Birkenstock (BIRK) Stock Surges After Strong Q4 Results and Positive FY25 Outlook
Birkenstock Holding plc (BIRK) shares experienced a premarket surge on Wednesday, climbing 1.32% to $56.80, following the release of its impressive fourth-quarter fiscal 2024 results. The company exceeded Wall Street expectations across key metrics, signaling robust growth and a positive outlook for the coming year.
Revenue Growth and Profitability
The company reported a 22% year-over-year (Y/Y) revenue increase on both a reported and constant currency basis, reaching €456 million (approximately $500.93 million). This figure comfortably surpassed analysts’ estimates of $439.29 million. Adjusted earnings per share (EPS) also saw a significant jump, rising 107% Y/Y to €0.29 ($0.32), exceeding the consensus estimate of $0.26. This impressive performance was driven by double-digit revenue growth across all segments: 21% in the Americas, 19% in Europe, and a remarkable 38% in the Asia-Pacific, Middle East, and Africa (APMA) region (on a constant currency basis). Direct-to-consumer (DTC) and business-to-business (B2B) revenue also showed strong growth, increasing by 18% and 26%, respectively, on a constant currency basis.
Gross Margin and EBITDA
Despite the robust revenue growth, Birkenstock experienced a 640 basis point decline in gross margin to 59.0%. The company attributed this decrease to under-absorption from added production capacity, a higher B2B share, currency translation impacts, and tough year-over-year comparisons. However, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) still rose by 31% to €125 million, resulting in an adjusted EBITDA margin of 27.4%, up 190 basis points Y/Y. Operating cash flow also increased significantly, reaching €429 million compared to €359 million in the prior year. As of September 30, 2024, Birkenstock held €356 million in cash and cash equivalents.
FY25 Guidance and Strategic Initiatives
Birkenstock’s positive momentum is expected to continue into fiscal year 2025 (FY25). The company provided upbeat guidance, forecasting revenue growth of 15% to 17% in constant currency, an adjusted EBITDA margin of 30.8% to 31.3% (a 50 basis point increase), and capital expenditures of approximately €80 million. CEO Oliver Reichert expressed confidence in the company’s ability to achieve its medium-to-long-term objectives of mid-to-high teens revenue growth, a gross profit margin of around 60%, and an adjusted EBITDA margin of over 30%.
Birkenstock’s strategic focus on both DTC and B2B channels is paying off, allowing it to reach a wider range of consumers and maximizing profitability. The company also announced a change in its reporting segments, effective from the first quarter of FY25. The Middle East and Africa will merge with Europe to form a new EMEA segment, while India will combine with the remaining Asia-Pacific countries to create a new APAC segment. The Americas segment will remain unchanged.
Market Reaction and Investment Implications
The positive financial results and optimistic outlook have been well-received by investors, driving the premarket surge in BIRK shares. The company’s strong performance in key metrics, coupled with its strategic initiatives and positive FY25 guidance, suggest a positive outlook for the future. However, potential investors should also consider the impact of macroeconomic conditions, currency fluctuations, and competitive pressures within the footwear industry.
Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Always conduct thorough research and consider consulting with a financial advisor before making any investment decisions.
