Birkenstock To Make Less Profit Despite Being on Trend

Birkenstock, the German shoemaker known for having a good blend of style and comfort, continues to be a winner with consumers despite its high price point. However, the company says it forecasts that it will make less money over the next year, according to CNN.

On Thursday, the shoemaker, which became a publicly traded company in October, for the first time reported its post-IPO quarterly results, and even though sales were solid, the company gave a conservative prediction for 2024, stating that it expects “modest headwind to impact margins.”

Following this announcement, shares of the company dropped by around 8.5%.

Birkenstock said it anticipates adjusted earnings margin for the whole year of about 30% driven by “planned ramp up costs” in comparison to 32% in 2023.

The company also expects revenue to increase by around 18% in 2024, in comparison to a year ago, as the company makes its way into a broader range of markets and invests in its distribution system and more retail spots.

The company reported a rise in sales of 20% for 2023 in comparison to a year ago, which was aided by a 6% rise in the units sold and a 14% rise in the average product price.

Abigail Gilmartin, a retail equity research analyst with Bloomberg Intelligence, said, “Their sales did really well for the quarter. The full-year sales guidance also came in above consensus for next year. The biggest thing that caused the stock dip was their commentary around margins.”

She added, “They have really strong profitability that was really eating them during their IPO and post IPO. For this year, margins fell due largely to inflation and they guided a little bit more conservatively.”

“We expect margins to reaccelerate as additional capacity comes online,” Gilmartin continued. “Overall the brand remains healthy with strong sales growth in the fourth quarter and encouraging first-quarter trends so far. The company has really high-quality products. Once you put on a Birkenstock, you realize that the footbed that it has makes it really comfortable.”

Beth Goldstein, footwear analyst with market research company Circana, said that the cost of Birkenstocks ranges from around $50 for its lower-end waterproof foam version to far beyond $200 for its iconic premium leather styles, which are popular and purchased by a broad range of consumers, from older shoppers looking for comfort to younger buyers inspired by TikTok trends.

She stated, “It is a premium product, but compared to other luxury items, Birkenstocks are fairly accessible.”