Industry Overview - The Zacks Shoes and Retail Apparel industry is focusing on brand-building initiatives and promotional efforts to enhance consumer engagement, driven by strong demand for activewear and wellness-oriented products [1][5] - Companies are leveraging product innovation, expanding athleisure collections, and investing in e-commerce and omnichannel strategies to capitalize on the growing trend towards healthy lifestyles [1][3] Challenges - The industry is facing persistent headwinds such as rising input and logistics costs, supply-chain disruptions, and elevated selling, general and administrative (SG&A) expenses, which are pressuring profit margins [2][7] - Macroeconomic factors including currency fluctuations, geopolitical uncertainty, and changes in tax and tariff policies are adding complexity to the operating environment [2][7] Future Outlook - Sustainable growth in the industry will depend on continued innovation, upgrades to digital infrastructure, and enhanced consumer engagement [3][5] - Established players like NIKE, Adidas, Skechers, Birkenstock, and Wolverine are well-positioned to navigate challenges and seize long-term opportunities [3][5] Consumer Demand Trends - There is a strong and steady consumer demand for athletic and athleisure products, projected to continue through 2025, with a growing appetite for performance and style [5] - The health and wellness movement is influencing buying patterns, leading to increased popularity of versatile, multi-functional footwear designs [5] E-Commerce Investments - Digital channels are a major growth engine for the athleisure market, with brands expanding their online presence through websites and social media [6] - Investments in supply-chain efficiency and fulfillment enhancements are critical for maintaining competitive advantages [6] Cost Headwinds - Companies are grappling with elevated costs due to commodity price inflation, supply-chain bottlenecks, and increased logistics expenses [7] - Higher SG&A expenses are driven by increased spending on marketing and digital initiatives, compounded by economic uncertainties and a challenging labor market [7] Industry Performance - The Zacks Shoes and Retail Apparel industry has underperformed compared to the broader Consumer Discretionary sector and the S&P 500, with a collective decline of 6.4% over the past year [12] - The industry currently holds a Zacks Industry Rank of 58, placing it in the top 24% of over 250 Zacks industries, indicating positive earnings outlooks for constituent companies [9][10] Valuation - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 28.96X, higher than the S&P 500's 23.02X and the sector's 20.24X [13] Notable Companies - **Skechers**: Focused on a multi-brand approach and e-commerce growth, with a projected sales growth of 8.2% for 2025 [18] - **Wolverine**: Emphasizing brand structure and efficiency, with expected sales growth of 6.5% and earnings growth of 46.2% for 2025 [22] - **NIKE**: Implementing a Consumer Direct Acceleration strategy, with projected declines in sales and earnings for fiscal 2026 [25] - **Adidas**: Benefiting from strong demand and improved margins, with projected sales growth of 13.8% and earnings growth of 86.5% for 2025 [29] - **Birkenstock**: Focused on high-quality products and DTC channels, with projected sales growth of 26.9% and earnings growth of 39.6% for fiscal 2025 [33]

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Core Viewpoint - Wall Street analysts are increasingly bullish on Birkenstock Holding, driven by strong recent performance data and a more favorable impact from Trump's tariff policies than previously expected, with some analysts suggesting it could outperform major sports brands like Nike and Adidas, positioning it as one of the best footwear stocks globally [1] Financial Performance - Birkenstock Holding reported a 16% revenue growth in FQ3 on a constant currency basis, with a reported revenue growth of approximately 12%, both exceeding Wall Street analysts' average expectations [2] - The company's total revenue for the quarter reached $739.62 million, surpassing analyst forecasts, with significant contributions from all business segments and channels [2] - B2B sales were a key growth driver, with an 18% increase in revenue on a constant currency basis, outpacing D2C channels [2] Market Strategy - The company successfully implemented price increases on core products without significant negative market reactions, indicating strong brand positioning [2] - Birkenstock is expanding its direct-to-consumer retail presence, having opened 13 new stores globally, with a goal of reaching approximately 100 stores by the end of FY2025 [2] Product Overview - Birkenstock is recognized as the pioneer of the "anatomical cork-latex footbed" sandals, which provide comfort and health benefits, making them popular for long-standing and commuting scenarios [3] - The "Birkenstock craze" reflects a combination of genuine comfort, health benefits, sustainable narratives, cultural diffusion, and high-end fashion rebranding [3]

