Yuki Iwamura/Bloomberg/Getty Images
Birkenstock sandals in a store in New York, USA, on Thursday, October 12, 2023.
New York CNN –
Birkenstock sandals may be as expensive as ever, and the folksy shoes are as popular as ever with shoppers. Despite all this, the company says it still expects lower profits next year.
The German shoe maker, which became a listed company in October, reported its first quarterly results after going public on Thursday. Despite strong sales, the company gave a cautious outlook for 2024, saying it expects “slight headwinds that will impact margins.”
Shares of Birkenstock fell nearly 8.5% on Thursday on the news.
The company said it expected a full-year adjusted profit margin of about 30%, pressured by “planned start-up costs,” compared with 32% in 2023.
Additionally, revenue in 2024 is expected to increase 17% to 18% year over year as the company expands into more markets and invests in more retail stores and its distribution system.
The company reported a 20% year-over-year revenue increase for 2023, driven by a 6% increase in unit volumes and a 14% increase in average selling price.
“Their sales performed really well in the quarter. The sales forecast for the full year was also above the consensus for next year. The biggest driver of the stock decline was their comments on margins,” said Abigail Gilmartin, retail equity analyst at Bloomberg Intelligence, in an interview with CNN.
“They have really strong profitability, which really ate them during their IPO and post-IPO. This year margins have fallen, largely due to inflation, and forecasts are a bit more conservative.”
Due to continued demand for the brand, the company was not forced to resort to large discounts over the holidays. Gilmartin said distribution center investments this year are more of a “near-term headwind” necessary for future growth.
“We expect margins to increase again as additional capacity comes online,” she said. “Overall, the brand remains healthy, with strong sales growth in the fourth quarter and encouraging trends in the first quarter so far. The company has really high quality products. As soon as you put on a Birkenstock, you notice that the footbed is really comfortable.”
Birkenstock sandals, which cost around $50 for a lower-priced waterproof foam version and well over $200 for the iconic premium leather models, are loved by both older, comfort-seeking consumers and younger, TikTok-inspired shoppers, said Beth Goldstein, footwear analyst at market research firm Circana.
“It's a premium product, but compared to other luxury items, Birkenstocks are quite affordable,” she said.
Birkenstocks, she said, enjoyed something of a resurgence a decade ago, fueled by collaborations with high-fashion brands and novelties like fur-lined versions. Then the pandemic came.
“The comfort of these sandals coincided with the casual comfort dressing trend that was already in play before the pandemic and accelerated as a result. Birkenstock was at the forefront of this,” Goldstein said. And that's where it could stay for now.
“There is no evidence that consumers are moving towards dressier styles. Casual comfort remains important to consumers,” she said.