Q2 2024 Birkenstock Holding plc Earnings Call

Speaker Change: [music].

Operator: Good morning, and thank you for standing by. Welcome to Birkenstock's second quarter fiscal 2024 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. The company has allocated 60 minutes in total to this conference call. I would like to remind everyone that this conference call is being recorded. I will now turn over the call to Megan Kulik, Director of Investor Relations.

Good morning, and thank you for standing by welcome to Birkenstocks second 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. The company has allocated 60 minutes in total to this conference call I would like to remind everyone that this conference call is being recorded I will now turn over the call to Meghan Kulik director of Investor Relations.

Megan Kulick: Hello, and thank you everyone for joining us today. On our call are Oliver Reichert, Director of Birkenstock Holding, PLC, and Chief Executive Officer of the Birkenstock Group, and Erik Massmann, Chief Financial Officer of Birkenstock Group. David Kahan, President of the Americas, Nico Bouyakhf, President of Europe, Klaus Baumann, Chief Sales Officer, and Alexander Hoff, VP of Finance, will join us for the Q&A section. Please keep in mind that our fiscal year ends on September 30th, and thus, our second quarter of fiscal 2024 ended on March 31st, 2024.

Speaker Change: Hello, and thank you everyone for joining us today on our call are Oliver Reicher director of Birkenstocks, holding plc, and Chief Executive Officer of the Birkenstocks Grit, and Eric <unk>, Chief Financial Officer of Birkenstocks David.

Speaker Change: David <unk> President of the Americas, Nico Boyle, President Europe, close Baumann, Chief sales Officer, and Alexander Hall, VP of Finance will join us for the Q&A section. Please keep in mind that our fiscal year ends on September 30th Thus our second quarter of fiscal 2024 ended on March 31 2024.

Speaker Change: You may find the press release and a supplemental presentation connected to today's discussion on our Investor Relations website Berkinstocks holding dotcom.

Speaker Change: Additionally, we have included in the press release tables and presentation to quarterly for fiscal year 2023 in order to aid in your year over year comparisons we.

Speaker Change: We would like to remind you that some of the information provided during this call is forward looking and accordingly is subject to the safe Harbor provisions of the federal Securities laws.

Speaker Change: These statements are subject to various risks uncertainties and assumptions, which could cause our actual results to differ materially from these statements.

Speaker Change: These risks uncertainties and assumptions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website at Berkinstocks holdings Dotcom, we undertake no obligation to revise or update any forward looking statements or information, except as required by law.

Speaker Change: During the call all revenue growth rates will be sited on a constant currency basis, unless otherwise stated we will also reference certain non <unk> financial information, we use non I F. R. S measures as we believe they represent operational performance and undermine results of our business more accurately the presentation of this non ifr.

Speaker Change: This financial information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with IRS reconciliations of I F. R. S to non <unk> measures can be found in this morning's press release and in our SEC filings with that ill turn the call over to al.

Speaker Change: Oliver.

Oliver Reichert: Thanks, Meghan and welcome to the business of T. We are very happy to have you with us.

Speaker Change: The business short language to capital markets and.

Speaker Change: In helping us so I'll go develop digital brands.

Speaker Change: Good morning, everybody and thank you for joining today's call.

Megan Kulick: You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website, birkenstockholding.com. Additionally, we have included in the press release tables and presentation the quarterly earnings per share for fiscal year 2023 in order to aid in your year-over-year comparisons. We would like to remind you that some of the information provided during this call is forward-looking and, accordingly, is subject to the safe harbor provisions of the federal securities law.

Megan Kulick: These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as in our filings with the SEC, which can be found on our website at birkenstockpolling.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 on a constant currency basis unless otherwise stated.

Speaker Change: We are happy to be here with you to discuss another exceptional quarter.

Megan Kulick: We will also reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent 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 the financial information prepared and presented in accordance with IFRS. Reconciliations of IFRS to non-IFRS measures can be found in this morning's press release and in our SAC filings. With that, I'll turn the call over to Oliver.

Speaker Change: Once again, we achieved the highest revenue level for the second quarter in our company's history.

Oliver Reichert: Thanks, Megan, and welcome to the Birkenstock team. We are very happy to have you with us bringing the Birkenstock language to capital markets and helping us further develop this super brand. Good morning, everybody, and thank you for joining today's call.

Speaker Change: Driven by growing demand for all our products across all segments.

Oliver Reichert: We are happy to be here with you to discuss another exceptional quarter. Once again, we achieved the highest revenue level for the second quarter in our company's history, driven by growing demand for our products across all segments, all channels, and categories. Accordingly, revenue grew by 23% versus our second quarter last year. We continue to see strong demand growth in our core markets and in the largely untapped white space areas we identified across segments, channels, categories, and usage occasions.

Speaker Change: Channels and categories.

Speaker Change: Accordingly revenue grew by 23% versus our second quarter last year.

Speaker Change: We continue to see strong demand growth in our core markets and in the largely untapped white space areas, we identified across segments channels categories and usage occasions.

Oliver Reichert: Given the strong results achieved in the first half of fiscal 2024 and the continued demand growth we are seeing, we are pleased to be raising our fiscal 2024 guidance, and continuing the 10-year, 20% growth trend we highlighted during our IPO. We are increasing our fiscal 2024 revenue growth forecast to 20% on a constant currency basis, up from our prior guidance of 17 to 18, and an adjusted EBITDA margin in the range of 30 to 30.5%.

Speaker Change: Given the strong results achieved in the first half of fiscal 'twenty 'twenty four and the continued demand growth. We are seeing we are pleased to be raising our fiscal 2024 guidance continuing the 10 year, 20% growth trends, we highlighted during our IPO.

Speaker Change: We are increasing our fiscal 'twenty 'twenty four revenue growth forecast to 20% on a constant currency basis.

Speaker Change: <unk> from our prior guidance of 17% to 18% and an adjusted EBITDA margin in the range of 30% to 35%.

Oliver Reichert: Our second quarter revenue growth was driven equally by an increase in ASP and units. ASP benefited from the continued shift to premium products, a favorable channel mix towards DTC, and the targeted sale price increase. Unit growth was strong across all sectors, but especially strong enough in one of the key white space markets we have been highlighting. The additional production capacity we have brought online over the past six months in Germany and Portugal to fuel our supply capabilities is allowing us to meet the growing global demand for our products.

Speaker Change: Our second quarter revenue growth was driven equally by a decrease in the ASP and units and.

Speaker Change: ASP benefited from the continued shift to premium products.

Speaker Change: A favorable channel mix towards DTC and the targeted third price increase.

Speaker Change: Unit growth was strong across all segments, but especially strong in that box.

Speaker Change: One of the key white space markets, we have been highlighting.

Speaker Change: The additional production capacity, we have brought online over the past six months in Germany, and Paul to go to fuel our supply capabilities is allowing us to meet the growing global demand for our products.

Oliver Reichert: While the overall global consumer market remains weak, Birkenstock achieved 23% growth, beating the market soundly as we continue to take share and become a must-have brand for key retail partners. As we and others have observed, consumers are increasingly becoming more selective and intentional in their spending. Consumers across all ages, segments, and price points are seeking brands they love. And Birkenstock is definitely one of these global supermarkets.

Speaker Change: While the overall logo consumer market remains weak stoked achieved 23% growth.

Speaker Change: Beating the market solidly as we continued to take share and become a must have brand.

Speaker Change: Four key retail partners.

Speaker Change: As we and others have observed consumers are increasingly becoming more selective and intentional in their spending.

Speaker Change: Consumer across all ages segments and price points are seeking brands, they love and bitten stope is definitely one of these global Super brands.

Speaker Change: The strength of the bit in store brands as evidenced by continued full price realization of over 90% at key distribution partners in our DTC business.

Oliver Reichert: The strength of the Birkenstock brand is evidenced by continued full price realization of over 90% at key distribution partners in our D2C business. Our D2C channel was, once again, our fastest growing channel in the second quarter of fiscal 2024, with 32% growth against the same period last year. We opened six new own retail stores, bringing the total to 57.

Speaker Change: Our DTC channel was once again, our fastest growing channel in the second quarter of fiscal 2024.

Speaker Change: With 32% growth against the same period last year.

Speaker Change: We opened six new owned retail stores, bringing the total to 57, our digital business also continues to perform very well increasing 29% from the prior year quarter.

Oliver Reichert: Our digital business also continues to perform very well, increasing 29% from the prior year quarter. Members of our fast-growing membership program are highly engaged and most apt to expand the purchases of our brand, spending more per transaction than non-members. Growing the membership base of loyal fans through priority access to new products and limited editions is proving successful and remains a key focus for us in fiscal year 2024.

Speaker Change: Members of our fast growing membership program are highly engaged and most apt to expand their purchases all brand spending more per transaction than non members.

Growing the membership base of loyal fans through priority access to new products and limited edition is proving successful and remains a key focus for us in fiscal year 2024.

Speaker Change: Our b to B business, which represented 76% of our revenue in the second quarter achieved healthy revenue growth of 20% against the same period last year supported by a higher sell through rates.

Oliver Reichert: Our B2B business, which represented 76% of our revenue in the second quarter, achieved healthy revenue growth of 20% against the same period last year, supported by a high self-through rate. This growth came despite a challenging wholesale market you've heard discussed by many of our peers. As a reminder, the second quarter is seasonally the highest B2B quarter due to sell-in for spring and summer. We saw a continued shift towards closed-tow silhouettes, including clocks, and premium products during the quarter. Close toe penetration was over 25%, up 900 basis points from the prior year period.

Speaker Change: This growth came despite a challenging wholesale market you've heard discussed by many of our peers.

Speaker Change: As a reminder, the second quarter seasonally the highest <unk> quarter due to selling for the spring and summer seasons.

Speaker Change: We saw a continued shift towards close tote silhouettes, including blocks and premium products during the quarter.

Speaker Change: Clothes toad penetration was over 25% up 900 basis points from the prior year period.

