Birkenstock Holding (NYSE:BIRK) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

Access the full call at https://events.q4inc.com/attendee/357701798

Summary

Birkenstock Holding PLC reported a strong second quarter with revenues growing over 14% in constant currency, despite challenges from inflation and geopolitical tensions.

Adjusted EBITDA margin remained robust at over 32%, although FX and tariffs impacted results.

The company reiterated its fiscal 2026 guidance for constant currency revenue growth of 13 to 15%, with a focus on expanding retail doors and driving digital growth.

APAC showed remarkable growth at 30% in constant currency, driven by strong performance in India, China, and Japan.

Management emphasized the resilience of their business model and commitment to mitigating external challenges, including exploring alternative shipping routes and maintaining strong inventory positions.

Full Transcript

OPERATOR

Good morning and thank you for standing by. Welcome to Birkenstock's second quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. After today's prepared remarks, we will host a question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star star 1 again. The company has allocated 45 minutes to this conference call and will take as many questions as time allows. I would like to remind everyone that this conference call is being recorded. I would now like to turn the call over to Megan Kulik, Director of Investor Relations hello and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding PLC and Chief Executive Officer of the Birkenstock Group, and Davita Krolo, Chief Financial Officer of the Birkenstock Group. Miko Boya, President of EMEA and Alexander Kauff, VP of Global Finance, will join us for Q and A today. We are reporting the financial results for our fiscal second quarter ended March 31, 2026. You may find the press release and the supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com The results have been filed on Form 6K with the SEC. We would like to remind you that some of the information provided during this call is forward looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements are subject to various risks, uncertainties and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website at birkenstock-holding.com we undertake no obligations to revise or update any forward looking statements or information except as required by law. We will reference certain non International Financial Reporting Standards (IFRS) financial information. We use non International Financial Reporting Standards (IFRS) measures as we believe they represent the operational performance and underlying results of our business. More accurately, the presentation of this non International Financial Reporting Standards (IFRS) information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with ifrs. Reconciliations of non International Financial Reporting Standards (IFRS) measures to International Financial Reporting Standards (IFRS) measures can be found in this morning's press release and in our SEC filings. Now I will turn the call over to Oliver.

Oliver Reichert (Chief Executive Officer)

