Q1 2025 Birkenstock Holding Plc Earnings Call
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Speaker Change: Good morning and thank you for standing by. Welcome to Birkenstock's first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.
Speaker Change: The company allocated 60 minutes in total to this conference call. I would like to remind everyone that this conference call is being recorded. I will now turn over the call to Megan Kulick, Director of Investor Relations.
Hello, and thank you everyone for joining us today.
Speaker Change: On the call are Oliver Reichert, Director of Birkenstock Holding, PLC, and Chief Executive Officer of the Birkenstock Group, Eric Massmann, the outgoing Chief Financial Officer of the Birkenstock Group, and Evita Krolo, Chief Financial Officer of the Birkenstock Group as of February 1st.
Speaker Change: Klaus Baumann, Chief Sales Officer, David Kahn, President Americas, Niko Bouiaf, President EMEA, Alexander Hoff, Vice President Global Finance will also join us for the Q&A.
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 berkenstockholdings.com.
Speaker Change: 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 cited on a constant currency basis unless otherwise stated.
Speaker Change: We will also revert to certain non-IFRS financial information. We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately.
Speaker Change: 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.
Speaker Change: Reconciliations of IFRS to non-IFRS measures can be found in this morning's press release and in our SEC filings.
Speaker Change: As a reminder, this quarter marks the first quarter we are reporting under our new operating and reporting segments, the Americas, EMEA, and APAC.
Speaker Change: We filed a 6K on January 16th with a recast of fiscal 2023 and 2024 segment results to align with the new reporting structure and to aid in your analysis of our results. With that, I'll turn it over to Oliver.
Good morning, everybody, and thank you for joining today's call.
Speaker Change: Before I start the quarterly review, I want to thank Eric for his strong leadership and guidance over the past two years as we navigated the IPO process and first year as a public company. Eric, I wish you all the best in your future personal and professional life.
Speaker Change: And of course, I want to welcome Ivica Krohlo to the Birkenstock family. Ivica brings the operational background we need as we allocate our resources to the most attractive opportunities for both revenue growth and cost containment.
Speaker Change: IBESA also brings the technical background to continue ERIC's effort to level up our finance function across all areas including audit, tax and FP&A
Speaker Change: I look forward to working with you as we write the next chapter of our success story. Welcome Ibiza!
Speaker Change: We are proud to report very strong start to our fiscal 2025 with record first quarter results, which came in ahead of our expectations, driven by very strong holiday demand for Bittenstock products.
Speaker Change: We delivered 19% revenue growth in the first quarter, above the high end of our 15-17% target for the full year. Revenue growth was supported by double-digit volume growth and mid-single-digit growth in average selling price.
Speaker Change: Growth in our B2B business benefited from very strong sell-through and reorders from our key wholesale partners throughout the holiday season.
Speaker Change: And our DTC business also strengthened during the critical holiday shopping period as strong gifting demand for styles such as the Boston Clock led to record traffic to our website.
Speaker Change: We are starting fiscal 2025 much in the same way we exited fiscal 2024.
Speaker Change: with strong and growing demand from our core markets and products by leaning into the wide-space growth opportunities we have identified close-toe shoes, the AIRPAC region and own retail.
Speaker Change: During the quarter, revenue from closed-toe silhouettes grew at over twice the rate of the overall group and increased share of business by 600 basis points.
Speaker Change: accounting for well over half of the revenue in the quarter.
Our peak winter quarter.
Speaker Change: During the first quarter, 12 of our top 20 selling silhouettes were closed-toe, including six in clogs and six in traditional lace-up shoes and boot category. We are very successfully turning Bittenstock into a four-season brand.
Speaker Change: Our APEC business grew at 47%, two and a half times the pace of the overall business.
Speaker Change: and we opened four new own retail doors during the first quarter bringing the total to 71 stores globally.
Speaker Change: By channel, as expected, we saw continued strength in our wholesale business, which grew by 30% during the first quarter of 2025.
Speaker Change: Once again, over 90% of the growth came from within existing doors, as our partners continue to allocate more shelf space to the Burtonstock brand.
Speaker Change: Our DTC business grew 10%, a strong result when compared to the 30% growth in the year-ago quarter.
Speaker Change: As we look to Q2 and the remainder of 2025, we expect more balanced growth between our D2C and B2B businesses.