Oliver Reichert: The premium offering across our range continues to resonate with the consumer, driving ASP up double digits in the quarter. As an example of this, our big buckle line grew over 28%, and sales of our newer braided styles have almost doubled year over year. During the quarter, two of our new premium styles, our new sandals, the Catalina and the closed-toe Lutri, ranked in our top 20.

Speaker Change: The premium offering across our range continues to resonate with the consumers.

Speaker Change: Driving a S P up double digits in the quarter.

Speaker Change: That's an example of this our big Buck line over 28% and sales of our new wall braided styles have almost doubled year over year.

Speaker Change: During the quarter two of our new premium styles, our new sandal Catalina and are close to lottery ranked in our top 20.

Oliver Reichert: While we have generated significant momentum and compelling top-line performance from our new styles, our momentum with our core silhouettes remains strong. Revenue from our top 5 core silhouettes, most of which have been around for close to 50 years, was up over 20% in the quarter, highlighting the commercial relevance of these iconic models and most recognizable styles. Now, let's move to our discussion of segment performance.

Speaker Change: While we have generated significant momentum and compelling topline performance from our new styles, our momentum with our core cigarette remains strong revenue from our top five cross sell rates most of which have been the wrong for close to 50 years was up over 20% in the quarter.

Speaker Change: Highlighting the commercial relevance of these like calling models and most recognizable stars.

Speaker Change: Now, let's move to our discussion of the segment performance.

Oliver Reichert: Within our largest segment, America's strong consumer momentum and demand for our brands continued in the second quarter. Revenue in the region was up 21% compared to the same period a year ago. D-to-C channel growth continued to outpace B-to-B growth, increasing our DTC share by over 200 basis points. Notably, 46% of digital DTC sales were from styles other than sandals as our brand fans continue to add Birkenstock products for different usage occasions.

Speaker Change: Within our largest segment the America strong consumer momentum in demand for our brands continued in the second quarter.

Speaker Change: Revenue in the region was up 21% compared to the same period a year ago.

Speaker Change: To see general growth continued to outpace b to B growth.

Speaker Change: Increasing our D to C share by over 200 basis points.

Speaker Change: Notably, 46% of digital DTC sales well from sites other than sandals as our brand fans continue to add beds installed products for different usage occasions.

Oliver Reichert: Over half of our digital revenue is generated from members of our membership program, who, on average, spend 15% more than non-members. And while our DTC revenue in America continues to be driven by our strong digital presence, revenue from our own retail doors continues to grow faster than. Our newest flagship store in the Miami Design District has performed ahead of expectations, with average order value 13% higher than other stores in the US, driven by a strong penetration of our premium 70-74 collection. The second quarter was another strong one for America's B2B champs.

Speaker Change: Over half of our digital revenue was generated from members of our membership program.

Speaker Change: Who on average spend 15% more than nonmembers.

Speaker Change: And while our D to C revenue in the Americas continues to be driven by our strong digital presence revenue from our own retail doors continues to grow above average.

Speaker Change: Our newest flagship store in the Miami Design District has performed ahead of expectations.

Speaker Change: With average order value, 13% higher than other stores in the U S drip.

Speaker Change: Driven by a strong penetration of our premium 70 74 collection.

Speaker Change: The second quarter was another strong one for the Americas b to be chairman.

Oliver Reichert: Our key wholesale partners recognize the strength of the brand and appreciate the rapid turnover of our products. Accordingly, they have allocated more space to Birkenstock and increased purchases by over 30% compared to last year, driven by the expansion of categories like closed-toe silhouettes. New points of distribution in the Americas accounted for a single-digit percentage of revenue, with a heightened focus on specialty retailers, including sports-specific running retailers, where the benefit of our footbed as a recovery from sport is finding strong end-use demand.

Speaker Change: Our key wholesale partners recognize the strength of the brand and depreciate the rapid turnover of our products.

Speaker Change: Accordingly, they have allocated more space to Britain stock and increased purchases by over 30% compared to last year.

Speaker Change: Driven by expansion of categories like clothes toad fluids.

Speaker Change: New points of distribution in the Americas accounted for a single digit percentage of revenue with a heightened focus on specialty retailers, including sports specific rounding retailers, where the benefit of our flatbed as recoveries and sport is finding strong end user demand.

Speaker Change: In Europe, we delivered exceptional broad based growth in the second quarter of fiscal 'twenty 'twenty four underpinned by strong consumer demand.

Oliver Reichert: In Europe, we delivered exceptional growth-based growth in the second quarter of fiscal 2024, underpinned by strong consumer demand. While the European retail market remains soft, Birkenstock continues to perform strongly, up by 21%, far outpacing any other brand. We saw strength in both the D2C and B2B channels.

Speaker Change: The European retail market remains soft and still continues to perform strongly up by 21% far outpacing any other brands.

Speaker Change: We saw strength in both the D to C and b to be generous.

Erik Massmann: The strong growth in Europe is directly related to the distribution transformation efforts we have made in the region, designed to grow ASP through more strategic placements that drive more premium priced products. We saw ASP increase double digits as demand for styles priced at over 100 euros grew by over 60% and reached over 50% of total sales. Close-toe silhouettes grew by over 80% in the second quarter, with some of our fastest-growing models, like the Bostons, up over 100%.

Speaker Change: Strong growth in Europe is directly related to the distribution transformation efforts. We have made in the region designed to grow Asp's grew more strategic placement that drives more premium priced products.

Speaker Change: We saw Asps increased double digits as demand for styles priced at over 100 Euro grew by over 60% and reached over 50% of total sales.

Speaker Change: Clothes toad tumors grow by over 80% in the second quarter with some of our fastest growing bubbles like the Boston up over 100%.

Erik Massmann: D2C growth outperformed B2B growth due to the continued strong online demand, led by over 100% growth in France. Online demand for clothes, premium leather, big butter, and other premium products was up over 40% in the quarter. Our membership program more than doubled in the quarter versus last year, and average order value was 25% higher than non-members. In B2B, we are increasing our shelf space and continue to be one of the top performing brands for our wholesale partners in Europe.

Speaker Change: Did you see growth outperformed Peter B growth due to the continued strong online demand led by over 100% growth in France.

Speaker Change: Online demand for clothes, so premium leather big button other premium products was up over 40% in the quarter.

Speaker Change: Our membership program more than doubled in the quarter versus last year and average order value was 25% higher than non members.

Speaker Change: In <unk>, we are increasing our shelf space and continue to be one of the top performing brands for our wholesale partners in Europe. The spring Summer order book was the highest ever with double the order book for clothes tool from a year ago.

Erik Massmann: The spring-summer order book was the highest ever, with double the order book for close tour from a year ago. Key retailers are increasing their purchases and shifting their volumes towards earlier delivery dates. And like America, the majority of the growth is coming from existing distribution partners. It is indicative of the strength of our brand that our fully implemented Spring-Summer 2024 prize increases had no adverse impact on demand, and our full prize realization in Europe remains very strong.

Speaker Change: Key retailers are increasing their purchases and shifting their volumes towards earlier delivery dates and likely America. The majority of the growth is coming from existing distribution partners.

Speaker Change: It is indicative of the strength of our brand our fully implemented spring summer 'twenty 'twenty four price increases had no adverse impact on demands.

Speaker Change: And our full price realization in Europe remains very strong.

Otmar: Otmar was again, our fastest growing segment in the second quarter of fiscal 2024 with revenue growth of 42% driven almost equally by volume and DSP.

Erik Massmann: APMA was again our fastest growing segment in the second quarter of fiscal 2020, with revenue growth of 42% driven almost equally by volume in days. Growth in the region was largely driven by our D2C channel, with the digital portion of the channel nearly doubling compared to last year. In addition, we added five new own retail stores, including four in India and one in Japan, bringing the total to 19. We also saw a healthy increase in B2B in the second quarter of fiscal 2024, which was driven by an expansion of our monobrand partner stores with 11 newly opened stores.

Otmar: Growth in the region was largely driven by our D to C channel with the digital portion of the general nearly doubling compared to last year.

Otmar: In addition, we added five new owned retail stores, including four in India and one in Japan.

Otmar: Bringing the total to 19.

Otmar: We also saw a healthy increase in b to B in the second quarter of fiscal 2024, which was driven by an expansion of our mono brand partner stores with 11 newly opened stores.

Erik Massmann: Demand in APMA is broad-based and, like other regions, has benefited from closed-toe silhouettes, including clocks, which more than doubled compared to the year-ago quarter. I will now turn it over to Erik to discuss our financial results in more detail.

Otmar: Demand in upfront is broad based and like other regions has benefited from close Tulsa, Louis including blocks, which more than doubled compared to the year ago quarter.

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

Erik Massmann: Thanks Oliver and good morning everyone. We're very pleased with Birkenstock's performance in the second quarter of fiscal 2024. While the broader consumer environment continues to be challenging, the health and strength of our brand are clearly reflected in our results. Birkenstock has become one of the few must-carry brands in the wholesale channel to drive traffic to the stores, and our D2C channels continue to grow as consumers become more intentional in their purchase.

Eric: Thanks, Oliver and good morning, everyone. We're very pleased with big box performance in the second quarter of fiscal 2024.

Eric: While the broader consumer environment continues to be challenging the health and strength of our brands are clearly reflected in our results.

Eric: <unk> has become one of the few mass KBR brands in the wholesale channel to drive traffic to the stores in our DTC channels continue to grow as consumers become more intentional in their purchases.

Eric: Now, let's have a look into the details of second quarter results.

Erik Massmann: Now let's have a look at the details of the second quarter results. Second quarter fiscal 2024 revenue was $481 million, growing 23% versus the prior year. We generated double-digit growth across all segments and channels, demonstrating the desirability and resilience of our brand.

Eric: Second quarter fiscal 2024 revenue was $481 million growing 23% versus prior year.

Eric: We generated double digit growth across all segments and channels demonstrating.

Eric: Demonstrating the desirability and resilience of our brands.

