Q1 2024 Birkenstock Holding PLC Earnings Call

Operator: Good morning. Thank you for standing by for the Birkenstock conference call. Stay on the line; your conference will begin shortly, Cannibal Crime, Wild West, or the inherent horrors of vandalism. online and in audiobook format This film is dedicated to the nuestros, the Western nation, and is dedicated to the memory of my family, and of my former explorers.

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Operator: Good morning and thank you for standing by. Welcome to Birkenstock's first quarter fiscal 2024 earnings conference. Next time, all participants are known analysts. Following the presentation, we will conduct a question and answer session and, Company Allocated 60 minutes. Now we turn the call over to you.

Alexander Hoff: Alexander, 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 Erik Massmann, Chief Financial Officer of the Birkenstock Group. David Kahan, President of America.

Good morning, and thank you for standing by welcome to Birkenstocks first quarter fiscal 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Nico Bouyakhf: Nico Bouyakhf, President of Europe, and Klaus Baumann, Chief Sales Officer, will join us today in the Q&A section to answer your questions with regard to the information we are sharing this morning. Please keep in mind that our fiscal year ends September 30th. Thus, our first quarter of fiscal year 2024 ended on December 31st, 2023.

The company allocated 60 minutes in total to this conference call I would like to remind everyone that this conference call is being recorded.

I'll now turn the call over to Alexander Hall, Vice President of Global Finance.

Hello, and thank you everyone for joining us today.

On the call are all about my shirts director of Stockholding plc, and Chief Executive Officer of the brokers to group and Eric <unk>, Chief Financial Officer of the books too quick.

Operator: You may find the press release and the supplemental presentation connected to today's discussion on our investor relations website, birkenstock-holding.com. 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 Security Service. 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 ACC, which can be found on our website at birkenstock-holding.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During the call, all revenue growth rates will be cited in constant currency, on this of the West. We will also reference non-IFRS financial information. We use non-IFRS measures, as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS financial information is not intended to be considered by itself or as a substitute for financial information prepared and presented in accordance with IFRS.

David Kirchhoff, President Americas, nickel buoy us President Europe, and close Baldwin Chief sales officer will join us to date, the acute infection to answer your questions with regards to the information we are sharing this morning.

Please keep in mind that our fiscal year ended September 30th.

Thus, our first quarter of fiscal year 2024 ended on December 31st 2023.

You may find the press release and the supplemental presentation connect to today's discussion on our Investor Relations website broken stock minus wording dot com.

We would like to remind you that some of the information provided on this call is forward looking and accordingly are 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 the mornings press release.

As well as <unk> filings with the SEC, which can be found on our website at book stock minus 14 Dot com.

We undertake no obligation to revise or update any forward looking statements or information, except as required by law.

During the call all revenue growth rates will be decided on a constant currency basis, unless otherwise stated.

We will also reference certain non <unk> financial information.

Oliver Reichert: Reconciliations of IFRS to non-IFRS measures can be found in the Morning Express release and in our SSE. With that, I'll turn the call over to Oliver. Thanks, Alexander. Good morning, everybody, and thank you for joining today. It's great to be here with you to discuss another exceptional quarter. We achieved the highest revenue level for the first quarter in our company's history, driven by growing demand for our products across all regions, channels, and categories. Accordingly, revenue grew by 26% versus our first quarter last year. We also successfully increased our production capacity as planned, penetrated our largely untapped white space areas, and maintained our strong profitability. Our revenue growth was driven by an increase in both ASP and EUR. ASP benefited from the continued shift to premium products, favorable channel mix towards D2C, and a sales price increase.

We use non <unk> measures as we believe there we presented the operational performance and underlying results of our business more accurately.

The.

<unk> of this non <unk> financial information is not intended to be considered by itself or as a substitute for the financial information pre pay ups and presented in accordance with IRS.

Reconciliations of <unk> to non <unk> measures can be found on the mornings press release and in our associates' Alex.

With that I'll turn the call over to Oliver.

Thanks, Alexander Good morning, everybody and thank you for joining today's call.

It's great to be here with you to discuss another exceptional quarter, we achieved the highest revenue level for the first quarter in our company's history, driven by growing demand for our products across all regions channels and categories.

Accordingly revenue grew by 26%.

Our first quarter last year, we also successfully increased our production capacity as planned.

Oliver Reichert: Additionally, units sold also increased as additional production capacity became available in Germany and Portugal to fuel our supply capabilities to meet the growing demand for our product. The strength of the Birkenstock brand is evidenced by continued high levels of full price realization across all points of distribution. We have observed that general consumer shopping has transitioned from shopping arbitrarily to intentional purchasing, where consumers are seeking the key brands and products they love.

Penetrated our largely untapped white space areas and maintained our strong profit formula.

Our revenue growth was driven by an increase in both Asps and units.

A S P benefitted from the continued shift to premium products.

A favorable channel mix towards D to C and sales price increases.

Additionally units sold also increased as additional production capacity became available in Germany, and Portugal to fuel our supply capabilities to meet the growing demand in our products.

The strength of the bedroom stock brand is evidenced by continued high levels of full price realization across all points of distribution we.

Operator: Accordingly, we remain highly confident in our ability to continue our strong performance through fiscal 2024 and beyond. Our DTC channel was once again our fastest-growing channel in the first quarter of fiscal 2020, resulting in a 53% share of revenue. Members of our fast-growing membership program are highly engaged and most apt to expand the purchases of our brand. As the average U.S. Birkenstock consumer owns 3.6 pairs, this growing membership base of loyal fans is proving to be fertile ground for our expansion and is a key focus for us in fiscal year 2020.

We have observed that general consumer shopping has transitioned from shopping, albeit Charlie to intentional chasing where consumers are seeking the key brand and products They love.

Accordingly, we remain highly confident in our ability to continue our strong performance through fiscal 'twenty 'twenty four and beyond.

Our DTC channel was once again, our fastest growing channel in the first quarter of fiscal 'twenty four.

Resulting in a 53% of share of revenue.

Members of our fast growing membership programs are highly engaged and most app to expand their purchases of our brands.

Operator: Despite a challenging backdrop in the wholesale market, our B2B business achieved healthy revenue growth of 22% against the same period last year. As a must-have brand for all leading retail partners, we expect our penetration to expand in fiscal 2020. In our first quarter, which marks winter in the northern hemisphere, we have seen a significant continuous shift towards closed-toe silhouettes, including, succeeding for the first time in the share offender, as well as a sustained move towards premium products. This is clearly demonstrated by a strong sell-through in premium products, such as clocks, boots, shearling products, and closed-toe sneakers. We are particularly excited to see our higher priced new boot silhouettes, the Highwood and the Prescott, outperforming our sellout expectations in DTC since their launch in October 2017.

S. The average U S bookings to a consumer owns three six pairs. This growing membership base of loyal fans is proving to be very tail round faraway expansion and is a key focus for us in fiscal year 'twenty 'twenty four.

Despite a challenging backdrop in the wholesale market, our b to B business achieved healthy revenue growth of 22% against the same period last year as a must have brand for all leading retail partners, we expect our penetration to expand and physical plentiful.

In our first quarter, which marks winter in the northern Hemisphere, we have seen a significant continuous shift towards closed toe silhouettes, including clocks.

Exceeding for the first time the share of silos.

As well as a sustained move towards premium products.

This is clearly demonstrated by strong sell through and premium products.

Operator: While we have generated significant momentum and compelling sales results from our new styles, our momentum with our core styles remains unbroken. This highlights the commercial relevance of our iconic models and the continued demand for our most recognizable styles. We have also seen higher sales of the premium leather executions of our classic silhouette. It's great to see these products remain in high demand after the peak holidays. In a marketplace where inventory access is a critical concern, our stock-to-sales ratios at wholesale partners proved to be an outlier. Now, let's move to our discussion of the segment.

Such as clogs boots, Schilling product and close toes sneakers.

We are particularly excited to see our higher priced new boot salutes the high wood and depressed cuts outperforming our sellout expectations in D. C. Since their launch in October 23.

