By Joshua Kirby

Sandal-maker Birkenstock ended the fiscal year with lower profitability, but said it expects healthier margins in the coming period as it makes greater use of new factory space.

Birkenstock booked a gross margin of 58.8% for the fiscal year ended Sept. 30, down from 62.1% a year earlier. Birkenstock said this was due to the planned and temporary effect of expansion in production capacity as well as greater wholesale revenue, which comes with a generally lower profit margin. Higher prices partially offset those effects, the company said.

"Both [wholesale and retail] channels are highly profitable and allow us to maximize our reach, especially into new targeted consumer groups," Chief Executive Oliver Reichert said. The company is expanding into areas including orthopedic and professional shoes, as well as closed-toe footwear, Reichert said, adding that the company has added 20 of its own retail stores over the year, taking the total to 67.

The group's earnings before interest, taxes, depreciation and amortization margin meanwhile fell to 30.8% from the 32.4% reported last year. Profitability should improve in fiscal 2025, Birkenstock said. It targets an Ebitda margin of 30.8%-31.3% and organic revenue growth of 15%-17% in the fiscal year. In the long term, the gross margin should reach 60%, the company said.

The German company, which listed on the New York Stock Exchange last year, sold 1.8 billion euros' ($1.89 billion) worth of footwear over the year. This included 456 million euros in the final quarter of the year, a little ahead of analysts' forecasts compiled by FactSet. That marks a 22% currency-adjusted increase on last year, a little above the company's 20% target.

Net profit, adjusted, came in at 240 million euros, 16% more than last year, Birkenstock said.

At Birkenstock's previous earnings update in August, a slip in the company's margin saw investors' confidence shaken and the share price plunge. In premarket trade, Birkenstock shares were down 1.5% from Tuesday's close at $55.20.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

December 18, 2024 05:47 ET (10:47 GMT)

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