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Company Overview - Birkenstock Holding plc (NYSE: BIRK) is recognized as one of the leading wearable shoe brands in Europe [1] Financial Performance - The company has recently reported its fiscal third quarter results, indicating a strong performance [1] Market Position - Birkenstock is positioned as a top brand in the wearable shoe market, highlighting its competitive strength within the industry [1]

Financial Data and Key Metrics Changes - The company reported third quarter revenues of $635 million, reflecting a 16% growth in constant currency, within the annual guidance range of 15% to 17% [19] - Reported revenue growth was 12%, with B2B growth outpacing D2C, up 18% in constant currency [19][20] - Gross margin increased by 100 basis points to 60.5%, while adjusted EBITDA margin rose by 140 basis points to 34.4%, marking the best third quarter margin ever [8][22] - Adjusted net profit reached €116 million, a 26% increase year over year, with adjusted EPS rising to €0.62 from €0.49, a 27% increase [23] Business Line Data and Key Metrics Changes - In the Americas, revenue grew by 16% in constant currency, with both B2B and DTC channels showing double-digit growth [14] - EMEA experienced a 13% revenue increase, with B2B outpacing DTC, driven by strong sell-through at retail partners [15] - The APAC region saw a 24% increase in constant currency, with expectations for accelerated growth in the fourth quarter [16] Market Data and Key Metrics Changes - Retail revenue at the top 10 wholesale partners in the U.S. increased by 25%, while in EMEA, it was up 20% [10][11] - The company noted a shift towards in-person shopping, favoring the B2B channel over DTC, with over 90% of B2B growth coming from existing doors [9][20] Company Strategy and Development Direction - The company aims to maintain relative scarcity and manage distribution growth tightly, with plans to reach around 100 stores by the end of the fiscal year [12] - The strategy includes investing in automation, IT, and infrastructure to enhance production capacity and efficiency [32][70] - The company is focused on both B2B and DTC channels, with a commitment to high-quality distribution and full-price realization [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting growth and profitability objectives despite currency headwinds and tariff impacts [25][27] - The company anticipates that B2B growth will continue to outpace DTC for the fourth quarter and the full year [20][42] - Management highlighted strong demand across all product categories, particularly in emerging youth markets [13] Other Important Information - The company ended the quarter with cash and cash equivalents of €262 million after a share repurchase of €176 million [23][24] - Capital allocation priorities include investing in the business, reducing debt, and opportunistic share buybacks [25] Q&A Session Summary Question: Current demand trends and visibility for fourth quarter acceleration - Management noted exceptional demand in Q3, with capacity constraints being the main issue, and aims for continuous margin improvement as the business scales [31][32] Question: Market response to price increases implemented on July 1 - Management reported no negative impact on demand post-price adjustments, with strong sell-through during the back-to-school season [36][38] Question: Impact of increased EU tariffs on revenue and margins - Management indicated that the effective tariff rate is manageable, with pricing flexibility and other levers to offset impacts [42][44] Question: EMEA growth performance and future expectations - Management acknowledged challenges in capturing full demand due to production capacity but expects a return to mid-high teens growth in EMEA [51][53] Question: Insights on closed toe product growth - Management confirmed a 400 basis point increase in closed toe revenue share, with strong performance across various styles [60][62] Question: Factory expansion plans and supply evolution - Management is on track with factory expansion plans, expecting full absorption by 2026, and is investing in capacity to meet growing demand [70][71] Question: Confidence among wholesale partners - Management noted strong demand from wholesale partners, reflecting consumer behavior and a desire for more product breadth [73][74] Question: DTC business performance and customer trends - Management highlighted strong performance in DTC, with new stores delivering higher ASP and increased transaction values [102][105]