Good morning Everybody. Since our Q1 results, a lot has happened. We face multiple conflicts in the Middle east, disrupting global supply chains and driving higher energy costs These cost pressures are fueling inflation, clearly causing pressure on consumer wallets. The annual inflation rate in US jumped to 3.3% in March 26, marking the highest level since May 24 and sharp increase from 2.4% in both February and January. Eurozone inflation reached 3% in April, the highest level since September 23, driven by 11% increase in energy costs. Eurozone inflation is broadly expected to remain elevated throughout the remainder of 2026. The U.S. supreme Court ruling striking down International Emergency Economic Powers Act (IEEPA) tariffs has actually increased our tariff exposure, at least temporarily. We estimate our refund claims will be about 30 million, but timing is still uncertain. In this challenging environment, we performed strongly and we once again demonstrated the resilience of our business model. In the second quarter we grew revenues over 14% within our target range of 13 to 15% growth in constant currency. Our adjusted EBITDA margin remains strong at over 32% despite the impact of FX and tariffs. Even in this uncertain environment, demand for Birkenstock remained strong and we delivered as promised. In our whitespace, growth opportunities closed. Our Penetration was up 300 basis points driven by strong growth in blocks. Asia-Pacific (APAC) grew at over two times the pace of the other regions and share of business was up over 100 basis points. Year over year. We opened five new owned retail doors bringing the total globally to 111. We are well on track to meet our target of 140 doors by the end of fiscal 26. Importantly, within our DTC business our own retail grew over 60% in constant currency. Same store sales were up double digits accelerating from the first quarter. We also continue to invest in our online business to drive better conversion and higher growth. Our Americas business remains strong up 14% in constant currency. It was driven by very strong B2B growth and sell through at partner doors which was up over 30% at key partners. Youth retailers and sporting specialty continue to lead the B2B growth. The in person shopping trend continues. Within the Americas D2C business we saw strong same store growth and we added two new stores in the Americas bringing the total to 17. Growth in EMEA was 11% in constant currency, a strong result when considering the negative impacts of the wars in the Middle East. We estimate the direct and indirect impact of the war reduced EMEA revenue by about 6 million euros and growth by about 300 basis points. About half of this was a direct impact due to our inability to complete shipments into the Middle East. The other half was due to muted consumer sentiment in Europe largely attributed double digit increase of energy costs and higher inflation While it is difficult to foresee how long the impacts will last, we have taken measures to mitigate some of the direct impact. We have secured alternative delivery routes and we can also steer products originally intended for the Middle east to other regions, especially APEC where demand remains very strong. This is the beauty of our engineered distribution model and put our resilience apec was up 30% in constant currency as planned, growing more than twice as fast as our other segments within our top markets in the region. Our strongest growth was in India, China and Japan. Apex showed the highest clothes penetration and highest ASP in the quarter compared to the other segments. Our production is ramping up as planned to reach our target of 10% annual growth in pairs sold. Despite the impact of different conflicts, inflation and tariff uncertainty, we are confident in our growth potential. We are reiterating our targets 13 to 15% for fiscal 2026 and the longer term targets we shared with you in January. Why are we so confident? We are a purpose driven brand and see strong global demand for the footbed that shows resilience in uncertain times as an affordable luxury brand to the huge pricing bandwidth. We attract a diverse range of consumers across geography, gender, age and income. We manage our distribution with discipline to maintain scarcity, properly segment the market and manage channel growth. The ultimate truth for brand health and momentum is sell through at full price which remains very strong at over 90%. Now I will pass the call over to Iwizar to go through the quarterly results in more detail.

Iwizar

Thanks Oliver. I'm happy to share with you the details of Birkenstock's performance for the second quarter of fiscal 2026 which met our expectations. Despite the headwinds Oliver already mentioned, we generated second quarter revenues of 618 million, growth of 8% on a reported basis. Growth in constant currency was 14%. The strong depreciation of the US dollar, Canadian dollar and Asian currencies compared to the second quarter of 2025 caused a 640 basis point headwind to revenue growth in the quarter. For reference, in the second quarter of 2026 the average euro to US dollar rate was 117, up from 105. In Q2 of fiscal 2025. We saw strong growth across all segments in the quarter. The Americas segment was up 14% in constant currencies, reflecting continuing strength in our most developed market. EMEA was up 11% and APEC up 30% in constant currency. As Oliver mentioned, we estimate the impact of the war in the Middle east was about 300 basis points to EMEA growth or about 100 basis points to consolidated growth

