Birkenstock Holding plc posted continued double-digit revenue growth across all segments and channels and solid profitability in fiscal year 2023, making the year the most successful in the company’s almost 250-year history of the brand based on revenues. Birkenstock said it anticipates sustaining its profitable growth trajectory across products and regions in fiscal year 2024 but expects sales growth to moderate slightly from the fiscal 2023 trend.

While Q4 margin growth was better than expected and the 2024 outlook for 17 percent to 18 percent growth outpaced the Wall Street expectation, BIRK shares were down on Thursday morning, falling nearly 14 percent in pre-market trading before the decline moderated.

The company, reporting its first quarterly and year results as a public company, generated revenues of €1.49 billion for the 12-month period ended September 30, 2023, a 20 percent increase compared to fiscal year 2022. The revenue growth was driven by unit growth of 6 percent and a 14 percent increase in the average selling price (ASP) since fiscal year 2022. BIRK said growth was supported by a sales channel mix favoring direct-to-consumer (DTC) revenues, the distribution takeover in key markets in Europe and the Asia-Pacific, Middle East and Africa (APMA) region, a shift in demand towards premium products and strong pricing power as reflected in a high number of full-price sales.

Birkenstock reported a 29 percent increase in DTC revenues on a constant-currency basis in fiscal 2023 compared to fiscal 2022, which expanded DTC penetration by 200 basis points to 40 percent of total sales.

Gross profit margin increased 180 basis points year-over-year to 62.1 percent of sales in fiscal 2023.

Birkenstock reported a net profit of €75 million, adjusted net profit of €207 million, EPS of €0.41 and pro-forma adjusted EPS of €1.10 based on a post-IPO share count of 188 million. Adjusted EBITDA increased by 11 percent to €483 million in fiscal year 2023, translating into an adjusted EBITDA margin of 32.4 percent of sales. 

Birkenstock said it successfully continued its profitable long-term growth trajectory as the fiscal year 2023 results solidified its historical track record, with the company achieving a CAGR of 20 percent in revenues for the past decade, an adjusted gross profit margin of over 60 percent and an adjusted EBITDA margin of over 30 percent.

A strong and healthy balance sheet reportedly underpinned financial performance in fiscal year 2023.

For fiscal year 2023, Birkenstock achieved cash flows from operating activities of €359 million, up 53 percent compared to the prior fiscal year. Strong operational performance and a lower inventory buildup compared to fiscal year 2022 primarily drove the increase. 

Cash flows used in investing activities were €101 million, primarily driven by production capacity expansion. Birkenstock’s strong cash flow generation allowed the company to cover its capital expenditure entirely out of cash flows from operating activities. In addition, Birkenstock said it successfully continued its deleveraging process post-IPO and used the net proceeds from the IPO and existing cash to repay a significant portion of debt after the fiscal year-end of 2023.

In October and November 2023, the company repaid $450 million on the USD Term Loan B and €100 million on the Vendor Loan, reducing net leverage to below 2.5 times post-IPO.

Consistent Double-Digit Revenue Growth Across Segments and Channels
All segments and channels (regional and global level) reportedly contributed to the company’s positive revenue development.

  • The Americas region posted 21 percent revenue growth in fiscal year 2023 on a reported basis and 20 percent on a constant-currency basis, making the region the largest contributor to overall revenue growth in absolute terms. Revenues were €804.7 million for the year, compared to €667.4 in the prior fiscal year.
  • Europe delivered 18 percent revenue growth in fiscal year 2023 on a reported and constant-currency basis to €529.5 million, compared to €449.1 million in the prior fiscal year.
  • The APMA region delivered the highest growth in relative terms at 24 percent on a reported basis and 27 percent on a constant-currency basis in fiscal year 2023, with China and India as key growth drivers, evidencing that Birkenstock’s continued execution in these large and strategic markets is accelerating its overall growth. Revenues were €152.4 million in fiscal 2023, compared to €123.0 million in fiscal 2022.

Fourth Quarter 2023
Birkenstock said its business model proved resilient in the fourth quarter, gaining more momentum in the three-month period ended September 30, 2023 despite subdued customer sentiment.

Fourth-quarter revenues grew 16 percent to €374.5 million on a reported basis and grew 22 percent on a constant-currency basis compared to the quarter that ended September 30, 2022. 

  • The Americas segment reported the highest growth of all regions, surging 30 percent on a reported basis (+40 percent constant currency) to €187.2 million, as the B2B channel outperformed other markets, which the company said was driven by its engineered distribution. Birkenstock reported Q4 growth in B2B revenues in the Americas of 61 percent on a reported basis and 73 percent on a constant-currency basis compared to the prior-year quarter.
  • Europe revenues were up 5 percent on both reported and constant-currency terms to €143.5 million, compared to €136.8 million in the prior-year corresponding quarter.
  • APMA revenues were up 7 percent to €42.4 million in fiscal Q4, with constant-currency growth pegged at 11 percent based on FX rate fluctuations.

“We are very pleased with our financial results and performance for fiscal year 2023,” commented Oliver Reichert, CEO and director of the Birkenstock Group. “The past year has been the most successful year in our 250-year-long tradition, and we entered our first year as a publicly listed company shortly thereafter. As a footbed company with a unique business model and a proven engineered distribution model, we offer a product with a purpose that withstands short-term market or fashion trends because it serves a primal human need—to walk as nature intended.”

Reichert said the company is confident it would grow its business by tapping significant addressable geographic, category extension and distribution white space, remaining committed to delivering “uncompromising premium quality to our customers and undeterred by the broader macroeconomic backdrop.”

Fiscal Year 2024 Outlook
Birkenstock expects financial performance in fiscal year 2024 to be driven by substantial growth in geographic and category extension white spaces, backed by its engineered distribution model and a disciplined investment and capital management approach.

Birkenstock expects fiscal 2024 revenues to be in the range of €1.74 billion to €1.76 billion on a constant-currency basis, reflecting overall revenue growth of 17 percent to 18 percent compared to fiscal year 2023, with all segments and channels contributing to revenue growth. Birkenstock expects Adjusted EBITDA of €520 million to €530 million on a constant-currency basis, resulting in an Adjusted EBITDA margin of approximately 30 percent.

In fiscal year 2024, BIRK expects a modest headwind to Adjusted EBITDA margins due to planned ramp-up costs and an initial under-absorption in Pasewalk. The added capacity will help fulfill future demand, and the company said it is on schedule to realize the benefits of this capacity expansion later in fiscal year 2024 and in future years. In the long term, Birkenstock expects an adjusted EBITDA margin in the low thirties with slight variations based on our investments.

Birkenstock projected its effective tax rate to be approximately 30 percent in fiscal year 2024.

The company said it remains committed to investing in production capacity and retail store expansion while continuing to deleverage its balance sheet in fiscal year 2024. 

Birkenstock expects to invest approximately €150 million of capital expenditure into growing production capacity and retail store expansion.

Image courtesy Birkenstock/Miami