While we have generated significant momentum and compelling says results from our new styles, our momentum with our core styles remained unbroken.

This highlights the commercial relevance of our iconic models and the continued demand for our most recognizable stars.

Operator: Within our largest reach in the Americas, consumer momentum and demand for our brand continue to increase. Revenue in the region was up 19%. A larger driver of the growth was, once again, the DTC channel. As one would expect in a quarter driven more by sell-through than sell-in, DTC penetration increased even further. Notably, approximately half of our revenues were generated from members of our membership program, which we are working to further expand given the strong brand engagement and fandom of these consumers. For our B2B channel in the Americas, please recall that we had large shipments early in the fourth quarter of fiscal 23 to capture the expected increase in demand around the holiday season. For the first quarter of 24, most of our top-line growth was driven by greater penetration within our existing B2B channels.

We have also seen higher sales of premium leather executions of our classic silhouettes, it's great to see these products remain in high demand after the peak holiday season.

In the marketplace, where inventory access is a critical concern our stock to sales ratios at wholesale partners proved to be an outlier.

Now, let's move to I'll discuss segment performance.

Within our largest region, the Americas consumer momentum and demand for all brand continued to increase.

Revenue in the region was up 19%.

A large driver of the growth was once again the D to C channel.

As one would expect in a quarter driven more by sell through and sell in DTC penetration increase even further.

Notably approximately half of our revenues was generated from members of our membership program.

Which we are working to further expand given the strong brand engagement and fandom, Steve consumers.

Operator: Specifically, with the expansion of categories like closed-toe silhouettes, with the vast majority of our shipment growth going to existing partners. Only a single-digit percentage of revenue in the Americas is attributed to new points of distribution, with a heightened focus on specialty retailers, including sports-specific running retailers, where the benefits of our footbed as a recovery from sport are finding strong end-use demand. In Europe, we delivered exceptional growth in the first quarter of fiscal 2024 in a macroeconomic environment where consumers remained more subdued in their spending. Birkenstock continued to perform strongly.

If I would be to be channel and the America. Please recall that we had large shipments early in the fourth quarter of physical trailing three to capture the expected increase in demand around the holiday season for the first quarter of 'twenty or most of our top line growth was driven by greater penetration.

Within our existing B to B channel.

Specifically with the expansion of categories like clothes toad silhouettes with the vast majority of our shipment growth go into existing.

Only a single digit percentage of revenue in the Americas is attributed to new points of distribution.

With a heightened focus on specialty retailers, including sports specific running retail is where the benefits of our foot bed as a recovery from sports is finding strong end use demand.

Operator: Our revenue in Europe increased by 33%, first. As a reminder, the reported revenue level in the fourth quarter of fiscal 23 was still impacted by our sales transformation initiatives, which have started to pay off in the first quarter of fiscal 23. Our growth in Europe was broad-based across all our channels and geocenters, underpinned by very strong set-out performance during the holiday. Notably, the sellout of Birkenstock products with some key partners was up high double versus first quarter fiscal year.

In Europe, we delivered exceptional growth in the first quarter of fiscal 'twenty, four and the macroeconomic environment, where consumers remained more subdued in their spending fitness store continued to perform strongly our revenue in Europe increased by 33% in the first quarter.

As a reminder, the reported revenue level in the fourth quarter of fiscal 'twenty three was still impacted by our sales transformation initiatives, which have started to pay off in the first quarter fiscal 'twenty four.

Operator: In DTC, revenue also increased significantly. The first quarter of fiscal 24 also marked the start of our ambitious store opening plan, in which we aim to double our fleet in Europe over the coming three years. After closing many literacy stores over the past two years, we are pleased to see the recently opened Cologne pop-up is among our top performing European stores, delivering the highest ASP from day one.

Our growth in Europe was broad based across all our channels and geographies underpinned by very strong sell out performance during the holiday season.

Notably the sell out of the bidding so products with some key partners was up high double digits versus first quarter fiscal 'twenty three in.

In D. C revenue also increased significantly and supported by our strong overall growth.

The first quarter of fiscal 'twenty. Four also marked the start of our ambitious store opening plan in which we aim to double our fleet in Europe over the coming three years.

Operator: In B2B, we are increasing our shelf space and continue to be one of the top performing brands for our wholesale partners. Key retailers are increasing their purchases and shifting their volumes toward earlier delivery. This is resulting in even higher revenue growth for B2B, with nearly all of this growth coming from existing distribution. Lastly, we successfully launched new products in our expansionary category. We presented our new and fully certified professional line at A-plus-A, the world's largest workwear trade fair, and received a great response from more than 3,000 industry visitors at our booth. This quarter, our professional product category delivered the second highest growth rate, both in terms of value and. It is indicative of the strength of our brand that we have fully implemented our spring-summer 24 price increases with no adverse impact on demand, and our full price realization in Europe Atma was our fastest growing segment in the first quarter of fiscal 24, with revenue growth of 51%.

After closing many leaches these stores over the past two years, we are pleased to see the recently opened Cologne pop up is among our top performing European stores, delivering the highest S. P from day one.

And B to B, we are increasing our shelf space and continue to be one of the top performing brands fall wholesale partners in Europe.

Key retailers are increasing their purchases and shifting their volumes towards earlier delivery dates.

This is resulting in even higher revenue growth for the B to b with nearly all of this growth coming from existing distribution partners.

Lastly, we successfully launched new products and our expansion of categories, we presented our new and fully certified professional line at eight plus a fair the worlds largest workwear trade fair and received great response from more than 3000 industry.

Visitors at our booth.

This quarter, our professional product category delivered the second highest growth rate.

Both in terms of value and units.

It is indicative of the strength of our brand that we have fully implemented our spring summer 'twenty four price increases there's no adverse impact on demand and our full price realization in Europe remains very strong.

Erik Massmann: Growth in the region was largely driven by our DTC channel, with the digital portion of the channel nearly doubling versus last year. We also saw a healthy increase in B2B in the first quarter of fiscal 24, which was driven by an expansion of our Monobrand partner store environment with 10 newly opened stores. Similar to the other regions, close-toe silhouettes, including clocks, played a decisive role in our success, contributing more than half of the total revenue in the. I will now turn it over to Erik to discuss our financial results in more detail. Thanks, Oliver, and good morning, everyone.

Uh huh.

Fastest growing segment in the first quarter of fiscal 'twenty, four with revenue growth of 51%.

Growth in the region was largely driven by our D to C channel, where the digital portion of the channel nearly doubling versus last year.

We also saw a healthy increase in b to B and.

In the first quarter of fiscal 'twenty, four which was driven by an expansion of our mono brand Pablo store environment with 10 newly opened stores.

Similar to the other regions close tote silhouettes, including clocks played a decisive role in our success contributing more than half of our total revenue in the region.

Erik Massmann: We are pleased with Birkenstock's performance in the first quarter of fiscal 2024. While the broader consumer environment continued to be challenging, our brand once again proved to be extremely healthy and our growth algorithm to be robust. Birkenstock is one of the few must-carry brands in the wholesale channel that also drives shoppers to retail stores and our D2C channel, particularly as consumers become more intentional in their purchase. This trend is reflected in our first quarter fiscal 2024 results, which includes the holiday season. Let's have a look at the details of the first quarter.

I will now turn it over to Eric to discuss our financial results in more detail.

Thanks, Oliver and good morning, everyone.

We are pleased with the stock's performance in the first quarter of fiscal 2024.

While the broader consumer environment continued to be challenging.

What brand once again proved to be extremely healthy and the outgrowth algorithm to be firmly intact.

The stock is one of the few must carry brands in the wholesale channel that also drives shop us to retail stores and our DTC channels.

Particularly as consumers become more intentional in their purchases.

This trend is reflected in our first quarter fiscal 2024 results, which includes the holiday season.

Erik Massmann: Revenue was 303 million euros, representing an increase of 26% versus the prior year. Birkenstock generated double-digit growth across all segments and channels, demonstrating the desirability and resilience of its brand. We are particularly excited by our D2C performance, which was up by 30% versus the prior year, driving D2C penetration to 53% of our revenue. At the same time, we increased B2B revenue by 22%. Gross profit margin for the first quarter of fiscal 2024 was 61%, down 70 basis points compared to the prior year.