Ivica

by channel for the year, B2B was up 15% in constant currency on the back of continued strong demand at our Key Partners and D2C is sustaining double digit growth up 12% in constant currency. We are still seeing stronger growth in our B2B channel compared to D2C as consumers, especially our newest younger consumers, prefer to shop in store. At the same time, our digital business remains a positive contributor to growth and we are taking measures to drive stronger digital growth in the future. Our own retail business was very Strong, up over 60% year over year in constant currency. We added five new doors same store. Sales growth accelerated from Q1 and was up double digits. Gross profit margin for the second quarter was 53.9%, down 380 basis points year over year. Adjusted gross profit margin including the reversal of distributor markup associated with the acquisition of our Australian distribution partner was 54.6% down 310 basis points. Adjusted gross profit margin excluding 230 basis points of pressure from foreign exchange (FX) and 90 basis points of pressure from incremental US tariffs was up 10 basis points year over year. Selling and distribution expenses were 138 million in the second quarter representing 22.4% of revenue. This was up 40 basis points from the prior year. General and administration expenses were 33 million of 5.3% of revenue down 30 basis points year over year. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in the second quarter of 198 million was down 1% year over year primarily due to tariffs and currency translation impacts. The fall through of foreign exchange (FX) effects reduced adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by 27 million. Excluding this foreign exchange (FX) impact, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was up 13%. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of 32.1% was down 270 basis points year over year. Excluding the foreign exchange (FX) and tariff impact. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin would have been up 60 basis points to 35.4%. Adjusted net profit of 93 million in the second quarter was down 10% year over year. Adjusted EPS for Q2 was €50 cents down 9% from €55 cents a year ago. Adjusted net profit and adjusted EPS were negatively impacted by foreign exchange (FX) translation of 17 million or €9 cents respectively and by a 15 million euro one time non cash expense or €8 cents per share. From the change in valuation of the embedded derivative in our Senior notes we generated 29 million in operating cash compared to the use of 18 million in Q2 2025. We ended the quarter with cash and cash equivalents of 201 million Euro. Our inventory to sales ratio was 39% in the quarter up from 36% a year ago. The primary reason is due to foreign exchange (FX). While our inventory is largely euro based, LTM sales are negatively impacted by the depreciation of the US dollar and other currencies. On a currency neutral basis our inventory to sales ratio was 37%. The increase from 36% last year is largely driven by by increased work in progress as we increase pre production of semi finished goods especially in clocks to reduce the bottleneck we have faced in final assembly. Inventory level was also impacted by the increase of capitalized tariffs. Our DSO for the quarter were a healthy 49 days, up from 46 days a year ago, primarily due to the higher B2B mix and timing of large shipments that occurred later in the quarter. During the quarter we spent 21 million euro in capex, adding to our production capacity in Aruka, Goelitz, Strut and Pavelwalk and beginning the build out of Wittigenau and finally continuing our investments in retail and IT. Our net leverage was 1.7 times as of March 31, 2026, up from 1.5 times at September 30, 2025 due to normal cash seasonality. Turning to our outlook for the remainder of fiscal 2026 in both the third and the fourth quarters, we expect revenue growth in constant currency within our annual guidance of 13 to 15%. We expect to experience less headwind from foreign exchange (FX) in Q3 and expect foreign exchange (FX) to be relatively neutral in Q4. At the €117 to US dollar rate which our annual guidance is based on, we expect approximately 200 basis points of headwind to reported revenue growth in Q3 and almost no difference between reported and constant currency growth in Q4. On margin for Q3 and Q4 we expect tariffs to have a similar impact on gross margin and ebitda margin in Q3 of about 100 basis points. In Q4 the impact will be around 50 basis points. foreign exchange (FX) pressure should be around 60 basis points in Q3 and neutral in Q4. Our business is remarkably resilient and we are confident we will be able to meet our fiscal 2026 guidance despite the additional headwinds from the Middle east, war deflation, increased tariffs and persistent foreign exchange (FX) pressures. We are reiterating our guidance for 2026 for constant currency revenue growth of 13 to 15%. The foreign exchange (FX) headwind to revenue growth should be about 350 basis points for the full year, resulting in reported revenue growth of 10 to 12% to 2.3 to 2.35 billion euros. This assumes an average euro to US dollar exchange rate of 117. We expect adjusted gross margin of 57 to 57.5% in fiscal 2026 inclusive. Of the 200 basis points of pressure from foreign exchange (FX) and US tariffs combined, we expect adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of at least 700 million euros for the year, implying an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of 30 to 30.5% inclusive. Of the 200 basis points pressure from foreign exchange (FX) in tariffs, our expected tax rate is 26 to 28%. Adjusted EPS is expected to be €1.90 to €2.05 including approximately 15 to €20 cents of pressure from foreign exchange (FX). This does not include the impact of any additional share repurchase. We remind you that we intend to repurchase share for a total consideration of $200 million during fiscal 2026. Subject to market condition, capital expenditures should be in the range of 110 to 130 million euros. We have a net leverage target for the end of fiscal 2026 of 1.3x to 1.4x excluding the impact of any additional share repurchase. With that, I'll turn it back to Oliver to close.