Erik Massmann: Again, our D2C performance was strong, up by 32% versus the prior year, driving D2C penetration up 200 basis points compared to last year. At the same time, we increased B2B revenue by 20%. Gross profit margin for second quarter fiscal 2024 was 56.3%, down 320 basis points compared to the prior year. Our ongoing capacity expansion, which will give us the bandwidth and the flexibility that will allow us to expand our footprint and under-penetrated segments and categories, was the primary driver of the decline in gross profit margin, representing 220 basis points of the year-over-year decline. Margin was also impacted by the planned one-time government-incentivized inflation-related bonuses and wage increases for our production workforce implemented in the second quarter.

Eric: Again, our D to C performance was strong up by 32% versus prior year driving needs to see penetration up 200 basis points compared to last year.

Eric: At the same time, we increased b two b revenue by 20%.

Eric: Gross profit margin for second quarter fiscal 2020, before was 56, 3% down 320 basis points compared to prior year.

Eric: Our ongoing capacity expansion, which will give us the bandwidth and the flexibility that will allow us to expand our footprint in underpenetrated segments and categories.

Eric: Primary driver of the decline in gross profit margin, representing 220 basis points of the year over year decline.

Eric: Margin was also impacted by the planned one time government incentivize inflation related bonuses and wage increases for our production workforce implemented in the second quarter.

Eric: Selling and distribution expenditures were $113 million, representing 23, 5% of revenue in the second quarter of fiscal 2024 up 220 basis points year over year due to increased it to see penetration and retail store investments.

Erik Massmann: Selling and distribution expenditures were $113 million, representing 23.5% of revenue in the second quarter of fiscal 2024, up 220 basis points year over year due to increased DTC penetration and retail store investment. G&A expenses were €20 million, down from €23 million in the prior year, despite incremental public company costs as the year-ago quarter was impacted by one-time corporate event expenses and accruals that did not repeat the same. The G&A declined as a percentage of revenue by 180 basis points.

Eric: G&A expenses were 20 million euros down from 23 million euros in the prior year, despite incremental public company costs as the year ago quarter was impacted by onetime corporate event expenses.

Eric: And accruals that did not repeat this year.

Eric: Just a declined as a percentage of revenue by 180 basis points.

Eric: Second quarter adjusted EBITDA of Euro of $162 million was the strongest in company history and up 7% versus the second quarter of fiscal 2023.

Erik Massmann: Second quarter adjusted EBITDA of €162 million was the strongest in company history and up 7% versus the second quarter of fiscal 2023. Adjusted EBITDA margin was 33.7%, down 470 basis points from the prior year, negatively impacted by the same temporary and one-time items we discussed in Gross Profits March, as well as the additional cost of expanding our retail and D2C presence and incremental public company and administrative costs. Adjusted net profit of €77 million was up 3%, and adjusted EPS of €41.7 fell a year ago due to higher D&A, mainly related to capacity expansion, and the IPO-related share increase.

Eric: Adjusted EBITDA margin was 33, 7% down 470 basis points from the prior year.

Eric: Negatively impacted from the same temporary and one time items, we discussed in gross profit margin.

Eric: As well as the additional cost of extending our retail energy to seed presence and incremental public company administrative costs.

Speaker Change: Adjusted net profit of 77 million euros was up 3% and adjusted EPS was <unk> 41 year or sets flat with a year ago due to higher D&A, mainly related to capacity expansion and the IPO related share increase.

Speaker Change: Let's now have a closer look at our balance sheet as of March 31, 2024.

Erik Massmann: Let's now have a closer look at our balance sheet as of March 31st, 2025. Cash and cash equivalents were $176 million as of March 31, up from $169 million at the end of the first quarter. In the second quarter of fiscal 24, inventory was 651 million euros, or about 40% of revenue down from 44 in the year ago second quarter. The seasonal increase in trade receivables to 200 million euros is in line with our expectations, given our sizable Q2 wholesale shipment.

Speaker Change: Cash and cash equivalents were $176 million as of March 31st up from 169 million at the end of the first quarter.

Speaker Change: In the second quarter of fiscal 'twenty, four inventory was $651 million or about 40% of revenue down from 44 in the year ago second quarter.

Speaker Change: The seasonal increase in trade receivables of 200 million euros as a line with our expectations.

Speaker Change: Given our sizable Q2 wholesale shipments.

Erik Massmann: With general payment terms in the range of net 30 to 60 days, monetization will largely be recognized in the next quarter. We will continue to deliver using cash generated from operations. Our net leverage was 2.6 as of March 31st. Earlier this week, we announced the refinancing of our loans and credit facilities, including the early pay down of approximately USD 50 million in loans. We continue to invest for future growth. Capital expenditures totaled €17 million in the second quarter, bringing the total amount invested year-to-date to €35 million, mainly related to our production capacity expansion and new store openings.

Speaker Change: With a generous payment terms in the range of net logistics of days.

Speaker Change: I wanted to the nation will largely be recognized in the next quarter.

Speaker Change: We will continue to deliver its using cash generated from operations.

Speaker Change: Our net leverage was two six as of March 31st.

Speaker Change: Earlier this week, we announced the refinancing of our loan to credit facilities, including the early pay down of approximately U S. Dollar 50 millions of loans.

Speaker Change: We continue to invest for future growth capital expenditures totaled 17 million in the second quarter, bringing the total amount invested year to date to 35 million euros, mainly related to our production capacity expansion and new store openings.

Speaker Change: With that I'll hand over back to Oliver.

Oliver Reichert: With that, I'll hand it over to Oliver.

Oliver: Thanks, Eric.

Oliver Reichert: Thanks, Erik. Let me summarize our discussion.

Oliver: Let me summarize our discussion the exceptional results during the first half of fiscal 2024 demonstrate the resilience of our business and our ability to achieve strong double digit revenue growth.

Oliver Reichert: The exceptional results during the first half of fiscal 2024 demonstrate the resilience of our business and our ability to achieve strong double-digit revenue growth. We are executing on our proven engineered distribution strategy to drive both volume and ASP growth and meet the growing consumer demand for our products, both classics and new, emerging products and across all segments and channels. We continue to significantly outpace our peers in America and Europe, with strong growth momentum in our DTC footprint and increasing demand from our loyal and steady B2B partners.

Oliver: We are executing on our proven engineered distribution strategy to drive both volume and ASP growth and meet the growing consumer demand for our products.

Oliver: Classics, and new emerging products and across all segments and channels.

Oliver: We continued to significantly outpace our peers in America and Europe.

Oliver: With strong growth momentum in our DTC footprint and increasing demand from our loyal and steady beat to be partners. At the same time, we are entering the next chapter of our growth trajectory as we tap into our largest REIT space market the up by region.

Oliver Reichert: At the same time, we are entering the next chapter of our growth trajectory as we tap into our largest wide space market, the submarine, increasing brand awareness and market share while following our playbook of disciplined engineered distribution to support ASO.

Oliver: Increasing brand awareness and taking market share while following our playbook of disciplined engineered distributions to support a S. P.

Oliver Reichert: Given the strong first half and the continued strong growth in demand we are seeing, we are raising our guidance for fiscal 2024. We now forecast total revenue of 1.77 to 1.78 billion euros, which equals 20% constant currency growth. In line with the compound annual growth we have achieved over the past decade, demonstrating the sustainability of our strong growth trend, we expect an adjusted EBITDA margin of 30 to 30.5% and adjusted EBITDA of 535 to 545 million euros.

Oliver: Given the strong first half and the continued strong growth in demand. We are seeing we are raising our guidance for fiscal 'twenty 'twenty four.

Oliver: We now forecast total revenue of $1 77 to 178 billion euros equals 20% constant currency growth.

Oliver: In line with the compound annual growth, we have achieved over the past decade, demonstrating the sustainability of our strong growth trends.

Speaker Change: We expect adjusted EBITDAR margin of 30% to 35% and adjusted EBITDAR of 535 to 545 million euros.

Oliver Reichert: We remain fully committed to our medium- and long-term targets of mid- to high-teens revenue growth, gross profit margin around 60%, and adjusted EBITDA margin over 30%. 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, and we have a long runway for growth ahead. I would now kindly ask the operator to open our Q&A session. Thank you.

Speaker Change: We remain fully committed to our medium and long term targets of mid to high teens revenue growth gross profit margin around 60% and adjusted EBITDAR margin over 30%.

Speaker Change: So in short we are very pleased to report that we have never been in a better position to grow our business bitterness August 250 year strong and we have a long runway for growth ahead.

Speaker Change: I would now kindly ask the operator to open our Q&A session. Thank you.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. In the interest of time, we ask that you limit yourself to one question on today's call. We also ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, please press star 1 on your phone at this time if you wish to ask a question. And please hold while we poll for questions. And the first question today is from Matthew Boss from J.P. Morgan. Matthew, your line is live. Thanks and congrats on a great quarter.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time and the interest of time, we ask that you limit yourself to one question on today's call.

Speaker Change: We also ask that while posing your question you. Please pickup your handset if listening on speaker phone to provide optimum sound quality. Once again. Please press star one on your phone at this time, if you wish to ask a question. Please hold while we poll for questions.

Speaker Change: And the first question today is coming from Matthew boss from J P. Morgan Matthew Your line is live.

Matthew Robert Boss: Thanks, and congrats on a on a great quarter.

Matthew Robert Boss: So Oliver could you elaborate on the brand's continued global momentum and have you seen any change in business. So far in the third quarter relative to the high teens embedded second half outlook and then just from a cost perspective, what is supporting the raise to your full year.

Matthew Robert Boss: EBITDA margin outlook relative to three months ago.

Speaker Change: Okay. Thank you for your question Matt.

Oliver Reichert: Okay, thank you for your question, Matt. We're seeing nothing in the current trading that would cause us to be more cautious on revenue growth in the second half of the year. As you know, we don't guide quarter to quarter, only for the full year and long term, and we are very comfortable with our forecast revenue growth of around 20% for 2024 in constant currency. By the way, which is consistent with our 10 year track record, as you know from our IPO roadshows, quarters can fluctuate, shipments can shift, but there can be some noise from quarter to quarter. Also, the second half is multi-to-sea heavy.

