© Reuters. FILE PHOTO: A Birkenstock shoe is displayed at Birkenstock shoe store in London, Britain, October 11, 2023. REUTERS/Toby Melville/File photo
By Ananya Mariam Rajesh
(Reuters) -Birkenstock warned of margin pressures stemming from costs tied to a global expansion, sending its shares down as much as 13% on Thursday, even as the German sandal maker reported strong holiday quarter demand for its pricey footwear.
Banking on shoppers ready to splurge on its sandals, Birkenstock (NYSE:) is opening stores across markets, including India and China, as it seeks to sell at full price unlike at wholesale retailers.
The company’s adjusted core earnings margin fell to 26.9% in the first quarter from 29.1% a year earlier, also weighed down by rising costs of raw material and labor.
The expansion-related costs “will slightly impact our margins in 2024”, said Alexander Hoff, vice-president of global finance, adding it “is clearly a temporary effect.”
Birkenstock’s shares, which had tumbled more than 12% below its initial public offering price of $46 last October, had eventually recovered over the following months and was last at $48.12 on Thursday.
Closed-toe silhouettes and newer products geared toward the growing running shoe market have helped the company carve out a niche in the U.S. and Europe, with double-digit revenue growth across its markets.
“They have been able to manage not having to put it on promotion … their markdown levels are very low even in the U.S.,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
Birkenstock’s quarterly revenue rose about 22% to 302.9 million euros ($328.65 million), compared with market expectations of 288.7 million euros, according to LSEG data.
The brand has also attracted fashion aficionados after actress Margot Robbie donned a pair of pink Birkenstocks in 2023’s blockbuster “Barbie” movie.
“Keeping the brand front and center on the fashion pages doesn’t come cheap and there is a risk that once its movie-star status wanes, stylish shoppers could move onto the next big thing,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:).
“However, comfort will always be valued by other core customers … even if fashion fans prove more fickle.”
($1 = 0.9217 euros)
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