Let's have a look into the details of first quarter results.

Revenue was 303 million euros, representing an increase of 26% Douglas pray yet.

Didn't stock generated double digit growth across all segments and channels.

Demonstrating the desirability and resilience of our brands.

We are particularly excited by our D to C performance, which was up by 30% versus prior year driving need to see penetration to 53% share of our revenue.

At the same time, we increased b two b revenue by 22%.

Gross profit margin for first quarter fiscal 2024 was 61%.

Down 70 basis points compared to prior year.

Erik Massmann: While we successfully recovered inflation by increasing sales prices and optimizing our channel and product mix, a slight margin compression was mainly caused by our ongoing capacity expansion and an unfavorable currency translation. Adjusted Selling and Distribution Expenditures, 103 million euros, representing 34% of revenue in the first quarter of fiscal 2024, generally in line with the first quarter of fiscal 2023. As a reminder, our first quarter is typically the quarter with the highest DTC share and, therefore, generally shows the highest selling distribution spend as a percentage of revenue. Adjusted general administration expenses were €24 million and 7.9% of revenue, up 110 basis points compared to the first quarter of last year. This increase is largely driven by public company costs, which we did not incur before our IPO.

While we successfully recovered inflation by increasing sales prices and optimizing our channel and product mix.

The slight margin compression was mainly caused by our ongoing capacity expansion and an unfavorable currency translation.

Adjusted selling and distribution expenditures 103 million euros, representing 34% of revenue in the first quarter of fiscal 2024.

Generally in line with the first quarter of fiscal 2023.

As a reminder, our first quarter is typically the quarter with the highest D to C share and therefore generally shows the highest selling and distribution spend as a percentage of revenue.

Adjusted General and administration expenses were 24 million euros, and seven 9% of revenue up.

Up 110 basis points compared to first quarter of last year.

This increase is largely driven by public company costs, which we did not incur before our IPO.

Erik Massmann: First quarter adjusted EBITDA of 81 million euros was up 12% versus last year, resulting in an adjusted EBITDA margin of 26.9%. The decrease versus prior year margin was largely driven by the aforementioned effects of ongoing capacity expansion, incremental SG&A expenses, and an unfavorable currency translation. Our first quarter effective tax rate was elevated due to increased tax expenses compared to the first quarter of fiscal 2023 related to one-time share-based compensation expenses and certain other non-deductible expenses.

First quarter adjusted EBITDA of 81 million Euro was up 12% versus last year.

Resulting in an adjusted EBITDA margin of 26, 9%.

The decrease versus prior year margin was largely driven by the before mentioned effects of ongoing capacity expansion.

Incremental SG&A expenses.

And an unfavorable currency translation.

Our first quarter effective tax rate was elevated due to increased Texas expenses versus the first quarter of fiscal 'twenty to 'twenty three.

<unk> to one time share based compensation expenses and certain other non deductible expenses.

Erik Massmann: These results cumulated in fully diluted adjusted earnings per share of €0.09, compared to 15 euro cents in the first quarter of fiscal 2023. Let's now have a closer look at our balance sheet as of December 31st, 2022. Cash and cash equivalents, 169 million euros. The decrease compared to year-end fiscal 23 is fully in line with our expectations and is a result of the typical seasonality of our business and our deleveraging program. In the first quarter of fiscal 2024, we built up inventory to prepare for the upcoming spring summer 2024 wholesale shipments while improving our inventory to sales ratio compared to the first quarter of fiscal 23. This build-up is a regular pattern we generally observe in the first quarter of each fiscal year. Additionally, we continue to deliver on it using our IPO net proceeds and excess cash on hand. We made early repayments on existing debt of 525 million euros, which reduced net leverage to 2.6 as of December 31st, 2022.

These results accumulated and fully diluted adjusted earnings per share of nine years since <unk>.

Compared to 15 euro cents in the first quarter of fiscal 2023.

Let's now have a closer look at our balance sheet as of December 31st 2023.

Cash and cash equivalents were 169 million euros.

The decrease compared to year end fiscal 'twenty three is fully in line with our expectations and as a result of the typical seasonality of our business and our deleveraging progress.

In the first quarter of fiscal 2024, we built up inventory to prepare for the upcoming spring summer 2024 wholesale shipments.

While improving our inventory to sales ratio compared to first quarter of fiscal 'twenty three.

This buildup is irregular pattern, we generally observed in the first quarter of each fiscal year <unk>.

Additionally, we continue to deleverage using our IPO net proceeds and excess cash on hand.

We made early repayments on existing debt of 525 million euros, which reduced net leverage to two six as of December 31st 2023.

Oliver Reichert: In addition, we continue to invest for future growth. Capital expenditures were 18 million euros and mainly related to our production capacity. With that, I'll hand over back to Oliver.

Further we continue to invest for future growth.

Capital expenditures were 18 million euros, and mainly related to tell our production capacity expansion.

With that I'll hand over back to Oliver.

Oliver Reichert: Thank you very much. Let me summarize our discussion. We are very pleased with the strong start to Fiscal 2015, with continued strong consumer demand for our products, both classic and new emerging products. We are executing on our proven engineered distribution strategy, ensuring high levels of full price realization across all segments. We remain committed to building on our foundation for success and driving long-term sustainable growth guided by our principles of function, quality, and trust. The exceptional first quarter results demonstrate the resilience of our business. In the Americas, we gained further growth momentum by deepening our D2C footprint while building on a loyal and steadily growing following. In Europe, our transformation plan is now paying off. At the same time, we are entering the next chapter of our growth trajectory as we tap into our largest white space market, the uptrend, increasing brand awareness and taking market share while following our playbook of disciplined engineered distribution. We believe this will catapult us on a new growth trajectory in the future. Demand continues to outpace supply in all segments and channels.

Thank you very much Eric.

Let me summarize our discussion.

We are very pleased with the strong start to fiscal 'twenty four.

With continued strong consumer demand for our products, both classic and new emerging products. We are executing on our proven engineered distribution strategy, ensuring high levels of full price realization across all segments and channels.

We remain committed to building on our foundation for success and driving long term sustainable growth guided by our principles of function quality and tradition.

The exceptional first quarter results demonstrates the resilience of our business.

In the Americas, we gained further growth momentum by deepening our DTC footprint, while building on our loyal and steadily growing following.

In Europe, our transformation plan is now paying off at the same time, we are entering the next chapter of our growth trajectory as we tap into our largest wide space market Yep region.

Increasing brand awareness and taking market share while following our playbook of disciplined.

Engineered distribution.

We believe this will catapult us on a new growth trajectory in the future.

As demand continues to outpace supply in all segments and channels.

Oliver Reichert: Given our continued momentum, we are even more confident in the guidance we provided you just last, while our strategic investment in sustainable growth temporarily impacts our profitability. We are fully committed, steering our business in line with a cross-profit margin over 60% and an adjusted EBITDA margin in the low 30% mid-term. We are carefully tracking costs on the sourcing and production side as our capacity expansion is proceeding. We continue to recover the impact of inflation through a selective price. So, in short, we are very pleased to report that we have never been in a better position to grow our business. Birkenstock is 250 years strong.

Given our continued momentum we are even more confident in the guidance. We provided you just lost months.

Allow us to T G investment in sustainable growth temporarily impacts our profitability midterm.

We are fully committed to steering our business in line with our cross profit margin over 60% and an adjusted EBITDA margin in the low thirties percent midterm, we are carefully tracking costs on the sourcing and production side as our capacity expansion is proceeding.

As expect.

We continue to recover the impact of inflation through selective price increases.

So in short we are very pleased to report that we have never been in a better position to grow our business because Stoke is 250 year strong and we have a long runway for growth ahead.

Operator: And we have a long runway for growth. I would now kindly ask the operator to open our Q&A. Thank you. At this time, we will be conducting question and answer. We ask that on today's call you limit yourself to one question. If you would like to ask a question, please press star 1 on your touch screen.