Oliver: We're seeing nothing in the current trading that would cause us to be more cautious on revenue growth in the second half of the year.

Oliver: As you know, we don't guide quarter to quarter only for the full year and long term and we are very comfortable with our forecast with revenue growth of around 20% for 2004, when the constant currency.

Oliver: By the way, which is consistent with our 10 year track record as you know.

Oliver: From our IPO Roadshows.

Oliver: Quarter can fluctuate shipments can shift, but there can be some noise from quarter to quarter.

Oliver: Also the second harvest more DTC heavy.

Operator: We have less visibility in the channel, and then we do in the B2B channel, where we have excellent audiobook visibility. We continue to hear about, as you put it so perfectly, Matt, a selective recession. So we are approaching our outlook for, especially DTC, with that in mind. Also, as you can see from our results, we are not seeing any current impact from COVID. And now, as part of the margin question, we are very pleased with our current outlook on margin, particularly given the investments we've made to support the growth in Parzivalik and Eruka.

Oliver: We have less visibility in the channel and then we do in the <unk> channel.

Oliver: While we have excellent order book visibility.

Speaker Change: We continue to hear about as you put it so perfectly matte.

Speaker Change: Selective recession, so we are approaching our outlook for especially due to see with that in mind.

Speaker Change: Also as you can see from our results we are not seeing any current impact from that.

Speaker Change: And now like the margin cost.

Speaker Change: Question of part of the question is we are very pleased with our current outlook on margin, particularly given the investments we've made to support the growth in posit bag in the row crop.

Operator: The main driver of the improved margin outlook is stronger revenue growth driving better fixed cost leverage and utilization. So halfway through the year, we are very comfortable. We can hit that 30 to 30.5% range, great color, best of luck. Thank you. The next question is coming from Randy Konik from Jeffreys. Randy, your line is live.

Speaker Change: The main driver of the improved margin outlook is stronger revenue growth driving better fixed cost leverage and utilization.

Speaker Change: So halfway through the year, we are very comfortable we can hit that 30% to 35% range.

Speaker Change: Our range.

Speaker Change: That's great color best of luck. Thank you.

Speaker Change: Yes.

Operator: Thank you. The next question is coming from Randy Konik from Jeffreys. Randy, your line is live. Yeah.

Speaker Change: Thank you. The next question is coming from Randy <unk> from Jefferies. Randy Your line is life.

Randy: Yes, Thanks, and good morning, everybody I guess, Eric maybe for you I wanted to just unpack gross margin a little bit and maybe kind of give us your perspective on additional drivers in the quarter and then looking ahead, how we should be thinking about the various fluctuation fluctuations around gross margins.

Randy: In coming quarters give us some perspective, there thanks guys.

Randy: Hey, Randy Thanks.

Erik Massmann: Yeah, it's Erik. So overall, I have to say that the gross margin will always vary from quarter to quarter due to the shift in channels and mix of business. So high B2B revenue, as we saw in Q2, now leads to lower ASP and, therefore, lower gross margin and, obviously, the other way around with higher D2C share. On the other side, high B2B share does lead to lower selling distribution costs. So that's always a balance.

Speaker Change: Yes, sorry.

Speaker Change: Overall I have to say the gross margin will always vary from quarter to quarter due to the shift.

Randy: And in channels and mix of business, So higher <unk> revenue as we saw in Q2 now leads to lower ASP and therefore, lower gross margin and obviously other way around because higher D to C share.

Randy: And the other sites highly to be sure does lead to lower selling and distribution costs. So that's always a balance and that's why we don't give.

Erik Massmann: And that's why we don't give guidance on quarterly margins. It can always shift a bit depending on the timing of orders and shipments. So we only look, or I mainly look at margins on an annual basis, and I feel very comfortable with our mid- to long-term guidance of around 60% gross margin and then a bit of margin of 30% plus. So in terms of the year-over-year decline that was discussed, 24, certainly is a transition year as we did significant investments in our production to support the demand we see and long-term growth.

Randy: <unk> quarterly margins it can always shift a bit with timing of orders and shipments.

Randy: So we only local mainly look at margins on the annual basis, and I feel very comfortable with our mid to long term guidance of around 6% gross margin and EBITDA margin of 30% plus.

Randy: So in terms of the year over year decline that was discussed.

Randy: 24, certainly is a transition year as we did significant investments until our production to support the demand we see and.

Randy: Long term growth.

Erik Massmann: So this was a temporary dilute, be diluted, and will continue until we reach greater utilization, but be aware and reminded we are exercising discipline in our distribution and control closely our growth to avoid the dilution of brand equity. So both reasons obviously lead to the margin we see this year, and long-term, as said, the guidance of around 60% gross margin, EBITDA 30+, we feel very comfortable.

So this is a temporary dial.

Randy: <unk>.

Randy: Be diluted.

Speaker Change: We'll continue until we reach greater utilization, but you were reminded we are exercising discipline in our distribution and control closely our growth to avoid the dilution of brand equity. So both reasons, obviously lead to the monitor we see this year and long term asset guidance of around 6%.

Speaker Change: Margins EBITDA 30, plus we feel very comfortable.

Speaker Change: Thank you.

Yes.

Operator: Thank you. The next question is coming from Dana Telsey from the Telsey Group. Dana, your line is live.

Speaker Change: The next question is coming from Dana Telsey from Telsey Group Dana your line of size.

Nico Bouyakhf: Hi, good morning everyone, and nice to see the progress. Two things, on retail store performance, anything different that you're seeing by region is there, and the new locations that you're going to, whether the store size and how you're thinking of the contribution to DTC of retail sales. And lastly, the category expansions that you're doing, any updates given the closed-toe performance of getting into some of those other occupational uses that your footwear can be used for. Thank you.

Dana Lauren Telsey: Good morning, everyone and nice to see the progress two things on the retail store performance anything different that you're seeing by region is there and the new locations that youre going to whether the store size and how youre thinking of the contribution to D. T. C F retail sales and lastly, the category.

Speaker Change: <unk> that you're doing any updates given the closed toe performance of getting into some of those other occupational uses that you are but where it can be useful. Thank you.

Nicole: Hey, Dan This is Nicole thanks, a lot for asking the question I'm going to cover the retail part of your question then all of us going to take over with the coastal part of the question. So first of all we are very pleased to be able to share with you that we are well on track with our global retail expansion in Q2, we opened.

Nico Bouyakhf: Hey Dana, this is Nico. Thanks a lot for asking the question. I'm gonna cover the retail part of your question, and then Oliver's gonna take over with the close-toe part of the question. So first of all, we are very pleased to be able to share with you that we are well on track with our global retail expansion. In Q2, we opened six new stores. From last year's Q2, we opened 13 new stores. Amongst others, Miami, as you know, in the design district, Tokyo, two stores, and Mumbai, also a new store.

Nicole: Six new stores from last year's.

Speaker Change: Q2, we opened 13, new stores amongst others Miami as you know the design district.

Speaker Change: Q2, two stores and Mumbai also a new store.

Nico Bouyakhf: Every store that we open is currently performing above plan, so that's very, very pleasant to see, and that's also a testament to the great magnetism that we have as a brand when we open a store. Every store basically, our average payback on CapEx is 12 to 18 months. So that shows you it's not a big investment case that we are having here. It's really something that adds to our top line, and that also adds to our profitability.

Speaker Change: Every store that we open is performing currently above plan, that's very very pleasant to see and that's also a testament of the great magnetism that we have as a brand when we open a store.

Speaker Change: Every store basically all average payback on Capex is 12 to 18 months. So that shows you. It's not a big investment case that we're having here, it's really something that adds to our top line and that adds also to our profitability.

Nico Bouyakhf: What we do see in our stores as well is that we have an over-indexed growth of premium price products and an over-indexed growth of close-toe. So wherever we open a physical connection to our consumers, those categories will benefit. For the remainder of this fiscal year, we plan to open a similar number of new stores in cities such as Paris and in cities such as Shanghai, so again, we are very confident with the outlook for our store expansion.

Speaker Change: Reducing our stores as well is that we have an over index growth of premium priced products and an over index growth of close to so wherever we open a physical connection to our consumers those categories will benefit.

Speaker Change: For the remainder of this fiscal year, we plan to open a similar amount of new stores in.

Speaker Change: In cities, such as Paris in cities, such as Shanghai, and so again, we are very confident with your outlook on our store expansion plans.

Speaker Change: So I'm, taking the close so.

Oliver Reichert: I'm taking the closed-toe part of your question, Dana. The last quarter was predominantly a sell-through quarter, and it was winter.

Speaker Change: Part of your question.

Speaker Change: Donna.

Speaker Change: The last quarter was predominantly a sell through quarter end. It was winter. So we saw more demand for the closed toe silhouette. It was over 50% of the sales were coming from close so silhouettes. So the growth in this segment was compared to last year first two quarters, 77%. So.

Oliver Reichert: So we saw more demand for the closed-toe silhouettes. It was over 50% of the sales were coming from closed-toe silhouettes. So the growth in this segment was, compared to last year's first two quarters, 77%. So you can really see this is a rocket.

Speaker Change: You can really see this as a rocket okay. So the <unk> segment, which we a few months ago when we prioritize.

Oliver Reichert: So the closed-toe shoe segment, which a few months ago when we prioritized IPO, we talked about it as a white space opportunity. And now you see, compared to the last year, the first half of the year, we grew by 77%. So that's really massive.

Speaker Change: IPO, we talked about it as a white space opportunity and now you see compared to the last year in the first half of the year, we grow by 77%. So that's really massive.

Oliver Reichert: The second quarter is a big selling quarter for our spring-summer season. So naturally, we will see more open-toe silhouettes in that mix in the second quarter. And the key here is that we are now a full-year, non-seasonal brand with strength in closed-toe, including clogs, sneakers, and sandals. ASP increases through closed-toe, as you know, and it opens up new usage occasions. Our non-sandal sell-through was over 40% in the quarter, which is super strong, okay?

