Birkenstock Holding plc increased its full-year guidance for fiscal 2024 after delivering a strong fiscal second quarter, including 23 percent sales growth on a constant-currency (CC) basis, driven by continued strong consumer demand for its products across all segments, channels and categories.

Based on the first half performance and what the company sees as continued demand growth, Birkenstock now expects fiscal 2024 reported revenue of €1.77 billion to €1.78 billion, reflecting overall revenue growth of approximately 19 percent on a reported basis and 20 percent on a constant-currency basis, up from its prior guidance of €1.74 billion to €1.76 billion, growth of 17 percent to 18 percent CC.

The company now expects Adjusted EBITDA to range from €535 million to €545 million, up from prior guidance of €520 million to €530 million, resulting in an Adjusted EBITDA margin of 30.0 percent to 30.5 percent.

The company reiterated its medium- to long-term profitability objectives for gross profit margin of approximately 60 percent and Adjusted EBITDA margin of over 30 percent.

Second Quarter Highlights
Fiscal second-quarter net revenue amounted to €481 million, an increase of 22 percent (+23 percent CC) year-over-year. Birkenstock reported top-line growth from strong consumer demand supported by new production capacity and category expansion. Revenue growth reportedly benefitted from increased sales of closed-toe silhouettes, which increased to over 25 percent of total revenue compared to the high teens a year ago.

During the fiscal second quarter, Birkenstock said it saw strong growth across all segments and channels and continued to benefit from significant geographic expansion, increased usage occasions and distribution white space. The company opened six new stores, bringing the total number of retail stores owned to 57.

DTC revenue grew 32 percent CC in fiscal second quarter 2024 compared to fiscal second quarter 2023, resulting in a DTC penetration rate of 24 percent, an increase of 200 basis points year-over-year.

B2B revenue grew 20 percent year-over-year as wholesale demand, supported by strong sell-through, reportedly “remains very strong.” The company said the second quarter is its seasonally highest B2B quarter due to sell-in for the Spring/Summer seasons.

In the Americas, strong consumer momentum and demand for the brand continued to drive record sales in the fiscal second quarter of 2024. In a relatively flat U.S. consumer market, Birkenstock said it delivered CC revenue growth of 21 percent in the second quarter, supported by continued strength in the DTC and B2B channels, with DTC penetration in the U.S. increasing by 200 basis points to 29 percent, compared to 27 percent in the prior-year second quarter.

Sell-through at strategic wholesale accounts grew by 33 percent as these retailers continued to allocate more shelf space to Birkenstock in response to strong consumer demand for additional styles and usage occasions.

Revenue growth was reportedly driven by strong volume growth and ASP growth as premium and closed-toe silhouette penetration continues to improve year-over-year.

In Europe, Birkenstock continues to see market-leading growth and share gains across the region. Europe grew 21 percent on a constant-currency basis, driven by strong demand in the DTC and B2B channels. Sell-through rates at key retail partners reportedly increased an average of 24 percent, with some up well over 50 percent. The company said the strength was directly related to the brand’s “transformation efforts in the region designed to increase shelf space and ASPs through strategic, disciplined distribution that drives more premium-priced products.”

ASPs reportedly grew at a double-digit rate in the quarter as demand for premium styles priced at over €100 grew by over 60 percent, and demand for closed-toe shoes grew by over 80 percent. The spring and summer order book proved very strong and resulted in the company’s highest quarterly deliveries for the region.

In the APMA region, Birkenstock achieved revenue growth of 42 percent on a CC basis for the fiscal second quarter 2024 reportedly due to strong, emergent consumer demand throughout the region. Revenue growth in the region was driven equally by volume and ASP growth. Following the overall company trend, demand for closed-toe shoes was especially strong, up nearly 100 percent from the prior year second quarter.

The company opened five new owned stores, including four in India and one in Japan, bringing the total in the APMA region to 20. Additionally, the company added 11 new mono-brand partner stores.

Gross profit margin was 56.3 percent of net revenue in the quarter, down 320 basis points from 59.5 percent in the prior-year Q2 period, primarily due to the temporary impact of production capacity expansion and planned, inflation-related wage adjustments and one-time bonuses for employees at the company’s production facilities.

Net profit grew 45 percent year-over-year to €72 million, or €0.38 per share, from €49 million, or EPS of €0.27, in the year-ago quarter. Adjusted Net profit was €77 million, up 3 percent year-over-year, and Adjusted EPS was €0.41, flat year-over-year, due to higher depreciation and amortization from recent capital investments and IPO-related share increase

Adjusted EBITDA amounted to €162 million, up 7 percent year-over-year. Adjusted EBITDA margin of 33.7 percent was down 470 basis points from 38.4 percent in Q2 last year, with the decrease consisting of 320 basis points from the decline in gross profit margin and the remainder split between incremental public company and administrative costs and investments in retail expansion

Cash flows from operating activities of €50 million, compared to €57 million a year ago, reflected an increase in trade receivables due to the growth in wholesale shipments, expected to be monetized in the third quarter.

Production Capacity Investment
Birkenstock said it continues investing in increasing production capacity to meet consumer demand for its branded products and expand in white-space markets.

The company reportedly invested €17 million in capital expenditures in the quarter, bringing the total year-to-date to €35 million. As previously communicated, the ongoing capacity expansion, including the new Pasewalk production facility, reportedly provides the company with the bandwidth and flexibility to expand its footprint into under-penetrated segments and categories. The company estimates the temporary impact of this investment in reduced gross margin and Adjusted EBITDA margin by 220 basis points in the second quarter.

Balance Sheet
Cash and cash equivalents were €176 million at quarter-end and net leverage of 2.6x as of March 31, 2024.

On May 28, 2024, Birkenstock announced its subsidiaries’ refinancing the existing term loans and replacing the undrawn ABL facility with a new revolving credit facility, including the voluntary early repayment of approximately $50 million. The transaction’s closing and the associated repayment of the existing financing is expected to take place within the next three months. The company said it remains committed to “further deleveraging its balance sheet with free cash flow.”

Image courtesy Birkenstock