO net proceeds and excess cash on hand,” Massmann noted while wrapping up the balance sheet and cash flow reports. We made early repayments on existing debt of €525 million, which reduced net leverage to 2.6 percent as of December 31, 2023. Further, we continue to invest for future growth. Capital expenditures were €80 million and mainly related to our production capacity expansion.”

Image courtesy Birkenstock