I would know kindly ask the operator to open our Q&A session. Thank you.

Thank you at this time, we will be conducting a question and answer session.

We ask that on today's call you limit yourself to one question.

If you'd like to ask a question. Please press star one on your telephone keypad.

Alexander Hoff: Confirmation Tone, Press Start, may be next, one question Starbucks. Hi, congratulations on the nice results today. Last quarter, you had mentioned some of the impacts of inflation and the AUR increases that you were taking. What are you seeing on those inflationary impacts? And it sounds like the new manufacturing facility.

A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for.

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Once again, we ask that you limit yourself to one question on today's call and please press star one now if you wish to ask a question I'm. Please hold while we poll for questions.

And the first question today is coming from Dana Telsey from Telsey Group Dana Your line is nice.

Hi, congratulations on the nice results today last quarter, you had mentioned some of the impacts of inflation and the AUR increases that you were taking what are you seeing in those inflationary impact and it sounds like the new manufacturing facility housed what's happening with capacity utilization what are you seeing.

Alexander Hoff: What's happening with capacity utilization? What are you seeing there, and how do you think about leverage? Thank you. Hi Dana. Thanks for the question. This is Alexander.

And how do you think about leverage thank you.

And I think for the classroom those Alexander.

Alexander Hoff: I will take that over. So, first of all, for the cadence of our earnings, we are going to guide them on quarterly margins, but what I can tell you is that we are very pleased with our margins, especially in a situation where we took the strategic decision to substantially increase production capacity. And please be reminded that it's not only Parzival we opened in September; it is also our expansion in Görlitz and our expansion in Portugal, and we are very happy to see that expansion because it gives us the possibility to meet future demands. We have already touched on that, that these e-tax will slightly impact our margins in 2024. This is clearly a temporary e-tax.

I will take that over.

Well first of all for the cadence of our earnings we aren't going to guide to quarterly margins.

What I can tell you is.

That'd be very pleased with our margin, especially in a situation, where we took the strategic decision.

Actually increased production capacity.

And please be reminded that it not only positive obviously opened in September and it's also our pension and garlic and our expansion in Portugal, and they're very happy.

To see that expansion because it's a it.

It gives us the ability to meet future demands.

We already had some that that those impacts will likely impact our margin. Despite the fall off is clearly a temporary we fully accounted a dollar guidance.

Alexander Hoff: We fully account for inflation in our guidance and our plans for and on the inflation side. Yeah, and Oliver mentioned we are carefully tracking the cost of sourcing and production. We see for this year low to mid-single-digit cost inflation, mainly labor and raw materials, which we expect to mitigate through our selected price increases. Again, all these are reflected in our guidance. And to sum it up, we are fully committed to steering our business in line with a gross profit margin of over 60% and then adjust its EBITDA margin to the low 30s in the mid-term. The next question is from Ed Aubin from Morgan Stanley. Yeah, good afternoon.

Last fall.

And on the inflation side.

Yeah, Oliver mentioned there.

Definitely tracking the Costless salt production.

We see for this year of low to mid single digits, a cost inflation, mainly labor and raw material.

Which we expect to mitigate a throw all selected price increases.

Again, all of those are reflected in our guidance.

And that's something that we are fully committed to steer our business are in line with the gross profit margin over 60%.

And then adjusted EBITDA margins in the low thirties and debates.

Thank you. The next question is coming from Ed Alban.

Morgan Stanley at your line is live.

David Kahan: Good morning, guys. So just on the mix, the close-toed ones, I think you said that the sales of those have now exceeded the sales of sandals. Are you talking about more than 50% of sales, just to clarify? Because my recollection, but maybe I'm wrong, was that close toe penetration was about 30% of sales last year. So that would be quite a steep increase. And then just related to that, you know, Oliver, you mentioned that a number of products did well close to the toe, but could you provide a little bit more color between, you know, the sneakers, slippers, boots, and the Boston? Is the Boston now exceeding 20% of your sales? That would be very helpful.

Yeah. Good good afternoon. Good morning, guys. So just on the on the makes the close to I think you said that it's the sales now exceeded.

Sales of sandals are you talking about more than 50% of sales just to clarify because my recollection, but maybe I'm wrong was that close to penetration was about 30% of sales last year. So that would be quite a steep increase and then just related to that you know Oliver you mentioned that.

The number of products did well in close to but could you provide a little bit more color between you know the sneaker slippers boots, and the Boston Boston now exceeding 20% of yourselves on that that would be very helpful. Thank you.

David Kahan: Thank you. Yeah, Edward, this is David. I'll take this. Yes, I mean, during the holiday season, which is more of a sell-through than a sell-in season, results for closed-toe footwear in general were quite significant. From D to C, 53% were non-fandles.

Yeah. Edward this is Dave I'll take that yeah.

Yes, I mean during the holiday season, which is more of a sell through the nacelle latencies results for closed toe footwear in general were quite significant.

D to C, 53% were non sandals, that's across all closed toe categories from sneakers to slippers to two.

David Kahan: That's across all closed-toe categories, from sneakers to slippers to clogs. Some of the sell-through on our new boots, like the Highwood and the Prescott, exceeded all expectations. And just to give you a little bit more color, absolutely, the Boston is what you would call the hot clog, but within the clog category, sales of everything other than Boston, including the Tokyo, which is a backstrap clog, the Nuser Mod 360, and the Buckley, all exceeded expectations.

To clogs.

The sell throughs on our new boots like the high wouldn't the Prescott, we're exceeding all expectations and just to give you a little bit more color absolutely. The Boston is what you would call the hot Claude but within the clog category sales of everything other than Boston, including the <unk>.

<unk>, which is basically a backdrop Claude the news our Mark III 60, the Buckley all exceeded expectations sales in.

David Kahan: Sales in clogs other than Boston were 75% higher. So it's a broadly based closed-toe business right now. And I think that's quite significant to say that this was the first time that non-fandles were a larger percentage of our business. And the next question is coming from Mark Altwager, and Bert.

Operator: Great, thank you for taking my question and congratulations on the strong results here. The sustained shift to premium products is nice to hear. How should we be thinking about ASP growth, both this year and longer term? Is mid-single digits still the right expectation, or are you gaining some confidence that it could be higher than this, given the success you're seeing in the premium price? Thanks for the question, Mark. That's a great view.

Operator: You're absolutely right, and you saw that also in the Q4 numbers we reported just a month ago that we're seeing a great shift towards premium products. Boston is helping clearly, but also other products. Colleagues have already mentioned that. Overall, it's a fair assumption to be in the mid to high single-digit ASP growth, and we already mentioned that we allocate roughly one-third to the product side, to the channel side, and to the pricing side. Between the quarters and between the years, there can be some little shifts, and yes, maybe this year there's a little shift towards the product side, but overall, in the long run, you should be good with this number. Thanks and congrats on another night. So, Oliver.

Spell that also the queue phone numbers all set just a month ago that.

Grace.

Shifts towards premium products Boston has has been clearly bumped to also order products colleagues already mentioned basket.

It's it's a <unk> to be.

Mitch too high single digit is Pedro and we already mentioned that'd be located roughly one theft too.

Product tied to the 10 O five and just with the pricing side.

Uhm between the Qualcomm in between the years there can be some little ship. That's yes, maybe this year, there's a little shift to walk the product side, but all the all in the long run you should be good with the phone number.

Thank you.

The next question is coming from Matthew boss from J P. Morgan Matthew Your line is life.

Great Thanks, and congrats on another nice corner.

Don't.

Oliver Reichert: Thank you, Matt. Oliver, could you elaborate on your increased confidence in this year's guide? Or have you seen any change in top-line momentum post-holiday relative to the more than 20% constant currency growth that we saw last quarter, just as you think about demand exceeding supply? As you know, Matt, demand for our products has exceeded our supply for years. We have had to invest in our growth capacity, which will lead to a planned moderate margin compression, as we said and as we showed in our model in the short to midterm. However, this would be more than compensated for in the midterm by further qualitative growth in all regions and channels and a higher overall efficiency in production. So, for the moment, we stay with our outlook and the guidance we just gave you a month ago. Just keep in mind, Matt, that the first quarter is normally our weakest quarter, and it's pretty strong already.