Speaker Change: with D2C likely to grow slightly faster than B2B in the second half of the year as we continue to add additional stores and invest in our digital business globally.
Speaker Change: Our membership base continued to grow nicely, reaching 8.8 million loyal members up nearly 30% year-over-year.
Speaker Change: Now let's move to a brief discussion of segment performance for the year.
Speaker Change: Within our largest segment, the America, we experience strong consumer demand for our brand throughout the quarter, especially around the peak holiday shopping period.
Speaker Change: Revenue in the region was up 16% compared to the first quarter of 2024.
Speaker Change: Close-toe share of business reached nearly two-thirds, driven by the incredibly strong demand for clocks.
Speaker Change: a category like sandals that is becoming synonymous with the name Bittenstock and making us a year-round wardrobe staple.
Speaker Change: B2B was especially strong as many of our strategic partners allocated more space to Birkenstock and experienced very strong holiday sell-through with many high-demand styles.
Speaker Change: such as the Boston Clock, selling out at most retail partners.
Speaker Change: America's DTC, which is almost entirely from our digital business, strengthened late in the quarter as shoppers sought out high-demand holiday gifting items.
including clocks, home shoes, and our shearling executions.
especially at the cold weather setting.
Speaker Change: Search for Birkenstock locks was up 70% over the critical holiday shopping period versus last year, driving increased traffic to Birkenstock.com
Speaker Change: We expanded our physical retail presence, opening our Boston Newbury Street store during the quarter. The ninth location in the U.S. and we plan to add several additional stores later this year.
Speaker Change: In EMEA, we delivered growth of 17%, which was broad-based across all countries.
Speaker Change: As consumers switched to their winter wardrobe, they remained loyal to the Birkenstock brand. Close toe, including clogs, grew over two and a half times faster than sandals, driving ASP higher.
Speaker Change: Laced up shoes and boots were up over 50% and increased share of business by 300 basis points.
Speaker Change: In our online channel, in EMEA, 16 of our top 20 selling styles were closed toe, including 7 boots.
Speaker Change: Shoes became the number two category in NMEA, showcasing strong growth in this important expansionary category. In our B2B channel, we doubled share of business in shoes compared to last year and continue to see strong growth in our order book for spring-summer 25.
Speaker Change: We were pleased to see that Birkenstock was a top choice on holiday wish lists.
Speaker Change: with sell-throughs at our key retail partners increasing up to 30% year-over-year during gifting season.
Speaker Change: We opened a new store in Amsterdam, Netherlands, during the quarter, bringing our store count in EMEA to 35 and identified key locations throughout Europe for additional on-retail stores through 2025.
Speaker Change: The APEC region was again the fastest growing segment in the quarter, growing 47%, two and a half times the pace of the overall business, and now we're presenting 13% of total revenue, up from 10.5% a year ago.
Speaker Change: Growth in the quarter benefited from an accelerated pace of store openings and earlier shipments to some B2B partners as we continue to make progress toward penetrating this significant white space for the Fittgenstock brand.
Speaker Change: Aligned with our roadmap and commitment to the region, we added two new own retail stores, bringing our total to 27 in the APAC region.
Speaker Change: We also expanded our strategic partnerships, increasing our monobrand partner doors by 19. We expect the pace of openings to moderate in the coming quarters, leading to a more normalized APEC growth rate of double the group average.
Speaker Change: Greater China made up approximately 30% share of APAC revenue and grew above segment average.
Speaker Change: We are still in the early stages of our market rollout there, but are steadily building brand awareness and demand through our increased retail and online presence.
Speaker Change: It is a market where we see a tremendous opportunity for strong brands to take share. We opened our first own store in Chengdu in October and will turn our successful pop-up store in Shanghai into a permanent store later this year.
Speaker Change: I will now turn it over to Eric to discuss our financial results in more detail.
Eric Massmann: Thanks, Oliver, and good morning, everyone. Before I jump into the quarterly results, I want to thank you all for your partnership, support, and patience as we navigated the IBO process and first year as a public company together.
Speaker Change: I wish Ivica and the entire Birkenstock family continued success in the future.
Speaker Change: Now, I'm happy to share with you one last time Birkenstock's exceptional performance for the first quarter of 2025, which came in ahead of our expectations.