Speaker Change: The second quarter is a big b to B cell in quarter four our spring summer season. So naturally we will see more open 'til silhouettes ended in that mix in the second quarter and the key is that we are now a full year non seasonal brand with strength in close so, including Clarkson sneakers and sandals.

Speaker Change: <unk> increases through close so as you know and it opens up new usage occasions.

Speaker Change: Our non sandal sell through was over 40% in the quarter, which is super strong.

Speaker Change: Okay.

Speaker Change: Great. Thank you very much.

Operator: Great. Thank you very much.

Speaker Change: Thank you Amanda.

Operator: Thank you. The next question is coming from Sam Poser from Williams Trading. Sam, your line is live. Thank you. Thank you for taking my questions.

Speaker Change: Thank you. The next question is coming from Sam Poser from Williams trading Sammy Your line is live.

Operator: Number one, Can you talk a little bit about how the sandal business has inflected more since the end of the quarter? And then secondly, not related, following up on the gross margin question, how long will it take for the new production facilities to be optimized so they are no longer a drag? on the margins away from that 200. When will that 220 base points go away and be offset by the productivity of those factories and the sales that relate to them?

Operator: Thank you. Thank you for taking my questions. Good morning. I have two.

Sam Poser: Thank you. Thank you for taking my questions. Good morning, I have two number one.

Sam Poser: Can you talk a little bit about like how has had to say it has the sandal business inflicted more since the end of the quarter and then secondly, not related a.

Speaker Change: Following up on the gross margin question, how long will it take for the new production facilities to be optimized. So you don't have it so they are no longer a drag.

Speaker Change: On the margins the way that 200 like when will that 220 basis points.

Speaker Change: Go away and be offset by the productivity of those factories and the sales that are related to them.

Alexander Hoff: I said, thanks for the question. This is Alexander, and I will take the first margin piece.

Speaker Change: Thanks for the question. This is Alexander and I will take the gross margin piece.

Alexander Hoff: Actually, what we communicated through the IPO and referring to Erik's statement, clearly 2024 is a transitionary year. We took the strategic decision to go with further capacity to meet future demand. We also indicated that, uh, we see better absorption in 25, but 24 is one year where we will bring over volumes from Görlitz to Pasewag mainly. Pasewag is the only factory out of our expansion program with Görlitz and Portugal, which is a complete new factory where we would bring in initially under absorption overhead, and so on. So that will be the heaviest impact in 24. We expect 25 onwards to see better absorption and a better impact on the margin side.

Speaker Change: Actually what we communicated through the IPO, referring to Eric statement.

Speaker Change: Clearly <unk> is a transition year, we took the strategic decision to go with the capacity to meet future demand.

Speaker Change: We also indicated that we see in 'twenty five.

Speaker Change: Absorption, but 24 is a one year, where we will bring the overall volumes from <unk> two positive all it's mainly.

Speaker Change: <unk> is the only factory out of our expansion program with.

Speaker Change: And Portugal, which is a complete new factory.

Speaker Change: Bring in.

Speaker Change: Initially under absorption of overhead and so on so that will be the heaviest impacted to a default.

Speaker Change: 'twenty five onwards to see a better absorption.

Speaker Change: But impact.

Speaker Change: The impact on the margin side.

David Kahan: This is David, Sam. Thanks for the question. Just a little color on the breakdown of the sandal business. The momentum in sandals has been incredibly strong, both DTC and at wholesale. As a matter of fact, what we're seeing in our core sandal business is not only strong sell-throughs but a transition in penetration, leather versus synthetic. Leather sandals are trending about 68% above last year, while synthetic is 22%. So we're not only seeing consumers still choose our icons across all the different styles, but we're seeing them trade up to more premium versions.

David Kahan: This is David, Sam.

Speaker Change: This is David Sam Thanks for the question just a little color on the breakdown with the sandal business the momentum in sandals has been incredibly strong.

Speaker Change: <unk> D to C N at wholesale as a matter of fact, what we're seeing in our core sandal business is not only strong sell throughs, but a transition in penetration leather versus synthetic leather sandals are trending about 68% above last year, while synthetic is 22%.

Speaker Change: So we're not only seeing the consumers still choose our icons across all the different styles were seeing them trade up to more premium version.

Speaker Change: Thank you very much.

Speaker Change: Thank you. The next question is coming from Simeon Siegel from BMO Simeon Your line is live.

Operator: Thank you. The next question is coming from Simeon Siegel from BMO. Simeon, your line is live.

Operator: Great, thanks. Hey, everyone. Really, really nice job, guys. Hope you're all doing well.

Speaker Change: Great. Thanks, Hey, everyone really really nice job guys hope, you're all doing well.

Operator: Oliver or David or Nico, maybe all of you, just the increased strength you're seeing with those key retailers that you talked about in prepared remarks, the earlier visibility, it's really all great to see. Can you speak to any changes you're seeing in maybe your discussions with them about the assortment that they're asking for versus your ability to suggest what they should take? I guess I'm just wondering, as you continue to innovate your products, do you think you're getting more trust and ability to suggest to them as opposed to them specifically asking for maybe more limited SKUs that have been your hero products historically? Thank you.

Simeon Siegel: Oliver or David or Niko, maybe I'll have you just the increased strength, you're seeing with those key retailers that you talked about in prepared remarks. The earlier visibility. It's really all great to see can you speak to any changes you're seeing and maybe your discussions with them about the assortment that they're asking for versus your ability to suggest what they should take.

Speaker Change: I'm just wondering as you continue to innovate your products do you think youre getting more stronger trust and ability to suggest to them as opposed to that I'm, specifically asking for maybe more limited skus that had been your aero products historically, thank you.

David Kahan: Simeon, great question. This is David.

David Sam: Jimmy and Great question. This is David as we've said before 95% of our growth is coming from existing retail partners. So clearly the demand is there to expand not only deeper inventory, but also the spread of products as we've said we Alex.

David Kahan: As we've said before, 95% of our growth is coming from existing retail partners. So clearly, the demand is there to expand not only deeper inventory but also the spread of products. As we've said, we allocate everything, every style, every quantity by door. Even for people that have chains with, you know, hundreds of doors, everything is allocated to the door level.

Speaker Change: Kate everything every style every quantity by door, even in people that have changed with hundreds of doors everything is allocated to the door level. So the assortments are really vendor managed what we're seeing is the momentum in closed toe in non sandal products is increasing.

David Kahan: So the assortments are really vendor managed. What we're seeing is the momentum in closed-toe and non-sandal products is incredibly strong. So not only are they doubling down on the sandal business, but they're also supporting all of the non-sandal categories. As a reference, we know that the overall wholesale market might be described as being a little choppy. Our sell through, and this is sell through, not sell in, was up over 30% in the quarter.

Speaker Change: <unk> strong so not only are they doubling down on the sandal business, but they're also supporting all of the non sandal categories.

Speaker Change: As reference we know that the overall wholesale market might be described as being a little choppy our sell through and this is sell through not sell in was up over 30% in the quarter. So obviously there was a lot of demand to expand our products and if you've been out at retail.

David Kahan: So obviously, there's a lot of demand to expand our products. And if you've been out at retail, as I know many of you have, you're seeing some of the incredibly strong statements at retail, like our 250th anniversary brought to life in many of the major retail partners.

Speaker Change: As I know many of you have youre seeing some of the incredibly strong statements at retail like our 250 year anniversary brought to life in many of the major retail partners.

David Kahan: That's great. And then just David, to your point about the synthetics, are you seeing, I don't know if you guys have done, I've updated the 3.6 survey, but are you seeing greater frequency of shopping? Like, are you seeing anything different with the synthetic option versus how people shopped your product before?

Speaker Change: That's great and then just David to your point about the synthetics are you seeing I don't know if you guys have gotten updated to $3. Six survey, but are you seeing greater frequency of shop like are you seeing anything different with the synthetic option versus how people shop your product before.

Speaker Change: I would say not at all except a lot of our consumers seem to be trade.

David Kahan: I would say not at all, except a lot of our consumers seem to be trading up to leather almost as an investment-type item. I would say in a lot of our consumers' closets, a pair of Birkenstocks might be the most expensive footwear item they have compared to some sneakers.

Speaker Change: Trading up to leather almost as an investment type item I would say in a lot of our consumers closets apparel berkinstocks might be the most expensive footwear item they have compared to some of the some of the sneakers and choosing a leather birkenstock, it's not an either or with synthetic because since.

David Kahan: And choosing a leather Birkenstock, it's not an either-or choice with synthetic because synthetic is also up. I just think that the response to leather products as people invest has been the penetration of leather is growing. Synthetic is growing also. So it's not an either-or choice. It's just reaching more consumers.

Speaker Change: <unk> is also up I, just think that are the response to the leather products as people invest.

Speaker Change: Has been at the penetration of leather is growing synthetic is growing also so its not either or it's just it's just reaching more consumers I believe.

Operator: Thank you, and the next question is coming from Mark Altschwager from Baird. Mark, your line is live.

Operator: Thank you. And the next question is coming from Mark Altschwager from Baird. Mark, your line is live. Thank you. First, just with Q3 being a bigger number.

Speaker Change: Thank you and the next question is coming from Mark All Schwaiger trauma Baird's Mark Your line is live.

Speaker Change: Thank you congrats on the progress and results here.

Speaker Change: First just with Q3 being a bigger DTC quarter I'm wondering if you can share any color on the momentum Youre seeing this spring relative to Q2.

Speaker Change: And then separately you mentioned with the spring price increases you didn't see any impact on demand.

Speaker Change: Could you speak to how you're thinking about like for like price increases in future seasons to offset some of the inflationary cost pressures. Thank you.

Speaker Change: Hey, Mark this is Nicolas speaking thank you for the question. So the first part of your question was to get a bit more color on the DTC performance and the current trading off Q3, So we see.

Nico Bouyakhf: Hey Mark, this is Nico speaking. Thank you for the question. So the first part of your question was to get a bit more color on the DTC performance in the current trading of Q3. So we see continued strong demand for traffic in our own stores, the new stores are performing really well, as I said, so there is definitely excitement around our physical touchpoint for the brand online as well. So we see increased traffic across the board to all the regions.

