Birkenstock, a popular footwear manufacturer, startled investors with a cautious view in the New Year despite its pricey-yet-folksy sandals being popular among buyers of all ages.
The German shoemaker, which went public in October, released its first quarterly results after the IPO on Thursday. Despite good sales, the business issued a cautious view for 2024, predicting a “modest headwind to impact margins.”
Birkenstock shares fell about 8.5% on Thursday following the news.
Birkenstock Spooks With Cautious Outlook Even As Its Sandals Stay On Trend
The company forecasts adjusted earnings for the year to be roughly 30% lower due to “planned ramp up costs” compared to 32% in 2023.
It also expects sales to increase by 17% to 18% in 2024, compared to the previous year, as the company expands into new areas and invests in more retail outlets and delivery systems.
The company stated that a 6% increase in unit sales and a 14% increase in average selling price would result in a 20% increase in revenues for 2023 compared to the previous year.
“Their sales did exceptionally well in the quarter. The full-year sales guidance for the coming year was also higher than expected. In an interview with CNN, Abigail Gilmartin, a retail equities research analyst with Bloomberg Intelligence, stated that their margin statement was the primary cause of the stock’s decline.
“They have extremely great profitability, which was a major issue during and after their IPO. This year, margins declined primarily due to inflation, and they advised a little more conservatively.
Birkenstock Spooks With Cautious Outlook Even As Its Sandals Stay On Trend
Because of the brand’s consistent demand, she claimed the company did not have to resort to significant discounting throughout the holiday season. Gilmartin stated that this year’s distribution centre investments represent a “near-term headwind” required for future growth.
“We expect margins to reaccelerate as additional capacity comes online,” she said. “Overall, the brand is healthy, with significant sales growth in the fourth quarter and promising first-quarter trends thus far. The company produces extremely high-quality items. Once you put on a Birkenstock, you realize how pleasant the footbed is.”
Birkenstock sandals, which range in price from about $50 for a low-cost waterproof foam version to well over $200 for its iconic premium leather styles, are popular among both older comfort-seeking consumers and younger TikTok-inspired shoppers, according to Beth Goldstein, a footwear analyst with market research firm Circana.
“It is a premium product, but compared to other luxury items, Birkenstocks are fairly accessible,” she said.
Birkenstock Spooks With Cautious Outlook Even As Its Sandals Stay On Trend
Birkenstocks, she said, experienced a rebirth about ten years ago, owing to collaborations with high-fashion labels and new additions such as fur-lined versions. Then the pandemic struck.
“The ease of these sandals matched with the informal comfort dressing trend, which was already in place prior to the pandemic and accelerated during it. Birkenstock was at the vanguard of it,” Goldstein explained. And it could remain there for the time being.
“There is no evidence that consumers are gravitating toward dressier styles. “Consumers still value casual comfort,” she said.
SOURCE – (CNN)
