Birkenstock tops earnings estimates, so why is stock down 4%?

Birkenstock (NYSE:BIRK) stock was plummeting on Thursday, dropping around 4% despite the release of a solid fiscal third quarter earnings report.

The German shoemaker scored revenue of €635 million, a 12% year-over-year increase. This narrowly missed estimates of €636 million.

But net profit jumped 73% to €129 million, while earnings were up 75% to €0.69 per share. On an adjusted basis, net profit grew 26% to €116 million while adjusted earnings were €0.62, up 27%. That beat estimates of €0.60 per share.

Further, the gross profit margin jumped 100 basis points to 60.5%, while the adjusted EBITDA margin expanded by 140 basis points to 34.4%.

Birkenstock was able to keep expenses and cost of sales in check and had lower finance costs – fueling the earnings beat.

“Underlying demand remains strong and we are on track to meet our target of constant currency growth at the high end of the 15-17% range we provided at the beginning of the year,” Oliver Reichert, CEO of Birkenstock, said. “We saw significant margin improvement in the quarter driven by sales price adjustments net of inflation and better absorption. This puts us on track to meet our Adjusted EBITDA margin target for the year despite the currency headwinds.”

Reichert added that the company is in a good position to deal with the impact of the 15% tariff agreement between the US and EU. It will deploy a combination of pricing adjustments, cost discipline, and inventory management to offset the tariff impacts.

Birkenstock reaffirms guidance, but

Looking at where the sales came from, Birkenstock saw a 15% increase in B2B sales to €390 million. This refers to sales to outside retailers and wholesalers.

Its direct-to-consumer or DTC sales rose 9% to €244 million. DTC sales are those from Birkenstock’s website or at its retail stores.

Geographically, the Asia-pacific region saw a 21% increase in sales to €61 million, while the EMEA region saw a 13% increase to €259 million. The Americas remains the largest market, as sales rose 10% to €312 million.  

The company reaffirmed its guidance despite the tariff headwinds. It expects fiscal 2025 revenue growth to be at the high-end of its guidance range of 15% to 17% range. Further, it maintains its forecast for adjusted EBITDA margin to be in the range of 31.3 to 31.8%, despite the strong depreciation of the US Dollar. That would be lower than the adjusted EBITDA range in Q3 of 34.4%, so perhaps that sparked the selloff.

Investors may have also been disappointed by lower-than-expected growth in the DTC business and within the Americas. The depreciation of the U.S. dollar may be adding to those growth concerns for the fiscal fourth quarter.

Investors may also be wary of Birkenstock’s valuation, which is fairly high for a retail stock at over 30. Perhaps they don’t see enough growth to warrant that valuation. It’s probably wise for investors to be somewhat cautious right now, given the tariffs, inflation, and economic uncertainty.