Speaker Change: Continued strong demand and traffic in our own stores. The new stores are performing really well as I said, so there is definitely excitement around our physical touch point.

Nico Bouyakhf: Yet we do have the big month still to come. So June, July, and also August are the big DTC months. And we're just very, we are confident, but we're also looking at those months to come in, in the next couple of The second question was on pricing, so to give a bit more color on the European pricing adjustments, we had in Spring-Summer 2024 two categories in mind for price executions. One was textile, a big part of the business.

Speaker Change: For the brand.

Speaker Change: Online as well so we see an increased traffic across the board.

Speaker Change: All the regions.

Speaker Change: Yet we do have the big months still to come So June July and also August a big DTC months and we are just very we're confident but we're also looking at those months to come in in the next couple of weeks. The second question was on pricing. So it should give you a bit more color on the European pricing.

Speaker Change: Adjustments, we had in spring summer 'twenty four two categories in mind for price executions, one was textile a big part of the business, we elevated the prices by 20% RFP and then you also touched Boston again.

Nico Bouyakhf: We elevated the prices by 20% RRP, and then we also touched Boston again with a 15% RRP increase. Both of them were well accepted by the consumers, so there was no sort of negative, no signs of rejection, or negative effects on our sell-through. We look at pricing as a strategic measure for the future, so every season, we go to the entire line and look at every model to see what the input cost is and how we have to adjust pricing given inflation, but also what our brand equity is so we can ask for an increased price. That's how we will approach pricing in the future. Goodbye.

Speaker Change: With 15% RFP increase both of them were not well accepted by the consumer So there was no.

Speaker Change: Negative no signs of rejection negative effect on our sell through well.

Speaker Change: Look at pricing as a strategic measure in the future. So every season, we go through the entire line.

Speaker Change: And look at every model to see what's the input cost and how do we have to adjust pricing given inflation, but also what's our brand equity where we can ask for an increased price thats, how we approach pricing in the future.

Speaker Change: Yes.

Nico Bouyakhf: Mark, this is Alexander. Just to add on the inflation piece and how it's impacting margin standalone Q2 you saw 100 basis points net inflation impact going forward. If I look into third and fourth quarter but also 25, what we currently see is labor with single-digit going down, then in 25 raw materials low single-digit percentage. So it's definitely the clear goal that we will offset any kind of inflation on Cork. An excellent color, too. Thank you. Thank you. The next question is coming from Sharon Zackfia from William Blair. Sharon, your line is live. Hi, thanks for taking the question. I'm curious.

Speaker Change: Cause I think Pandora just to add on the on the inflation piece.

Speaker Change: Impacting margin Standalone Q2, you thought a 100 basis points in that nation impact going forward.

Speaker Change: If I look into.

Speaker Change: For the fourth quarter, but also 25, what we currently see is labor.

Speaker Change: Gold agents going down then in 'twenty, five raw material low single digit.

Speaker Change: So it's definitely the clear goal that we will.

Speaker Change: Offsetting any kind of inflation on cost.

Speaker Change: Yes.

Speaker Change: Excellent color. Thank you. Thank you.

Speaker Change: Thank you. The next question is coming from Sharon Zackfia from William Blair Sharon Your line is rash.

Operator: Thank you. The next question is coming from Sharon Zackfia on behalf of William Blair. Sharon, your line is live.

Sharon Zackfia: Hi, Thanks for taking the question I'm curious just given the strength that you continue to see in the U S and as you've been opening more stores are you seeing any kind.

Sharon Zackfia: Kind of changes in the demographic of our customers and then you asked whether you look at kind of the income levels gender region, our agents and I'd also be similar.

Sharon Zackfia: Interested in a similar answer for Europe, and then the transformation efforts that you've had in that region. Thanks.

David Sam: Yes. Thanks for the question Sharon. This is David I think you have to just kind of wrap your arms around the fact that this brand has the broadest demographic of any brand on the face of the Earth. When we talk about our addressable market. It really is quite frankly everybody.

David Kahan: Yeah, thanks for the question, Sharon. This is David.

David Sam: We're just reaching new consumers.

David Sam: Everywhere, we look we are reaching athletes right now when they recover from sports finding the benefits of the foot bad we are seeing a significant growth rate now in the youth market, who is basically maybe a little bit tired with athletic footwear over the last couple of seasons and has <unk>.

David Sam: Added berken stock to their closet, and just remember in a lot of those chains that have been predominantly athletic footwear, driven a pair of birkenstocks as an incremental purchased in those stores. So those stores are very keen to add something like broken stocks to their assortments. So I would say we're growing across all them.

David Sam: Graphics, most quickly probably the youth and more sports oriented consumer, but it's been very very broad.

David Sam: The growth has been just as strong in some of our old time heritage Brown shoe comfort stores that go back to the early 19 seventies.

Speaker Change: Thank you David.

Speaker Change: Sure and thank you for your question I would definitely Echo David's point the beauty of US is you don't lose all the customers why do you win new customers and younger customers and that's what we see also in Europe, we do see.

Abroad broader based growth among younger audiences that find those for many reasons 17 74, the Boston and some great PR executions in Europe, but what happens is they stay with us and they stay with us until the very end. So you don't lose that older customer why do you win the younger customer.

Speaker Change: In the audience.

Speaker Change: And you can see some of it also in our membership program growth.

Speaker Change: Our membership program growth by 40%.

Speaker Change: So that's another sign or signal to see okay. How visit this brand is and how the more we collect the broader defense base will be.

Speaker Change: No matter our age groups races, social demographic, it's all in one basket.

David Kahan: I think you have to just kind of wrap your arms around the fact that this brand has the broadest demographic of any brand on the face of the earth. When we talk about our addressable market, it really is, quite frankly, everybody. We're just reaching new consumers everywhere we look. We're reaching athletes right now when they recover from sports, finding the benefits of the footbed.

Speaker Change: 70%, 80% of our collection. This union sex. So we had the perfect brand welcomed more and give them access to their footprint and once they are in the footprint they come back.

David Kahan: We're seeing significant growth right now in the youth market, who are basically maybe a little bit tired of athletic footwear over the last couple of seasons and have added Birkenstock to their closet. And just remember, in a lot of those chains that have been predominantly athletic footwear driven, a pair of Birkenstocks is an incremental purchase in those stores. So those stores are very keen to add something like Birkenstocks to their assortments.

David Kahan: So I would say we're growing across all demographics most quickly, probably the youth and more sport-oriented consumer. But it's been very, very broad, and the growth has been just as strong in some of our old-time heritage brown shoe comfort stores that go back to the early 1970s.

Speaker Change: Thank you. The next question is coming from <unk> Rambourg from HSBC.

David Kahan: Thank you, David. And also, Sharon, thank you for your question. I would definitely echo David's point.

<unk> Rambourg: Your line is live.

Nico Bouyakhf: The beauty of us is you don't lose older customers while you win new customers and younger customers. And that's what we see in Europe too. We do see a broader base of younger audiences that find us for many reasons, 1774, Boston, some great PR executions in Europe. But what happens is, they stay with us, and they stay with us until the very end. So you don't lose that older customer while you win the younger audience.

Speaker Change: Hi, there I hope you can hear me, Okay I just wanted to.

Speaker Change: Congratulations on the quarter.

Speaker Change: The upgrade for the.

The guidance to two follow ups, one on the Asian potential major clouds are older.

Speaker Change: It seems that the consumers under pressure in China for most <unk>.

Speaker Change: <unk> companies, but it's probably not the case for you I'm wondering if this is a good time to find prime locations at preferential.

Speaker Change: Our costs are.

Speaker Change: And to build awareness.

Speaker Change: Do you have a capacity issue.

Speaker Change: In terms of shipping to Asia, and particularly China, and maybe can you remind us of what the setup is there in terms of working with a partner or going direct and then maybe secondly.

Speaker Change: If you can talk about Asp's I think David was quite clear on.

Speaker Change: Consumers upgrading to leather.

Speaker Change: You've put through quite a few price increases if I look at the 23% growth in the quarter.

Speaker Change: I remember you gave a reference point at the time of the IPO, saying that the average pair was retelling out about $90 at the time.

Speaker Change: Would we be on that metric today, and if you can maybe split the 23% growth between volume mix increases and price increases that would be super useful. Thank you.

Speaker Change: So I'm, taking the first part of your four pods of your one question.

Nico Bouyakhf: And you can see some of that also in our membership program growth, our membership program growth by 40%. So that's another sign or signal to see how vivid this brand is and how the more we collect, the broader the fan base will be. No matter age groups, races, social demographics; it's all in one basket. 70-80% of our collection is unisex, so we are the perfect brand to welcome them all and give them access to the footbed, and once they are in the footbed, they come back.

Speaker Change: Thank you for the questions.

Operator: Thank you. The next question is coming from Erwin Ramborg from HSBC. Erwin, your line is live.

Speaker Change: Why is the chosen so overall the Atmel region.

Speaker Change: From a geographic point of view one of our biggest white space opportunities of course in SCC in the numbers.

Speaker Change: We are grow there by a 42% so that's quite a massive growth and compare it to a lot of others brands cooling down in this environment, we are very encouraged and.

Speaker Change: Please keep in mind that this 42% growth is coming with a full disciplined and highly.

Speaker Change: Engineered distribution model, where we don't flood the market and we don't over push.

Speaker Change: Always in a pull mode. We are allocated products and Klaus who is responsible for the region will give you more detail about our distribution.

Speaker Change: <unk>.

Speaker Change: The strategy, there and how we execute that.

Distributions in this segment.

Operator: Hi there. I hope you can hear me okay.

Speaker Change: Evan Klaus here Hello, Thank you for your question.

First of all I want to point out that obviously, we are aware of the problems in China and what's going on I mean, we they are in the market since a long time the whole story, you're doing as an up my story. So we are not only depending on China.