<unk> could you.

Could you elaborate on your increased confidence in this year's guide or have you seen any change in top line momentum post holiday relative to the more than 20 per cent constant currency growth that we saw last quarter, just as you think about demand exceeding supply.

No ma'am demand.

Product says exceeded also apply for Ya.

We have had to invest in our growth capacity, which will lead to to a planned moderate mountain compression has decided that to show that our model.

<unk> however.

However, this would be more than compensated for in the midterm by the qualitatively growth in all regions and channels.

And and the higher overall efficiency in production so for the for the moment, we stayed with our with our outlook in our our guidance.

We just gave you a month ago, you know to keep in mind that the first board is is our weakest quarter normally.

And it's pretty strong already so yeah, you can see yes, I'm smiling and uhm.

Oliver Reichert: So, yeah, you can see us smiling, and we're very confident. Thank you. Just as a reminder, if you wish to ask a question today, please press star 1 on your phone, and others to ask a question from: Hi Oliver, Erik, and Alexander, thanks for taking my question. Just on that point of greater confidence, is there a particular region which has made you feel a little bit warmer about life as we look at the year ahead since January?

And they're very confident.

Thank you and just as a reminder, if you wish to ask a question today. Please press star one on your phone at anytime once again.

If you wish to ask a question at anytime.

The next question is coming from Louise a single horse from Goldman Sachs lose your line is life.

Hi, all of that era can Alexander Thanks for taking my question and get on that 10 point going to <unk>.

Nico Bouyakhf: And particularly in Europe, given the big acceleration there, is there anything about the timing of deliveries or phasing or anything that we should think about as we go through into Q2 as well? Thank you. Hey, Luis, this is Nico speaking, heading up Europe.

Which is made you feel a little bit about life.

Your head.

January and particularly on Europe, given the big acceleration that is there anything on the timing of deliveries or phasing or anything that we should think about <unk> into key too as well. Thank you.

Hello. This is Nicole speaking I'm heading up Europe. So first of all we are very very delighted to see Europe, completing the transformation plan to share the details with you during the I P O and she had more details with you and the last quarters call Q for fiscal twenty-three was impacted by a transformational efforts.

Nico Bouyakhf: So first of all, we are very, very delighted to see Europe completing the transformation plan. We shared the details with you during the IPO and shared more details with you in the last quarterly call. Q4 fiscal 23 was impacted by transformational efforts.

Nico Bouyakhf: Now, as we have almost completed our transformational plan, these impacts have become smaller, almost minimal. And we are very, very confident with our current position in the European market. The overall market is soft, as we know, but we are very, very strongly positioned. And two years of hard work in our transformation plan are now paying off. So Q1 is another quarter.

<unk> almost completed all transformational plan these impacts become smaller almost minimal and we are very very confident with our current position in the European market Mmm Yoga market is soft as you know, but we are very very strongly positioned and three years of hard work and our transformation plan on.

Paying off so Q1 is another quarter, we substantially increased our industry. It's another quarter revenue significantly outdoor units and it's another quarter were closer Shaw a business is growing faster than our sandwiched business as long as I mentioned in this quarter that is glitching two seasons.

Nico Bouyakhf: We substantially increased our ASP. It's another quarter where revenues significantly outgrow units. And it's another quarter where our closed-source business is growing faster than our business. As Oliver mentioned, in this quarter that bridges two seasons, we had two consecutive price adjustments, no signs of rejection, and our full price realization is superior to the market. So that shows you that we have done our homework in Europe and are very, very confident about how we look into the future. Hello, briefanni.

Two consecutive price adjustments no signs of rejection and our football's realization is superior to the market. So that shows you that we have now homework in Europe, and we are very very confident about how we look into the future.

Thank you. The next question is coming from Sam Poser from Williams trading.

Thank you good morning, everybody.

Uhm.

Operator: Hello, friends. Good. Thank you. Good morning, everybody. I've got two questions. Sorry, I'm going to break the rules.

Two questions trying to break the rule. The first question is about your inventory levels that at the end of the year.

At the end of last year represented about seven the sales that followed in Q2 and Q3 last year represented around 73% of the inventory you had at the end of Q1. Your cost of goods is that was that accurate because or should we expect that same.

Operator: The first question is about your inventory levels at the end of the year. Are you or are you expecting to slow down the turn a little bit? I mean, because I'm looking at it from an inventory productivity perspective. Looking forward to it, and others. And, as always, thanks for watching. And I'll see you next time. So I start, that was number one, yeah. Okay, I tell it to everyone. So, if you want me to, I'll ask you to because I got cut off last time. No, no, no, no, no, no, no, no. Let me get no second one, Stefan. You bet. It depends on the length of the answer, though.

Kind of thing this year or.

Four four are you expecting to slow down the turn a little bit I mean cause if.

I'm looking for looking at it from an inventory productivity perspective.

Looking forward.

[laughter].

So I thought that was number one okay [laughter] I felt like.

Oh, you want me to also added because I got cut off.

No second one seven is that [laughter].

Operator: As you can see, as you saw, that changes the inventory level, but you're always aware that 20% of the inventory would be raw materials and work in progress. And the vast majority of the carryover products are already contracted values. And the healthy inventory is shown by the pull price, more than 90%, especially due to the classic styles and so on. The ratio actually came down if you compared it to Q1 last year, 42% inventory to sales ratio versus 35% last year. But it's higher than the end of Q4.

<unk> as you see as you saw him we would that change it suddenly the inventory level, you're always aware, that's 50 per cent off.

Inventory would be raw materials and work in progress.

And the <unk> majority of victory <unk> already contracted value and the the healthy inventory as shown by the full price more than 90 per cent.

Especially due to the Catholic style since on the ratio actually came down if you compared to Q1 last year 42 per cent inventory to says racial <unk> 75 last year and that is higher than and a few for now. This is obviously due to the <unk> to to redo the whole sale shipment.

Alexander Hoff: Now, this is obviously due to the fact that in Q2, we do the wholesale shipment, and we pre-produce to be ready and prepared for the big shipments, which we do in Q2. So it's A, in line with the development in the past, and B, getting better year over year because we work harder, and, as you see, successfully with a 3% downturn already in Q1 this year. Thank you. And then secondly, the average selling price increase, how much can you break that down of the mid to high singles, whatever it's going to be by pricing by the actual taking of price, and then channel product and geographic mix that may, you know, be helping or hurting in either play in all those. Yeah, this is Alexander. I will take that over.

That'd be pre produce to be ready and prepared for the big shipments, which we do in queue too. So it's it's a in line with the development of the path and be getting better year over year, because we do have caught on this end and as you see successfully with a three per cent.

Downtown already and then you wanted us here.

Thank you and then secondly, the average selling price.

Increase how much can you break that down the.

The middle high singles whenever it's gonna be by pricing by the actual taking of price and then channel product and geographic mix that may be helping or hurting and either play and all those places.

Yes.

I will take that over.

Alexander Hoff: We saw just a little effect in channel mix. Last year's quarter was even that strong than this year's quarter, so there's a slightly positive factor, but you can reject that. The other two are more relevant, which is the pricing point, Nico touched on that, especially in Europe and the upper region with price increases. And let's say the other 50% is related to the product. This question is coming from... Hi, thanks for taking the question. I just wanted to come back to the full year guide.

We saw just a little effect N channel makes lucky.

<unk> was.

Even that's wrong, then that <unk> slightly positive effects.

But you can reject that the other two are more relevance, which is surprising <unk> equal test on that.

Actually in the <unk> region with Fries increases.

And the lemonade the other 50% is related to the product peace.

Thank you. The next question is coming from Sharon's OXEA.

From William Blair sharing your line of sight.

Hi, Thanks for taking any question.

I just wanted to come back to that point Your guide and then obviously it started with a really strong December and I think the implication that would be you know ground with moderate to 15, 70% top line for the rest of the here, which is very very healthy about any sleep allow.

