German shoe company Birkenstock anticipates a sales surge of more than 15% in the 2024 financial year, following a robust 20% increase to nearly €1.5 billion (£1.29 billion) in 2023. Despite this optimistic forecast, investors showed dissatisfaction, causing a more than 8% decline in Birkenstock’s shares.
These results mark the company’s first since its shares debuted in the US, exposing the long-standing family business to public market scrutiny. Despite executive confidence in future prospects, the share drop was attributed to a decline in profits last year and an expected further contraction in margins in 2024 due to ongoing investments.
Birkenstock’s move towards a more public profile comes amid skepticism regarding the sustainability of strong consumer spending, especially as economic growth slows in key markets like the US, and luxury sales show signs of weakening.
CEO Oliver Reichert remains undeterred by broader economic challenges and expressed confidence in the company’s growth trajectory. He noted during an analyst call that Birkenstock’s demand resilience is different from desire-driven luxury brands, which face more substantial pressure. Reichert emphasized that Birkenstock perceives growth across various segments.
Once associated with a nature-loving, granola-eating image, Birkenstock’s reputation has undergone a transformation in the past decade, marked by designer collaborations and prominent appearances in films like Barbie. However, its journey in the stock markets has been characterized by volatility, reflecting uncertainties in valuing the company as it straddles the line between a maker of “luxury” shoes for the mass market.
Birkenstock’s shares experienced a sharp decline upon their October debut but have since recovered. In mid-morning trade in New York on Thursday, they were priced at around $45 per share, similar to the public offering, resulting in a market value of approximately $9 billion.
CEO Reichert acknowledged the difficulty in comparing Birkenstock to other listed companies, as it does not fit neatly into categories like luxury, fashion, or traditional footwear.
For the three months ending on September 30, the company reported a loss of €28 million (£24 million; $30 million), attributed to increased administrative expenses ahead of the listing. Analysts, anticipating a small profit, were disappointed by the figures. Despite this, Birkenstock highlighted using funds from the share sale to pay down debt and emphasized growth opportunities as consumers increasingly choose to buy directly from the brand, bypassing traditional retail channels.
Reichert acknowledged a conservative full-year forecast due to inflation risks and the executive team’s relative inexperience in navigating the evolving sentiments of financial markets. The company projects sales growth of 17-18% in its 2024 financial year.
