• Revenue Growth: 22% in constant currency for fiscal year 2024, reaching over EUR1.8 billion.
• Adjusted EBITDA Margin: 30.8% for fiscal year 2024, exceeding expectations.
• Adjusted Net Profit: EUR240 million for fiscal year 2024, up 16% from 2023.
• Adjusted EPS: EUR1.28, increased 30% year-over-year.
• Cash and Cash Equivalents: EUR356 million as of September 30, 2024.
• Operating Cash Flow: EUR429 million in 2024, up 20% year-over-year.
• Net Leverage: 1.8 times as of September 30, 2024.
• Store Expansion: 67 stores globally, up from 47 at the end of fiscal '23.
• Wholesale Business Growth: 23% in fiscal year 2024.
• Direct-to-Consumer (D2C) Growth: 21% in fiscal year 2024.
• Inventory to Sales Ratio: Improved to 35%, down from 40% in '23.
• Capital Expenditures: EUR74 million in 2024.

• Warning! GuruFocus has detected 2 Warning Sign with BIRK.

Release Date: December 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Birkenstock Holding PLC (NYSE:BIRK) reported a strong fiscal 2024 with a 22% revenue growth in constant currency, surpassing expectations.
• The company achieved an adjusted EBITDA margin of 30.8%, exceeding the high end of their forecast.
• BIRK's own retail revenue grew over twice the pace of the overall business, with 20 new stores opened globally in fiscal 2024.
• The APMA region was the fastest-growing segment, with a 42% increase, nearly double the pace of the overall business.
• BIRK's membership base grew by over 30% during the year, with members spending on average 30% more than non-members.

Negative Points

• Gross profit margin for the full year was down 330 basis points from 2023, impacted by temporary under-absorption costs from added production capacity.
• The company anticipates only modest improvement in gross margin for 2025, with full absorption of fixed costs expected by the third quarter of 2026.
• BIRK's net leverage was 1.8 times as of September 30, 2024, which is above their target of 1.5 times for fiscal 2025.
• The company faces challenges in maintaining a balance between B2B and B2C growth, with 90% of B2B growth coming from existing wholesale partners.
• Despite strong growth, the company is cautious about expanding too quickly, emphasizing the need for mindful planning and quality control.

Q & A Highlights

Q: Oliver, you cited 15% to 17% growth as the right pace for a healthy long-term business. Why do you think that's the right pace going forward, and what are you seeing in the first quarter relative to that pace? A: Oliver Reichert, CEO: We can grow faster based on demand, but we plan for the long term, considering our vertical integration and responsibilities to our employees. Growing mid to high teens means doubling our business every five years, which is strong growth. For Q1, we're seeing a strong holiday season and expect to be at the higher end of our 15% to 17% growth guidance.

Q: Can you give more color on 1Q B2C versus B2B performance and how you're planning for fiscal 2025? A: Nico Bouyakhf, President Europe: We expect balanced growth between B2C and B2B in fiscal 2025, with nuances quarter-to-quarter. Retail is only 10% of B2C, but our retail expansion is performing well. We remain disciplined in B2B distribution, with 90% of growth from existing partners expanding their offerings.

Q: How should we think about gross margin trends going into 2025? A: Erik Massmann, CFO: The Q4 gross margin last year had noncash adjustments, so look at the quarterly trends for guidance. We expect a modest improvement in gross margin for 2025, with EBITDA margin increasing by up to 50 basis points.

Q: Can you discuss the drivers within the closed-toe category and its potential growth? A: David Kahan, President of Americas: Closed-toe includes clogs, boots, and shoes, with strong momentum across all. In the US, clogs like the Boston and Tokyo are driving growth. Closed-toe has a higher ASP than sandals, and Europe is seeing strong performance in boots and laced-up shoes.

Q: What are your plans for store openings in fiscal 2025, and how do you see the brand's positioning in China? A: Nico Bouyakhf, President Europe: We plan to increase our store fleet by 50% in fiscal 2025, focusing on strategic locations. Klaus Baumann, Chief Sales Officer: In China, we're accelerating growth with new stores and digital channels, aiming to double our presence next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.