Oliver Reichert: I mean, you've obviously started with a really strong December, and I think the implication would be, you know, growth would moderate to 15-17% on the top line for the rest of the year, which is very, very healthy, but obviously below the trend you've been at. Is there any particular part of the world or, you know, wholesaler DTC where we would expect to see some deceleration because of what's happening with, you know, capacity expansion or anything else as we think about the rest of the year? Or is it more a reflection of it's still early in the year and there's inherent uncertainty just generally in the environment?

<unk> is there any particular part of the world or wholesale.

<unk> D T C, where we would expect to see.

Deceleration because of what's happening with you know capacity expansion or anything else as we think about the rest of the year or is it more a reflection of it it's still early in the year and and there's an inherent uncertainty just generally in any environment.

Oliver Reichert: Thank you for your question. It's really, it's really about, you know, having just assured the guidance four weeks ago. And on the other hand, it's just the first quarter; we see a lot of demand in the markets, all channels, all geographic areas. And, and so, honestly, we will just feel much better if we stay with our guidance for the moment. As you know, we already have some information about Q2, of course. So you may see us changing our position. But for the moment, we're good with the guidance. Thank you. Thank you, Sharon.

Thank you for your question.

It's really.

[noise] about you know, having just assuring the guidance of four weeks ago and on the other hand, it's just the first quarter, we'll see a lot of a lot of.

Uhm demanded the markets all channels, all geographics and and so.

Honestly, we will just feel much better if you stayed with our guidance for the moment.

No we already have some some information about you too of course. So you may you may see changing opposition.

But for the moment, we are good with the guidance.

Oliver Reichert: Thank you. The next question is coming from... Thanks. Hey, everyone. Nice job. Hope you're all doing well.

Okay. Thank you.

Thank you.

Sharon.

[noise] is coming from <unk> from BMO capital markets semi in your line of life.

Thanks, I ever a nice job of your <unk>.

Operator: Could you elaborate at all on the increased shelf space for European B2B? Is that gaining new partners deeper with specific existing partners, both? Just any further color there, because that was really great to hear.

Could you elaborate at all on the increase shelf space for the European be to be that gaining new partners deeper with specific existing partners. Both just any further color there because that was really great to hear and then if you could quantify the name gross margin drivers this quarter, perhaps just isolating one time this ramp costs versus the underlying performance and how you're thinking about those within girl.

Oliver Reichert: And then if you could quantify the main gross margin drivers this quarter, perhaps just isolating one-time-ish ramp costs versus the underlying performance and how you're thinking about those within gross margin going forward. Thanks, guys. Hi Simeon, thank you for the question. I'll take the first part.

Marching going forward. Thanks Gotcha.

Hi, I'm thinking about the redfin I'd take the first part.

Oliver Reichert: The good news is, and that's really something which is really a super, super strong message, I would say, that we did this 26 percent growth, more or less with 95 of the existing doors. So you can really imagine that we grab shelf space in the different doors, and we really expand their interest in the brand. And their sellout, and their overall behavior towards the brand is super, super positive.

The good news isn't that's really something which is really super Super strong message I would say that we we did just 26% growth more or less with 95 of the existing doors. So you can really imagine that'd be grab shelf space and the different doors and we we really expand their interest.

The brand and that's all out and their their overall behavior towards the brand is super Super positive and we are very proud that we can generate such a huge growth.

Oliver Reichert: And we are very proud that we can generate such huge growth with existing partners. So you can imagine that once we add other doors and go into different categories, because you know that we have a lot of white space categories in our back end, this will deliver massive future growth. That's why we're so confident about our long-term outlook and our profitability, and that's why we're investing that amount of money in doubling the capacity. Again, really keep in mind that this company is doubling their capacity. It's not just a slight increase; it's a doubling of the whole thing. So that's heavy lifting.

With existing partners. So you can imagine that one three we at the doors and go in different categories. Because you know that we have a lot of widespread categories in an hour backhand.

This will deliver a message for you to grow that's why I was so confident.

Longterm mm mm <unk> our profitability.

And that's why we are investing that that's amount of money in the in doubling the capacity again really keep in mind that this company doubling the capacity, it's not just a slight increase its a doubling of the whole thing. So that's heavy lifting and we're planning to do this within the next three years. So.

Oliver Reichert: And we're planning to do this within the next three years. So, yeah. Be Superconfident! Hi Simeon, this is Nico.

Yeah. So.

But confidence.

This is nicole so to add a bit time to watch all of them are just chairs, yes, b. Two b was very very strong and coupons and said, okay I'll get to see business, but yet D. T. C increased revenues high high double digit so actually that's the magic thing with US one doesn't come at the expense of together if I look at the due to the.

Nico Bouyakhf: So to add a bit to what Oliver just shared, yes, B2B was very, very strong in Q1. In fact, it outgrew our DTC business, but yet DTC increased revenues by high double digits. So actually, that's the magic thing with us. One doesn't go at the expense of the other.

Nico Bouyakhf: If I look at the B2B growth, basically, three things drove that growth. One, we had a very, very strong order book for autumn-winter 2023. For B2B, our closed-tool business grew five times faster than our sandbox business.

<unk> basically it please savings to go with that.

One and we had a very very strong order book for ultimate that 23.

For me to be closed for business do five times faster than in Los Angeles business. So that shows you that you'll also taking the success. Some G T C postal business into the to be.

Nico Bouyakhf: So that shows you that we are also taking the success from DTC with our closed-tool business into B2B. And then, for spring-summer 2024, we even had a stronger order book. So what's currently happening is retailers are not just increasing their orders with us; they're also over-proportionately increasing their orders on earlier delivery dates in order to be ready to serve consumers earlier. That's the second thing.

And then appointment for spring Summer 24, we even had a strangle audible. So what's currently happening is you tell us about increasing the orders with US you're also in over proportionately increasing the delivery.

<unk> and what is it you're ready to serve consumers earlier.

That's the second thing and then all of it just chairs and some info we enjoy currently at very high growth rate all professionals products. So you saw the product.

Nico Bouyakhf: And then, as Oliver just shared in his intro, we currently enjoy a very high growth rate for our professionals' products. So, you saw the product. It's an expansionary category. We shared with you the product in Unique, which is fully certified, presented at the biggest trade fair, and we are now getting really strong demand from retailers, which is helping us to push our business again beyond the sandbox category. Hi, this is Lorraine Hutchinson from Bank of America. I don't know where the Brian came from, but thank you and good morning. Give us the Brian inside of you, Lorraine. Give us the Brian.

<unk> never category, Yes, you have with you the product in Munich 40 certified presented at the biggest trade fair and now getting an elitist on demand from retailers in which is helping us to push our business again beyond the sandwich category.

Thank you and the next question is coming from Brian Hutchinson from Bank of America, Bryan and your line of life.

[noise] Hi, this is Lorraine Hutchinson from Bank. This is Lorraine Hutchinson forgot to their account.

I don't know where the Brian <unk>, but thank you good morning, yeah.

Yeah, Yeah, both Brian W. The ready to give up the Brian <unk>.

Operator: I wanted to just ask you to comment a little bit on the Asia growth trajectory. What are you hearing from consumers there? It sounds like product acceptance is closed, so it has been great. Have the price increases been greeted with the same level of success as Europe?

Hi, I wanted to just ask you to comment a little bit on the.

The Asia growth trajectory, what are you hearing from consumers there it sounds like the product except it. This close till has has been great have the price increases been greeted with the the same level of success as Europe, and how do you envision that business growing over the next several years. Thank you.

Klaus Baumann: And how do you envision that business growing over the next several years? Thank you. Thank you for the question. Klaus here, running the APMA region.

Thank you for the commission cloud here running Moriches.

Klaus Baumann: First of all, I think it's very important to understand that we are growing everywhere in the APMA region. So we are right now setting up Greater China, Japan, Indonesia, Southeast Asia, and we are now opening a lot of partner stores, and we see very strong sell-out growth in existing stores. And also, we are building our own fleet now and also optimizing our T2Z business there. So this is a business, for example, where we had very strong results at the last 11.11 event. And with this, we can see, and we are building a lot of confidence in this sector. So teams are all on the ground, and we are heading forward. The price increase has no effect at all.