Oliver Reichert (Chief Executive Officer)

Thanks Ivica we are confident in our business model and its resilience. Even in the face of pressures from war, inflation, tariff and effects, demand for our beloved brand remains strong. We are a democratic and accessible brand. Our addressable market is every human being that walks on two feet. We are unique in that we have products to address consumers with price points from $50 to our 7074 collapse at up to $2,000. At Birkenstock, we turn challenges into opportunities. As a brand with a heritage of over 250 years, we stick to our plans, continue to take share, steer product between geographies and channels to optimize margins and use our strong balance sheet and capital allocation decisions to increase shareholder returns. In an overall challenging context, we continue to see plenty of opportunities. We see it in the fast growing APAC market, in our expanding owned retail fleet and in our developing closed TOW business. We have proven our ability to mitigate external challenges and difficult market conditions to drive strong, profitable growth. Now we will take your questions. Thank you.

OPERATOR

We will now begin the question and answer session. A reminder to Please limit yourself to one question. If you would like to ask a question, please press star 1. To raise your hand to withdraw your question, press star 1.

Matthew Boss (Equity Analyst at JP Morgan)

Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from the line of Matthew Boss with JP Morgan. Matthew, your line is now open. Great, thanks. So Oliver, first half revenue growth averaged 15% full year. Reiterated forecast calls for 13% constant currency growth in the back half. Could you just break apart the factors that you're embedding in the second half forecast? If we could think about capacity constraints, Middle east exposure and channel mix. And could you elaborate on the impact that you're seeing today where you cited the more muted consumer sentiment in Europe

Oliver Reichert (Chief Executive Officer)

tied to higher energy costs and inflation. Thanks for your question Matt. The clear answer to the first part of your question is that we're not seeing any slowdown in second half of fiscal 26 from everything we see that we can control. Of course demand remains strong and resilient despite the headwinds from the different conflicts, inflation FX and tariffs. Actually as you know we've to pay ten percentage points higher tariffs compared to pre liberation day. As you know we're super resilient purpose driven brand. We can reach consumers with price points from 50 to up to US$2,000 and we have a global addressable market of every human being. So the stage is set and we reach consumers with a broad range of products for almost all user locations and across thousands of doors globally. Keep in mind we own most parts of our supply chain which shields us and protects us other than most of our industry peers from the disruption in the global supply chain and the risk related to shipment delays. I think this is very important, especially in these days. All this together supports our business and brand through tough times of disruption. To sum it up, we've always shown the ability to overcome challenges. Our track record supports this through all kinds of external headwinds. Covid war, energy crisis. We are seeing no difference this time around. Still, as you know, we cannot be blind what's going on in the world around us. So yes, we are conservative in how we guide for the rest of the year. Keep in mind the third and the fourth quarters are our two largest quarters and are very DTC heavy, especially in EMEA which is most directly exposed to these external changes and challenges. It's important that we recognize this uncertainty in our outlook. That's how we think about the guidance for the second half of the year. But that said, we are confident in our guidance of 13 to 15%, a range we can deliver even if unexpected challenges arise. I hope this answers your questions. Thank you Matt.

OPERATOR

Your next question comes from the line of Laurent Vasinescu with BNP Pariba Laurent, your line is now open.

Laurent Vasinescu (Equity Analyst at BNP Paribas)

Good morning. Thank you very much for taking my question. Oliver, I wanted to follow up on EMEA. Your growth was up 11% for the quarter. The prior quarter was up 17%. You mentioned the war has reduced EMEA growth by about 300 basis points. Can you quantify the ongoing risk of exposure exposure in the Middle east region for the rest of the fiscal year? And should we be lowering our EMEA growth rate for 3Q and 4Q? And what are you seeing in terms of overall consumer sentiment in emea? Thank you very much.

