Weaker margins dampen a strong Q1 for Birkenstock

(Sharecast News) - US-listed shares in Birkenstock dropped in New York on Thursday despite the German sandal maker beating analysts' forecasts with its first fiscal quarter results, as adjusted profits declined on the back of margin pressures. The company, which floated on Wall Street in October, said revenues were up 22% over last year at a record €302.9m in the three months to 31 December, well ahead of the €288.7m expected by analysts, as a result of price increases and strong demand in the US.

However, Birkenstock has been investing heavily in new store roll-outs across Asia over recent months, which provided a drag on the bottom line, along with rising materials and labour costs.

The company reported an adjusted net profit of €16.71bn for the quarter, down from €26.51bn a year earlier, though adjusted earnings per share fell to 9 cents from 15 cents a year before, in line with analysts' forecasts.

"As previously communicated, our strategic investments into future growth are having a planned, temporary impact on our profitability," chief executive Oliver Reichert.

Gross profit margins declined to 61.0% from 61.7% as a result of unfavourable currency movements and one-off investments in "ongoing capacity expansion", while adjusted core earnings margins fell to 26.9% from 29.1%.

However, Reichert said: "In the medium-term, we are confident we will continue to deliver our objectives of a gross profit margin over 60% and an adjusted EBITDA margin in the low thirties percent."

The share price was down 4.5% at $48.97 by 1125 ET.