<unk> <unk> everywhere in my region. So we are right now sitting upgraded China, Japan <unk>.

Southeast Asia and.

We are now opening another department stores and V C <unk>.

Existing source and what's going to be I'm using that one moment, please and order optimizing our T. Two Z business. There. So this is a business. For example, we have very strong resolve on the last 11 11 event.

And with this we can see an immediate feeling a lot of confidence.

<unk> so it seems I'll hold on the ground and.

Heading for driving cause he's had no effect at all January the prices are like.

Klaus Baumann: Generally, the prices are like 10 to 15% higher in this region already. And mainly, there is a history of our product in the key markets. So on that side, there is no negative trend or any rejection from the consumers. I think we are just beginning in this region, and there is a huge white space everywhere.

250 per cent higher than just reach in already and mainly there's a history on the product and the key markets. So <unk> no negative trend or any recheck symptom consumers.

The very beginning.

Mm mm mm.

<unk> everywhere. So we're looking very confident for continuing these girls path.

Klaus Baumann: So we are looking forward very confidently to continuing this growth path. Maybe you can add something about... Thank you, Dr. Greens.

Maybe you can add something about.

<unk>.

Alright.

Gross.

Operator: Hi. Any more questions? Yes, apologies.

[noise] any any more questions.

Operator: The next question is coming from Randy Conant, to your left. Yeah, thanks a lot, guys. I just want to talk about, elaborate, talk more about the closed-toe strength. And it appears, you know, David, from your comments earlier, that there's just a higher acceleration in adoption of this part of the bid. So, maybe give us some perspective or remind us where you think closed-toe penetration will be, where you had said it would be, I don't know, previously, and does this kind of make you think that closed-toe penetration can, you know, become even more of a part of the business than you previously might have thought? And maybe tell us, maybe, what are the differentials in ASPs of closed-toe versus sandals? Because you might get a benefit there, potentially, with mix as well. Thanks, guys. Yeah, Randy. Hey, great question.

Yes apologies at the next question is coming from Randy conic from Jeffries.

Your line of sight.

Yeah. Thanks, a lot guys I just wanted to talk about elaborate talk more about the closed toe Australia and it. It. It appears you know David your comments earlier that there's just a higher acceleration in adoption of this part of the bitch. So maybe give us some perspective of remind us enough, where you sink closed toe penetration.

<unk>, where you had said it would be I don't know how previously and does this kind of think make you think that close to a penetration can.

Become even hire a part of the business that you previously might've thoughts and remind us maybe what is the differentials in asp's of closed toe versus sandals cause you might get a benefit their potentially with mixes well thanks guys.

[noise], Yeah, Randy Hey, Great question, Yes, the response to close telling the adoption two are closed toe products has been even better than I think we expected and again you're in a holiday season, we're we're talking about a quarter that used to be when Burke.

David Kahan: Yes, the response to closed-toe and the adoption of our closed-toe products has been even better than I think we expected. And again, you're in a holiday season where we're talking about a quarter that used to be when Birkenstock was pretty dormant, as you remember in the market. No longer are we dormant in fall-winter.

In stock was pretty dormant as you remember in the market no longer are we dormant in fall winter right now on our own direct to consumer to to put it in perspective fall winter is over 50 per cent of the mix, which is driven by closed toe products. So I think the beauty of it is closed <unk>.

David Kahan: Right now, on our own direct-to-consumer site, to put it in perspective, fall-winter is over 50% of the mix, which is driven by closed-toe products. I think the beauty of it is that closed-toe includes everything from clogs to boots, and every style that we've put in the market, whether it's direct-to-consumer or whether it's in our best retail partners, has been Obviously, there is a significant mix impact, which will increase the ASP overall. But I just think consumer adoption has been very, very high. Again, you have to remember our membership represented 49% of our direct-to-consumer business.

Jeffrey thing from clogs to boots, and every style that we've put in the market, whether it's direct to consumer or whether it's in our best retail partners. It's been performing very very well, obviously, there is a significant mix impact, which will increase the a S. P. Overall.

I just think the consumer adoption has been very very high again, you have to remember our membership represented 49% of our a direct to consumer business and when you start to share things like close to a product with members who have a two time click through rate versus.

David Kahan: And when you start to share things like closed-toe products with members who have a two-time click-through rate versus non-members, you're starting to see the return on investment be much higher, and there is a higher adoption rate between returning customers. So, I think what we said originally in our roadshow and pre-IPO about the potential of closed-toe products probably might be conservative based on what we're seeing right now, and Just to add to this one, thank you, David. For Europe, what we can see is that among the top 10 revenue-driving models, five are closed-toe, and three are boots. And one of those boots is the boot that we just introduced. So, the boots are the Highwood, the Stellan, the Bryson, and these are at a higher price point.

Non members, you're starting to see the return on investment be much higher and higher adoption rate between returning customers. So I I think what we said originally in our roadshow and pre I P. O about the potential of clothes soap product probably might be concern.

It is based on what we're seeing right now that's that's a good thing.

Just to add to this one thank you David for Europe, what we can see is among the top 10 revenue driving models, five <unk> and <unk> and one of the suit is the booth that we just introduce so the boots are the high road and the seven the Bryson and there's a higher price point, so we can <unk>.

David Kahan: So, we can migrate consumers into higher price point products and also into non-sandals products. What we are currently seeing is that during the autumn-winter 24 B2B order intake, retailers are going with us on that path. So, they're really believing in us that we can transition the success from D2C into B2B. So, we are very confident about the closed-toe business, but also the closed-shoe and boots business. And this is like the ultimate answer of, okay, how can you grow 26% on the same number of stores? How is this possible?

Great consumers into higher price point product and also into non sandwich called us. What we're currently seeing is doing the ultimate not 24 to the order intake retailers are going with us that part. So they are really believing us uhm that'd be 10, uhm transition to success from D C and to be to be so we are very confident about the close to a <unk>.

<unk>, but also the clothes shoes and boots business.

And does this like it ultimately <unk> Oh, Okay. How can you grow 26% on the same amount of stores I was as possible. So this is really laggy shows the strength of the brand and and that's a sad doing Jimmy Roadshow, and we saw some skeptical faces. There you know this is a new category.

Oliver Reichert: So this is really like it shows the strength of the brand. And as we said during the roadshow, and we saw, you know, some skeptical faces there, this is a new category for this brand, having this closed-toe shoe option. And now, in the relatively short term, you see that we're performing super well in this sector. And just to add one last point there, because, yeah, obviously, the US market is fairly developed to grow at the rate that we grew when 95% of that revenue growth is coming from not only existing accounts but existing doors. That really shows the strength of retailers and consumers in expanding our brand way beyond the sandal category. Thank you. Again, it is star one if you wish to ask a question.

For this brand having to disclose so the shoe option and and now in a relatively short Tom you'll see like they're performing Super Welinder seconds, and just add one last point there because yeah, obviously the U S market is fairly developed to grow at the rate that we grew when.

95% of that revenue growth is coming from not only existing accounts, but existing doors that really shows the strength of retailers and consumers in expanding our brand way beyond the sandal category.

Thank you.

Once again it is star one if you wish to ask a question just to remind you that if you wish to ask a question you can press star one at any time over the next.

Operator: I know that if you wish to ask a question... Starr, this question is coming from Paul LeJouez from Citi. Paul, your line is up. Hey, thanks, guys. Two months into the second quarter; just curious if you can share how you're thinking about top line growth in 2Q, given what you've seen to date. And how should we be thinking about gross margin, not just in 2Q but as we move through the year? I think the first quarter came in a little bit better than you were thinking. If you can give us any color there in terms of how gross margin looks relative to last year, as we move throughout the year, Paul. I think I can refer to what I said before. 24th is the transition year.

Next question is coming from Paul.

[noise] I'm city.

His life.

<unk> you two months in through the second quarter, just curious if he can share how you're thinking about top line growth and two Q given what you seem to date and how should we be thinking about gross margin not just from two Q, but as we move through the year I think first quarter came in all of it better than what you were thinking if you can give us any color.