Nico

Hey Laurent, this is Nico. Thank you for your question. I'm going to answer this being responsible for the EMEA region. So let me start by saying that we continue to deliver double digit growth in EMEA in a market that is overall flat to slightly negative context. We believe 11% on a constant currency reflects the underlying brand strength and is a pretty robust result. As in previous quarters, we continue to be one of the very few chosen brands as Oliver just mentioned and we will continue and do continue to take share with a very strong full price realization. Now with regards to the impact of the current situation In Middle East, Q2 was indeed a very busy quarter for us, specifically the end of the quarter and we saw some external disruptions related to the Middle east situation. Most importantly, all our team members and partners in the region are safe. Our partner stores are open and our online business is operating. The team has shown really strong resilience to continue our business under extreme conditions. Yet we saw a revenue impact of 6 million equalling 300 basis points headwind to our growth. Two impacts, one direct impact, which is half of it, primarily in B2B related to the Strait of Hormuz being blocked. We could effectively not ship product into the region and the other one is an indirect impact, mostly in Europe in both our DTC channels due to reduced tourism in some of our key cities and a more cautious sentiment among local consumers. Excluding those effects, growth would have been in line with our planned fiscal year guidance of 13 to 15%. With regards to the outlook in EMEA for H2, we believe there will be an ongoing direct impact in our Middle east business. Our Middle east team is exploring all measures to offset this risk. We now put a bigger focus on Saudi Arabia that has proven more resilient due to more local consumers. And we also have started to ship product on different routes into alternative ports to get product into the region. However, the majority of our Middle east business sits within the war impacted region. That was the direct impact that we anticipated. The indirect risk is really difficult to predict at this point. If inflation continues to rise, we can anticipate further pressure on the consumer wallet, consumer sentiment. As per today we identified approximately 10 to 12 million of revenue risk in EMEA which at this point we believe we can offset with other regional segments. So there's no change in our overall revenue guidance.

OPERATOR

Your next question comes from the line of Ed Oban with Morgan Stanley. Ed, your line is now open.

Ivica

Yes, good afternoon guys. Thank you for taking my question. So Oliver, you've addressed the impacts of the Middle east on revenues, but what about the COGS side? What's the impact of energy and other inflation on your business? Hi Johan, this is Ivica. Thanks for your question. Where we currently see higher inflation related to Middle east is energy, is freight rates and is raw materials, especially in everything that is petroleum based materials such as Eva granulate and salt sheets for example. In general the exposure is mitigated by our strong inventory position. So the impact naturally is and will be gradual. And as you know, as a manufacturing company, we always address input cost inflation as we make our pricing decisions. So no change to this, no change to this approach and we see no impact on margin guidance for the overall fiscal 26.

OPERATOR

Your next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine, your line is now open.

Lorraine Hutchinson (Equity Analyst at Bank of America)

Thank you. Good morning. You mentioned tariffs are now 10 percentage points higher versus pre liberation day. If this structure holds, what's the impact on gross margin guidance and how quickly can you raise prices to offset the margin dollars associated with the new tariffs?

Ivica

Hello Rain, it's Ivica speaking. Thanks for your question. So as a background and as you rightly said, if you recall, prior to April 25, we were paying average tariffs of just over 10% depending on the product mix. In April 25, our average tariff initially went up to 25%. Then with the European Union agreement in July of 25, this settled to just over 15%. Now after the US Supreme Court ruling, we are at just over 20%. So this including the Section 122 temporary tariffs. So if the current tariff structure were to hold, which is still very unclear at this point, we could see some additional increase in margin pressure in Q4. However, given our strong inventory position in the US which is now tariffed at a range of rates, we don't believe it would push us out of our targeted margin range for the year. And with regards to your second part of the question on pricing, we will follow the same approach we have always followed. So our pricing is very targeted, very granular on a season by season, style by style level. And it's designed in a way to protect our margin in the first instance and to pass through higher input cost.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.