Operator: I just wanted to congratulate you on the quarter and the upgrade in the guidance. Two follow-ups, one on the Asian potential, maybe for Klaus or Oliver. It seems that the consumer is under pressure in China for most consumer companies, but it's probably not the case for you. I'm wondering if this is a good time to find prime locations at preferential costs and to build awareness. Do you have a capacity issue in terms of shipping to Asia and, particularly, China? And maybe you can remind us of what the setup is there in terms of working with a partner or going direct?

Speaker Change: And what we learn in expanding I mean, the strategy following our learnings from the <unk>.

Speaker Change: And in the U S. So it's a qualitative distribution and it's a mixed model. So obviously, we are going with the D to C focus, but we also signing in the partner to balance out also the size of the territories.

Speaker Change: Yes. This is.

Speaker Change: And talking about allocation I mean, we have prepared that field a way before as we also talked in the roadshow a lot, but now the allocation situation has so much improved that's the underdeveloped markets are like.

Speaker Change: Positively affected from that and there is no problem on that right now.

Thank you.

Speaker Change: I was just.

Operator: And then maybe secondly, if you can talk about ASPs, I think David was quite clear about consumers upgrading to leather. You've put through quite a few price increases. If I look at the 23% growth in the quarter, I remember you gave a reference point at the time of the IPO saying that the average pair was retailing for about $90 at the time. Where would we be on that metric today? And if you could maybe split the 23% growth between volume mix increases and price increases, that would be super useful. Thank you.

The ASP part of your question, which was the soft part of your question.

Oliver Reichert: So I'm taking this first part of your, four parts of your one question. Thank you for the question. Wisely chosen.

Speaker Change: As you know, we don't give any quarterly guidance.

Oliver Reichert: So overall, the APMA region is, from a geographic point of view, one of our biggest white space opportunities, of course. And as you see in the numbers, we have grown there by 42%. So that's quite a massive growth, and compared to a lot of other brands cooling down in this environment, we're very encouraged. And please keep in mind that this 42% growth is coming with a fully disciplined and highly engineered distribution model where we don't flood the market, and we don't overpush.

Speaker Change: But as I said in mess response.

Oliver Reichert: It's always in a pull mode. We allocate the products, and Klaus, who's responsible for the region, will give you more in detail about our distribution, our strategy there, and how we implement the engine distribution in this segment.

Speaker Change: Arent seeing any significant changes in the trends we are really pleased by the current trends.

Klaus Baumann: Evan Klaus here. Hello. Thank you for your question. First of all, I want to point out that obviously we are aware of the problems in China and what's going on. I mean, we've been in the market for a long time. The whole story we're doing is an APMA story.

Klaus Baumann: So we are not only depending on China. And what we learn from expanding, I mean, the strategy following our learnings from the EU and the US. So it's a qualitative distribution, and it's a mixed model.

Klaus Baumann: So obviously, we are going with a D to C focus, but we also are signing in a partner to balance out the size of the territories. So this is and talking about allocation. I mean, we have prepared that field way before, as we also talked about in the roadshow a lot. But now the allocation situation has so much improved that the underdeveloped markets are positively affected by that, and there's no problem with that right now.

Speaker Change: But we still have a hyphen.

Speaker Change: Important months ahead of us.

Speaker Change: Heavy indeed to see where we have less visibility and that's.

Speaker Change: We're about halfway through fiscal Q3, and despite the volatile market environment.

Speaker Change: Having.

Speaker Change #100: You're hearing so much about those.

Speaker Change #100: Of rumors around of course, we're not seeing anything that would give us pause.

David Sam: And I would say David from your perspective, you may add something here because asps is really growing I mean, one interesting point on Asps and it's a good way to look at it is speaking for the U S. According to the economic reports from the FTR a retail prices.

Oliver Reichert: All right. Thank you. Now, grab the ASP part of your question, which was the fourth part of your question.

Speaker Change #101: On footwear are basically up <unk>, 3%, our ASP is up six 4%. So it's a multiple of what's going on in the market part of it is mix and part of it is price, but obviously.

Speaker Change #102: You know when youre selling through product at virtually full price, 90% plus full price realization, that's where you get the benefit of the ASP because the consumers realize the equity of your brand and they're willing to pay the price and I think we're proving that right now in this environment.

Speaker Change #103: Super useful thank you.

Oliver Reichert: As you know, we don't give any quarterly guidance, and as I said in Matt's response, we aren't seeing any significant changes in the trend. We are really pleased by current trends, but we still have a very important month ahead of us. That is heavy indeed to see where we have less visibility.

Speaker Change #104: Thank you. The next question is coming from Adrienne <unk> from Goldman Sachs. Adrian Your line is live.

Oliver Reichert: And that we're about halfway through fiscal Q3. And despite the volatile market environment we are having, we hear so much about. So there are a lot of rumors around. Of course, we are not seeing anything that would give us a pause.

David Kahan: And I would say, David, from your perspective, you may add something here because ASP is really growing. I mean, what one interesting point on ASP, and it's a good way to look at it, is Speaking for the U.S., according to the economic reports from the FDRA, retail prices on footwear are basically up 0.3 percent. Our ASP is up six full percent, so it's a multiple of what's going on in the market.

David Kahan: Part of it is mix, and part of it is price. But obviously, you know, when you're selling a product at virtually full price, 90 percent plus full price realization, that's where you get the benefit of the ASP, because the consumers realize the equity of your brand, and they're willing to pay the price. And I think we're proving that right now in this environment.

Adrienne: Hey, good morning. Thank you very much for taking my question I was wondering if you could comment a little bit on the performance of the new product categories and then your products I'm thinking maybe of some of the sneakers you released and some of the boots and also what would be the impact on the ASB from this new reduces thank you very much.

Speaker Change #106: So as you can imagine.

Speaker Change #107: It's a very big push in Asp's in this in the <unk> segment, we talked about the massive growth rates there.

Speaker Change #108: As you know like ASP right now is like 50% coming from from a product mix and 50% is coming from from a channel mix. So the product is a key driver for the ASP at the moment, especially in the first half of again just keep this in mind.

Speaker Change #108: The winter season like the first two quarters are more affected by this.

Speaker Change #108: <unk> and <unk>.

Speaker Change #108: <unk> in the ISP, but.

Speaker Change #109: Yeah, we're very proud about this.

Speaker Change #109: Growth here, because it was pretty strong.

Speaker Change #110: Thank you very much.

Operator: Super useful, thank you. Thank you. The next question is coming from Adrian DuVergier from Goldman Sachs. Adrian, your line is live. Hey, good morning.

Speaker Change #111: Thank you and the next question is coming from Paul unless U S from Citibank.

Operator: The next question is coming from Adrian DuVergier from Goldman Sachs. Adrian, your line is live. Hey, good morning. Thank you very much.

Speaker Change #112: Your line is live.

Speaker Change #113: Hey, Thank you.

Paul: Can you just go back to the past work.

Speaker Change #115: Well, Oh ramped up as that facility today at what capacity is producing at and I'm curious if you could talk about the performance and efficiency relative to your plan and where you expect to be by the end of the year.

Speaker Change #115: Also I think at one point, you said that facility could increase your volumes by 50%. Let me know if I'm remembering that correctly and any update there and then just last can you frame the size of some of your larger countries in the Atmel region. Thanks Scott.

Speaker Change #116: So I'm, taking the first pod like to pause about the new factory, which is like <unk>, Portugal and pathologic.

We are super happy with.

Speaker Change #117: Set up an <unk> at the moment as you know, we will definitely grow the pairs and the very.

Speaker Change #118: Let's say.

Speaker Change #119: I'll just say it in English.

Speaker Change #119: Disciplined way moving forward, we told you that overall we will.

Speaker Change #119: Develop like 10% unit growth every year and.

Speaker Change #119: And Thats, what we are executing so we're happy with it.

Speaker Change #119: Starts was in parts of our we.

Speaker Change #119: Hired most of the people there already which is the most important thing for us to get access to the workforce, which is super strong at the moment.

Speaker Change #119: We're constantly improving and developing and further developing the footprint also in our production segment in Portugal, which has a root cause which was which.

Speaker Change #119: Help us to be much more flexible than in the past.

Speaker Change #119: And.

Speaker Change #119: It's the same thing for positive like you know, we're focusing on the EBITDA portion of the business focusing on the <unk> portion of the business coming from pause about but also making sure that we have the maximum flexibility within this new factory to make sure we can.

Speaker Change #119: Develop and further support our global growth.

Speaker Change #119: That's something where we really.

Speaker Change #119: For the big Big effort in them and as you know from our outperformance and raising the guidance you may expect.

Like shorten the timeline of the return on invest curve, which will definitely be the case.

Speaker Change #119: During the road show, we talked about return of invest in training six or normalized margin level, let's say.

Speaker Change #119: And this will be shortened now because the performance is much better than expected.

Speaker Change #120: Thank you. The next question is coming from Michael Binetti from Evercore.

Speaker Change #121: Michael Your line is live.

jacqueline well: Hi, This is jacqueline well on behalf of Michael Binetti, Thanks for taking our questions.

Speaker Change #123: So all of that on the top site cost silhouettes do I well, it's like 20% into quarter can you talk about how trends from here.

Eric: And how to sustain that kind of crows, and maybe for Eric I gave it in Americas towards the GDP is now 29% of penetration. So this quite out of home.

Speaker Change #124: L P to P selling our revenues grew roughly about 60% year, yet, but sell through strategic accounts is really high.

Speaker Change #125: Or do you treat the sum that up is that driven by perhaps exiting non strategic accounts and really keep the southern catch up to the sell through.

Speaker Change #126: Quarter end of fourth quarter and I'm, just curious about was sell into strategic accounts, rather keep to that 33 does that tell us that a company.

Speaker Change #125: Okay.

Oliver Reichert: As you can imagine, it's a very big push in ASP. In this closed social segment, we talked about the massive growth rates there.

Speaker Change #127: Because I'm, taking the first part of your question. Thank you for your question.

Speaker Change #128: As you know we are universal purpose driven brands never goes out of fashion, we are beyond fashion.

Speaker Change #129: I think the biggest proof point here is that revenue from our five classic silhouettes, which make up roughly 75% of the business.