<unk>, they're in terms of how gross margin looks relative to last year as we move throughout the year.

Yeah. Thank you for quite some Paul I think I can reference to what I said before.

24th of transition year.

Erik Massmann: In terms of margins, EVPA, and gross margin, clearly, we see the effects of capacity. However, there are also some other effects which influence or could influence our margins. You saw in Q1, just with 110 basis points from currency translation, just to a weaker US dollar compared to prior years. Overall... On the margin side, what we can say, you see also from the Sirocco Financial Q2 margin is always a gross margin, always a little bit below the other quarters due to the high wholesale share. But on an annual basis, we will stick with the numbers we gave out. And we will see. We are absolutely positive about that. But let's see what comes out. Michael Benet, Core ISI.

Gotcha.

<unk> clearly, we C B U X problem capacity.

Now also some other effects, which influence of <unk> <unk>, just with one out of 10 based on falling from currency translation just.

To a week here you are so low compared to prior years number.

All the all.

On the mob decide what we can pay you'll see <unk>.

Q too marg, and that's always <unk>, it's always a little bit below.

Below the other quarter due to the high wholesale chair.

On an annual basis, where you stick with the numbers, we gave out and let's see we are absolutely positive on that but let's see what will come out.

Thank you. The next question will be from Michael Benetti.

Erik Massmann: Hey, guys. Thanks for taking our questions here. Let me just follow that one really quickly with you, Erik. If I just follow the work on the IPO and the consensus numbers here, it does look like a pretty meaningful step down in gross margin in 2Q is expected. Is that – it looks like 600, 700 basis points. Is the change in B2C versus B2B growth rate that drastic when we look at 2Q versus 1Q or the other quarters in the year to explain that big step down? And then I was just wondering on the gross margin if you could help us quantify a little bit just – how much you thought the mixed effects were, but more so, do you have any way to quantify the impact of the factory absorption on the gross margin in the first quarters that we understand that? I'm curious if, you know, the unit growth rate in the quarter was maybe above what you planned. If we see that continue.

Evercore ISI, Michael your line of <unk>.

Hey, guys. Thanks for taking our questions here, let me just follow that one really quickly with you at the if I just followed the work on the I P. O in that in that consensus numbers here. It does look like a pretty meaningful step down and gross margin and two Q as expected is that is that.

It looks like six 700 basis points is that the change in D. C vs B growth rate.

That drastic when we look at Q Q versus one to you or the other quarters in the air to explain that big step down and then I was just wondering on the gross margin. If you if you could help us quantify a little bit just.

How much you've got the mixed effects were but more so do you have any way to quantify the the the the impact of the factory absorption on the gross margin and the first course that we understand that I'm I'm curious if you know the unit growth rate in a quarter was maybe above what you planned if if we see that continue.

Erik Massmann: Does the accounting for that mean that you're pulling forward incremental units that have a higher per cost unit from the new factories, or do you see better leverage if you pull forward unit growth? I'm trying to understand how to model forward the factory absorption component on the gross.

Does that does the accounting for that mean that.

You're pulling forward incremental units that have a higher cost.

<unk> <unk>.

Many factories or do you see better leverage if you pull forward unit gross I'm trying to understand how to model forward the factory absorption component.

Erik Massmann: Hey Michael, thanks for the question. So clearly Q2 without giving a concrete number, but you're absolutely right: with such a high wholesale share, we will see a lower margin. This is typical seasonality. We have it every year.

Grosses.

[noise] Hey, Michael Thanks for all the question.

So clearly you.

You too without giving a concrete number but you're absolutely right with such a high <unk> chair, we will see a lower margin. This is typical two vanilla tea, we have it in every year you thought also <unk> where are you you you haven't shed really a higher seizure with gets you.

Erik Massmann: You saw it also in Q1, where you have a generally higher D2C share, which gives you a better gross margin. On the other way around, at the EVTA margin level, there's not that much impact from the channel perspective. And on the second one, so do we see, or did we already see some absorption from the new capacity in Q1? Actually, these are all products we produced some months ago, so this is not a material effect in Q1, and we also opened Parzivalk in September, so we're ramping up currently. We are in the ramp-up phase which will last until 2025. So you have not seen it substantially in the numbers going forward on a full-year basis. This is the main effect on 24 numbers, gross margin, and EVDA margin, so the capacity expansion. But again, a temporary effect. This question is coming from Edward. Sandler, Edward Hey guys, thanks very much for taking my question.

<unk> the other way wrong Q2 of the EBIT, a modern level, that's not that much impact from the channel.

<unk> and the second one so do we see we already <unk>, probably do a capacity to one.

Actually these are also.

Products, we produce some months ago. So this is not a material effect in Q1.

And we also all composite log in September so with ramping up currently we have the the <unk> until 25.

<unk> substantially the numbers going forward in the full year basis.

This is the the main effect on 20 phone numbers Ross modern EBIT margin so the the capacity expansion.

But again a temporary effect.

Thank you and the next question is coming from Edward.

From Piper Senator Edward your line of sight.

Hey, guys. Thanks, very much for taking my question I never wanted the big product partners has been E V. A and really kind of more water sports would love a quick update on performance their particular asthma and we noted that you're interesting more kind of water sport sandals in the Americas curious if you have any early reached this season. Thank you.

Klaus Baumann: I know one of the big product priorities has been EVA and really kind of more water sports. I would love a quick update on performance there, particularly in APMA. And we noted that you're introducing more water sports sandals in the Americas. Curious if you have any early reads this season.

Klaus Baumann: Thank you. Yeah, yeah. Hello, Klaus again.

Yeah Yeah.

Hello, clouds again, I'm not sure if I understood you right, but you're asking a performer and song.

Klaus Baumann: I'm not sure if I understood you right, but you're asking performance on EVA in the APMA region. So, obviously, the territory of APMA is a very good area for us, and we are building on that. There are these non-corked sandals, especially for the areas with rain times and stuff.

<unk>.

Obviously the territory.

<unk> is a very good reason for us and we are building on that please.

<unk>.

For the territories with rain time and stuff.

Klaus Baumann: This is absolutely in the plan. At this moment, we are really doing a kind of balancing out very well how much product we are putting into this region, also for controlling our ASP and also, yeah, well, building the qualitative part of the brand on the product side too. Ed, I think you asked about EVA and the Americas. Just as a reference and just as a reminder, we've said this before, but that's all incremental product to Quark. There is not a pair of EVA pods that takes away a pair of Quarks. We've seen absolutely the opposite.

Absolutely.

At this moment, we are really doing kind of done anything at all very well how much product. We are putting into this region also for controlling a Y S. P and also yeah, well <unk> part of the plan.

I too and I think you asked also about E. P. A in the Americas, just as reference and just as a reminder, we've said this before but that's all incremental products to fork. There is not a pair of V V. A that takes away a pair of Cork, we've seen absolutely the opposite we see this demand flywheel.

David Kahan: We see this demand flywheel where every product that we continue to expand in the market drives more and more demand across the line. So whether it's water sports, whether it's after performance sport use, it's purely incremental, and it's additional use occasions. And anytime we can open up our brand to additional use occasions, it's more pairs than somebody's wardrobe, and it's more top line revenue. And just to remember also, regardless of the ASP on EVA, it may carry potentially a higher EBITDA margin. So it's not directly related to ASP when it comes to that product. Thank you. And that does... And also, this concludes today's program. Connect your lines. Thank you.

<unk>, where every product that we continue to expand in the market drives more and more demand across the line. So whether it's water sports whether it's after after performing sport use it's purely incremental and it's additional used vacations and anytime we can open up our brand to us.

<unk> I'll use occasions, it's more Perez and somebody's a wardrobe and it's more top line revenue in just to remember also regardless of the a S. P. I N E V. A it may hot it may carry potentially a higher EBIT margin. So it's it's not directly related to E. S. P.

When it comes to that product.

Thank you and that does conclude today's Q&A section and also this concludes today's conference call.

You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.

Thank you.