Group 1: Earnings Performance - Birkenstock reported quarterly earnings of $0.7 per share, exceeding the Zacks Consensus Estimate of $0.67 per share, and up from $0.49 per share a year ago, representing an earnings surprise of +4.48% [1] - Over the last four quarters, the company has surpassed consensus EPS estimates four times [2] - The company posted revenues of $720.54 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 2.56%, compared to year-ago revenues of $564.76 million [2] Group 2: Stock Performance and Outlook - Birkenstock shares have declined approximately 11.4% since the beginning of the year, while the S&P 500 has gained 10% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.41 on revenues of $606.77 million, and for the current fiscal year, it is $1.86 on revenues of $2.44 billion [7] Group 3: Industry Context - The Shoes and Retail Apparel industry, to which Birkenstock belongs, is currently in the top 40% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Birkenstock's stock performance [5] - Caleres Inc., another company in the same industry, is expected to report quarterly earnings of $0.51 per share, reflecting a year-over-year change of -40% [9]

Financial Performance - Revenue increased by 12% to €635 million, or 16% on a constant currency basis[11] - DTC (Direct-to-Consumer) revenue increased by 9% to €244 million, or 12% on a constant currency basis[11] - B2B (Business-to-Business) revenue increased by 15% to €390 million, or 18% on a constant currency basis[11] - Gross profit increased by 14% to €384 million, with a gross profit margin of 605%, an increase of 100 basis points[11, 18] - Adjusted EBITDA increased by 17% to €218 million, with an adjusted EBITDA margin of 344%, an increase of 140 basis points[11] - Adjusted net profit increased by 26% to €116 million[11] - Adjusted EPS (Earnings Per Share) increased by 27% to €062[11, 27] Regional Performance - Americas revenue increased by 10%, or 16% on a constant currency basis, to €312 million[14] - EMEA (Europe, Middle East, and Africa) revenue increased by 13%, or 13% on a constant currency basis, to €259 million[14] - APAC (Asia-Pacific) revenue increased by 21%, or 24% on a constant currency basis, to €63 million[14] Cost Management and Balance Sheet - Selling & Distribution Expenses were €163 million, representing 256% of revenue, a decrease of 80 basis points[20] - General & Administrative Expenses were €31 million, representing 49% of revenue, an increase of 40 basis points[20] - Net debt increased by 6% to €1096 million, with net leverage at 17x LTM (Last Twelve Months) Adjusted EBITDA[11, 32] - Inventory-to-sales ratio improved to 33% of LTM revenue[30]

