Revenue: EUR574 million, up 19% year over year on a reported basis and 18% in constant currency. Gross Margin: 57.7%, up 140 basis points year over year. Adjusted EBITDA: EUR200 million, up 23% year over year, with a margin of 34.8%, up 110 basis points. Adjusted Net Profit: EUR103 million, up 33% year over year. Adjusted EPS: EUR0.55, up from EUR0.41 a year ago. Cash and Cash Equivalents: EUR235 million at the end of the quarter. Inventory to Sales Ratio: 36%, down from 40% in Q2 2024. Net Leverage: 1.8 times as of March 31, 2025. Store Count: 77 owned stores, with six new stores added during the quarter. Americas Revenue Growth: 23% in reported currency and 20% in constant currency. EMEA Revenue Growth: 12% year over year. APEC Revenue Growth: 30%, with China more than doubling in revenue year over year. Capital Expenditures: EUR21 million during the quarter, on track for EUR80 million for the year.

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Release Date: May 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Birkenstock Holding PLC (NYSE:BIRK) reported a record EUR574 million in revenues for the second quarter, marking a 19% increase year over year. The company achieved a gross margin of 57.7%, up 140 basis points from the previous year, driven by better absorption of costs and favorable currency translation. Birkenstock's D2C channel showed strong growth, with a 25% increase in its membership base, reaching over 10 million loyal members. The APEC region was the fastest-growing segment, with a 30% increase in revenue, driven by strong growth in the D2C channel and strategic partnerships. The company is on track to expand its retail presence, aiming for 100 owned stores by the end of the fiscal year, with 77 stores currently in operation.

Negative Points

The company faces potential headwinds from tariffs and foreign exchange fluctuations, which could impact growth and margins in the second half of the year. Despite strong performance, the third quarter is expected to be the slowest growth quarter due to the seasonal mix of products. General administration expenses increased by 150 basis points year over year, primarily due to higher IT expenses related to ERP conversion. The company is experiencing increased competition in the market, which may require strategic pricing adjustments to maintain its competitive edge. Birkenstock's reliance on European manufacturing and materials could pose risks if there are disruptions in the European supply chain.

Story Continues

Q & A Highlights

Q: Oliver, could you speak to your confidence in your outlook for the rest of the year and your raised EBITDA margin guidance, despite the elevated macro uncertainty with tariffs and foreign exchange? A: Oliver Reichert, CEO: We see the current situation as an opportunity rather than a risk. We are confident in offsetting the effects of existing tariffs and have factored current FX levels into our margin outlook. Importantly, we are not seeing changes in consumer behavior or demand, with full price realization at 90% and a strong order book from wholesalers.

Q: Could you expand more on your plans for tariff mitigation and the impact on demand for Birkenstock? A: Unidentified Company Representative: We will fully offset the 2025 tariff impact. With 96% of our raw materials sourced from Europe and 100% of manufacturing in the EU, we have pricing flexibility without impacting consumer demand. Our vertical integration allows us to gain efficiencies across our value chain, and we see this as an opportunity to gain market share.

Q: How are the new stores rolling out, and is the number of new store openings still the same around the world for your own stores? A: Mehdi Bouyakhf, President of Europe: We are operating 77 stores and added 6 this quarter. Our new stores, including those in Paris, London, Nashville, and Shanghai, perform well quickly. We aim to reach 100 stores by the end of this fiscal year and 150 by 2027, focusing on the right locations for optimal consumer experience.

Q: Can you talk about the scaling wholesale opportunity and the forward opportunity for increasing channel representation? A: David Kahan, President of Americas: Our growth is primarily from existing retail accounts, with limited expansion of our footprint. We focus on strategic and surgical expansion, with over 90% of growth from existing accounts. We are cautious about partner quality and will expand when it aligns with our strategic goals.

Q: How are you thinking about cash flow and cash flow uses in the back half of the year? A: Unidentified Company Representative: Our priority is to invest in the business, particularly in white space opportunities, with about EUR80 million in CapEx for this year. We aim to reduce debt and have discretionary cash available for potential share repurchases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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