Speaker Change #128: <unk>.

Oliver Reichert: And as you know, ASP right now is about 50% coming from a product mix, and 50% is coming from a channel mix. So the product is a key driver for ASP at the moment, especially in the first half of the year. Again, just keep this in mind. The winter season, like the first two quarters, is more affected by this closed social sequence in the ASP. But yeah, we're very proud about this growth here because it was pretty strong.

Grew by over 20% as I said in the quarter and ASP was up over 10%. So if you see these are the core core portion of the business and its growth, 20% and even in the ISP, we grow by 10%.

Operator: Thank you, and the next question is coming from Paul Lejuez from Citibank. Paul, your line is live.

Speaker Change #128: This is.

Speaker Change #128: We'll say this is a massive message to the market that we are growing everywhere, okay and really above the average.

Speaker Change #128: I think that says a lot about the fashion risk within the company and what we learned is that our I can still have.

Speaker Change #128: A lot of growth potential as we continue to innovate and add to this euros models with new features like premium leather big Barcodes to ceiling.

Speaker Change #128: Some of the other models as well.

Speaker Change #128:

Speaker Change #128: To maintain the relevance on the long term. Okay. So this is really what we're doing within our product teams, we create a trend within the brand constantly.

Speaker Change #128: And while we see the continuous growth in our longtime core icons new product introductions have been incredibly strong don't forget this whenever we bring something to the daylight.

Speaker Change #128: Super strong in sell through is super strong and sell out.

Speaker Change #128: Because we're up 31% over last year, and new styles like the Catalina and lottery.

Speaker Change #128: <unk> ranked now in our top 20 styles. This quarter. So this is something thats really encouraging and it shows that we have the rights.

Speaker Change #128: Connection to the market and it's not fashion driven it's coming from 250 year old purpose driven brand and that is the metric we are executing in the market.

Nicole: Justin I'm going to take the second part of your question. This is Nicole I think we have to differentiate between sell in and sell through so what you see now as a sell through in our B to B partner as a sell in of previous quarters. So that gives you the perspective on those two numbers.

Speaker Change #130: You know we have done a big transformation in B to B in Europe. So we exited many partners globally distribution is a living document so you'll definitely see here and there some terminations going on it's a normal effect, but we don't sort of consider a big termination wave ahead of us with <unk>. However, we manage our <unk>.

Speaker Change #130: Partners are very tightly so.

Speaker Change #130: Do you understand that we allocate the product you understand that we achieve full price realization that is superior to any other brand out there and they also understand that we.

Speaker Change #130: Leverage our partners with them, having a specific role in the marketplace, we'd reach validation authentication of a product that's what they have to do for us and that goes beyond being transactional and that's how we look at <unk>.

Speaker Change #131: Thank you.

Operator: Thank you. The next question is coming from Michael Binetti from Evercore. Michael, your line is live.

Speaker Change #132: And the final question today is coming from Jim Duffy from Stifel. Jim Your line is live.

Operator: Hey, thank you. Can you just go back to the patchwork facility? How ramped up is that facility today? At what capacity is it producing? I'm curious if you could talk about the performance and efficiency relative to your plan and where you expect to be by the end of the year. Also, I think at one point you said that this facility could increase your volumes by 50%. Let me know if I'm remembering that correctly and any updates there. And then, just last, can you please outline the size of some of your larger countries in the ATMA region? Thanks, guys.

Operator: Hi, this is Jesselyn Wong on behalf of Michael Binetti. Thanks for taking our questions here.

Jim Duffy: Oh, Thank you and thanks for squeezing me in my.

Oliver Reichert: So I'm taking the first part, like the Parzivalk, the new factory, which is like Arruca, Portugal, and Parzivalk. We're super happy with the setup in Pasewag at the moment. As you know, we will definitely grow the pairs in a very, Let's say, um.., say it in English, in a very disciplined way moving forward. We told you that overall, we would develop like 10% unit growth every year, and that's what we're doing.

Operator: So Oliver, on the top five core silhouettes, they were up over 20% in the quarter. Can we talk about how trends have been from here and how to sustain that kind of growth? And maybe for Eric or David, America's total G2C is now 29% penetration.

Oliver Reichert: So we're happy with the status in Pasewald, and we've hired most of the people there already, which is the most important thing for us to get access to the workforce, which is super strong at the moment, where we're constantly improving and developing and further developing the footprint also in our pre-production segment in Portugal, which is Arruca, which will help us to be much more flexible than in the past. It's the same thing for Parzivalg, focusing on the EVA portion of the business, focusing on the PU portion of the business coming from Parzivalg, but also making sure that we have the maximum flexibility within this new factory to make sure we can develop and further support our global growth.

Operator: So this quarter, wholesale B2B selling revenues grew roughly 16% year-on-year, but sell-through to strategic accounts was really high at 33% there. Is that driven by BERC exiting non-strategic accounts? And will we see the sell-in catch up to the sell-through in the third quarter and the fourth quarter? And just curious, what was the sell-in to strategic accounts relative to the 33% sell-up that the company cited? Thank you.

Oliver Reichert: And that's something where we really, put a big, big effort in. And as you know, from our out performance, and by raising the guidance, you may expect, like, shorten the timeline of the return on invest curve, which will definitely be the case. You know, during the roadshow, we talked about return on investment in 26 or, let's say, the normalized margin level. And this will be shortened now because the performance is much better than it used to be.

Jim Duffy: My question builds on some of the comments in your last response, we're very pleased to see the strong uptake of close toe sandals I'm curious can you speak to the gender mix contribution to the close to adoption and maybe highlight some of the specific styles beyond the Boston that are contributing to that strength.

Oliver Reichert: Guys, I'm taking the first part of your question. Thank you for your question.

David Sam: Yeah, Hey, Jim This is David.

Oliver Reichert: As you know, we are a universal purpose-driven brand that never goes out of fashion. We are beyond fashion. I think the biggest proof point here is that revenue from our five classic silhouettes, which make up roughly 75% of the business, grew by over 20%, as you said in the quarter, and ASP was up over 10%. So, as you can see, these are the core, core portion of the business, and it grew 20%. And even in the ASP, we grow by 10%.

Oliver Reichert: This is, I would say, a massive message to the market that we're growing everywhere, okay, and really above the average. I think this says a lot about the fashion risk within the company, and what we learned is that our icons still have lots of growth potential as we continue to innovate and add to these Eros models with new features like premium leather, big buckles, the shilling, and you know some of the other models as well. They maintain their relevance in the long term.

David Sam: Yes, the Boston certainly has led the way, but what we find is just like when the Arizona opened up the sandal category to other styles like the geyser in EMEA or a Boston is doing the same thing in clogs, we introduced the style called the Lou tree, that's outselling any expectation we could.

Oliver Reichert: Okay, so this is really what we're doing within our product teams. We create a trend within the brand constantly. And while we see the continued growth in our long-term core icons, new product introductions have been incredibly strong. Don't forget this.

David Sam: Possibly had for that category.

Other styles like the Tokyo the Naples.

Speaker Change #134: It's like Nico said anytime we introduce a new style and we bring it we give it a little oxygen it really starts to exceed all expectations sell through on our sneakers.

Oliver Reichert: Whenever we bring something to daylight, it's super strong in sell-through, and it's super strong in sell-out. Sneakers were up 31% over last year, and new styles like the Catalina and Lutry ranked now in our top 20 styles this quarter. So this is something that's really encouraging and shows that we have the right connection to the market, and it's not fashion-driven. It's coming from a 250-year-old purpose-driven brand, and that is the magic sauce we are putting into the market.

Nico Bouyakhf: I'm going to take the second part of your question. This is Nico.

Nico Bouyakhf: I think we have to differentiate between sell-in and sell-through. So what you see now as a sell-through in our B2B partners is a sell-in from previous quarters. So that gives you the perspective on those two numbers.

Speaker Change #135: Speaking for the U S sell through was 31% higher and what's most interesting is when we talk about like white space categories. You can almost look at men as one big White space that we don't really identify yet, but our men's business is up 45% at retail sell through versus a year ago.

Nico Bouyakhf: We, as you know, have done a big transformation in B2B in Europe. So we have exited many partners. Globally, distribution is a living document. So you'll definitely see some terminations going on. It's a normal effect, but we don't sort of consider a big termination wave ahead of us with B2B.

Nico Bouyakhf: However, we manage our B2B partners very tightly, so you understand that we allocate the product. You understand that we achieve full price realization that is superior to any other brand out there. And we also understand that we leverage our partners, with them having a specific role in the marketplace, be it reach, be it validation, be it authentication of our product. That's what they have to do for us, and that goes beyond being transactional. And that's how we look at B2B.

Nico Bouyakhf: And the final question today is coming from Jim Duffy from Stiefel. Jim, your line is live. Oh, thank you.

Operator: The final question today is coming from Jim Duffy from Stiefel. Jim, your line is live. Oh, thank you. Thanks for joining us.

Speaker Change #135: In a market that again is basically flat so any category any gender any segment that we give a little bit more oxygen to with discipline, we start to see the results and the benefits.

David Kahan: Hey Jim, this is David. Yeah, the Boston certainly has led the way, but what we find is just like when the Arizona opened up the sandal category to other styles like the Giza and the Maiori, the Boston is doing the same thing in clogs. We introduced a style called the Lutry that's outselling any expectation we could possibly have for that category. Other styles like the Tokyo, the Naples, it's like Nico said, anytime we introduce a new style and we bring it, you know, we give it a little oxygen, it really starts to exceed all expectations.

David Kahan: Sell-through on our sneakers, speaking for the U.S., was 31 percent higher. And what's most interesting is when we talk about like white space categories, you can almost look at men as one big white space that we don't really identify yet. But our men's business is up 45 percent at retail sell-through versus a year ago in a market that, again, is basically flat. So any category, any gender, any segment that we give a little bit more oxygen to with discipline, we start to see the results and the benefits.

Speaker Change #136: Thank you.

Operator: Thank you. And this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Speaker Change #137: Thank you and this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.