Revenue Performance - Revenue for the three months ended June 30, 2025, was €635.0 million, an increase of 12% on a reported basis and 16% in constant currency compared to the same period in 2024[111]. - The Americas segment accounted for 49% of revenue, while EMEA represented 41% for the three months ended June 30, 2025[102]. - DTC revenue grew by 9% on a reported basis and 12% in constant currency, while B2B revenue increased by 15% on a reported basis and 18% in constant currency[111]. - The APAC segment showed significant growth potential, with reported revenue growth of 21% on a reported basis and 24% in constant currency for the three months ended June 30, 2025[111]. - Revenue from the Americas segment for the three months ended June 30, 2025, was €312,266 thousand, a 10% increase from €282,865 thousand in 2024[123]. - APAC revenue grew by 21% to €63,178 thousand in the three months ended June 30, 2025, compared to €52,044 thousand in 2024[123]. - Revenue for the nine months ended June 30, 2025 increased by €222.2 million, or 16%, to €1,571.1 million, with strong growth in the APAC segment at 31%[160]. Profitability Metrics - Net profit reached €129.2 million, a 73% increase from €74.6 million, with EPS rising to €0.69, up 75% from €0.40[119]. - Adjusted EBITDA was €218.3 million, reflecting a 17% year-over-year increase, with an adjusted EBITDA margin of 34.4%, up 140 basis points from the previous year[119]. - Adjusted net profit for the same period was €116,025 thousand, up from €91,870 thousand in 2024, leading to an adjusted net profit margin of 18.3%[129]. - Net profit for the three months ended June 30, 2025 increased by €54.6 million, or 73%, to €129.2 million[157]. - Adjusted EBITDA for Q3 2025 increased by €31.9 million, or 17%, to €218.3 million, with an adjusted EBITDA margin of 34.4%, up from 33.0% in Q3 2024[181]. - Net profit for Q3 2025 improved by €54.6 million to €129.2 million, with a net profit margin of 20.3%, up from 13.2% in Q3 2024[179]. Cost and Expenses - Gross profit margin improved to 60.5%, up 100 basis points from 59.5% in the same period last year, driven by sales price adjustments and better absorption of new manufacturing capacity[111]. - Cost of sales for the three months ended June 30, 2025 increased by €22.1 million, or 10%, to €251.0 million, primarily due to an increase in the number of footwear pairs sold[164]. - Selling and distribution expenses for the three months ended June 30, 2025 increased by €13.6 million, or 9%, to €162.8 million, driven by online revenue growth and retail expansion[169]. - General and administrative expenses for the three months ended June 30, 2025 increased by €5.6 million, or 20%, to €33.0 million, reflecting growth as a publicly traded company[152]. - Income tax expense for Q3 2025 increased by €14.2 million, or 39%, to €50.5 million, driven by higher taxable income in Germany and the United States[177]. Cash Flow and Financing - Cash flows from operating activities totaled €260.6 million, although operating cash flow decreased by €20.9 million year-over-year due to tax payment timing and working capital development[119]. - Cash flows used in investing activities for Q2 2025 were €21.1 million, an increase of €3.9 million from Q2 2024, primarily due to higher property, plant, and equipment purchases[203]. - Cash flows used in financing activities for Q2 2025 were €210.1 million, significantly higher than €35.8 million in Q2 2024, mainly due to share repurchases of €176.4 million[205]. - As of June 30, 2025, total loans and borrowings amounted to €1,181.7 million, slightly down from €1,194.6 million in 2024[208]. - The company expects to finance its operations and working capital needs for the next 12 months from cash generated through operations[195]. Market and Operational Risks - The company is exposed to market risks primarily associated with foreign exchange and interest rate fluctuations[211]. - The company faces intense competition from both established companies and new market entrants[218]. - The company aims to execute its direct-to-consumer (DTC) growth strategy while managing risks related to its e-commerce platforms[218]. - The company is dependent on the reputation of the BIRKENSTOCK brand, which is crucial for maintaining market share[218]. - The company has identified risks related to the expansion of retail stores and the management of leased and owned real estate[218]. - The company is focused on adapting to changes in consumer preferences to attract new customers[218]. - The company faces potential losses from counterfeit products affecting its brand and market share[218]. - The company is subject to risks related to global health events that could impact operations[218]. - The company must manage relationships with major wholesale partners to avoid deterioration or termination[218]. - The company is aware of the economic conditions impacting consumer spending, including inflation and trade policy actions[220].

Group 1 - Investors in Birkenstock Holding plc (BIRK) should monitor the stock closely due to significant movements in the options market, particularly the Oct. 17, 2025 $22.5 Call which has high implied volatility [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in Birkenstock Holding's stock price, possibly due to an upcoming event [2] - Birkenstock Holding currently holds a Zacks Rank 3 (Hold) in the Shoes and Retail Apparel industry, which is in the bottom 30% of the Zacks Industry Rank, with mixed analyst earnings estimates affecting the consensus estimate for the current quarter [3] Group 2 - The high implied volatility surrounding Birkenstock Holding may indicate a developing trading opportunity, as options traders often seek to sell premium on such options to capture decay, hoping the stock does not move as much as expected by expiration [4]