Speaker Change: First quarter revenue were EUR 362 million, growth of 19% in both reported and constant currency, above the high end of our 15-17% annual guidance for the year.
Speaker Change: B2B was up 30% and our D2C was up by 10%, a strong result.
Speaker Change: DTC share of business was 49% in the quarter, down 400 basis points from a year ago.
Speaker Change: As Oliver mentioned, we expect more balanced growth between D2C and B2B for the remainder of 2025.
Roth's margin for the quarter was 60.3 percent.
Speaker Change: slightly down 70 basis points year-over-year primarily due to the higher B2B mix this year.
Speaker Change: Selling and distribution expenditures were €118 million in the first quarter, representing 32.7% of revenue, down 130 basis points primarily due to the lower D2C penetration compared to last year.
Speaker Change: General administration expenses were €24 million, or 6.7% of revenue in the quarter, down 120 basis points year-over-year, primarily due to the operating leverage from strong revenue growth and lower IPO-related expenses.
Speaker Change: EBITDA in Q1 of Euro 102 million was up 25% year-over-year and margin of 28.2% was up 130 basis points year-over-year due to the strong improvement in SG&A.
Speaker Change: Adjusted net profit of €33 million in the first quarter was up 99% and earnings per share was €0.18, up 100% from a year ago.
Speaker Change: Cash flows used in operating activities during the first quarter was EUR 12 million, an improvement of EUR 34 million year-over-year. This was driven by the strong EBITDA growth combined with improved working capital efficiency.
Speaker Change: We ended the quarter with cash and cash equivalents of EUR 299 million down from EUR 356 million at the end of fiscal 2024 due to the normal seasonality of our working capital usage.
Speaker Change: We improved our inventory-to-sales ratio to 39%, down from 42% in Q1 2024.
Speaker Change: Our DSO for the quarter were 15, down from 19 a year ago, despite the higher B2B mix.
Speaker Change: During the quarter, we spent €90 million in capital expenditures, adding to our production capacity in Parzweig, Görlitz and Aruka.
Speaker Change: Our net leverage was 1.9 times as of December 31, 2024, up slightly from 1.8 times at the end of fiscal year 2024 due to the seasonality of our working capital.
Speaker Change: I now hand the call over to Ivica to discuss the outlook for the second quarter and remainder of fiscal 2025.
Ivica Krohlo: Thank you, Eric, and I appreciate your support during this transition.
Ivica Krohlo: As we look forward to the remainder fiscal 2025, we believe we are well positioned to meet our stated growth and profitability objectives.
Ivica Krohlo: For the remainder of 2025, we see more balanced and healthy growth from both D2C and B2B, with D2C coming in slightly ahead of B2B overall for the year.
Ivica Krohlo: We are reiterating our growth and margin targets for the year.
Ivica Krohlo: We forecast revenue growth of 15-17% in constant currency. Gross profit margin should improve year over year as we increase utilization and efficiency at our production facility, moving closer to our 60% target.
Ivica Krohlo: And we expect adjusted EVDA margin in a range of 30.8 to 31.3%, an increase of up to 50 basis points compared with 2024.
Ivica Krohlo: CapEx are expected in the range of 80 million euro and we see net leverage of approximately 1.5 times by year end.
Ivica Krohlo: As you know, the second quarter is an important quarter for our B2B business, with significant shipments to our partners for the spring-summer season.
Ivica Krohlo: We feel good about where we are relative to our full year revenue growth guidance of 15 to 17 percent.
Ivica Krohlo: The mix in Q2 is more heavily weighted to B2B, so we expect the usual seasonal decline in gross margin and increased EBITDA margin when compared to the fiscal first quarter, but all within the context
of our full-year Margin Guidance.
Ivica Krohlo: And now, I'll hand it back to Oliver for his closing remarks.
Thanks, Ivica.
Oliver Reichert: We are off to an excellent start in 2025 with strong double-digit revenue growth, excellent margins, and success leaning into the white space areas we highlighted over a year ago.
Oliver Reichert: Our brand strength was evident as Birkenstock proved to be one of their clear winners this holiday season and that strength continues with a very strong order book into the important spring-summer season.
Oliver Reichert: We are leaning into the strong consumer demand in both our B2B and D2C channels and continue to carefully execute on our proven engineering distribution strategy to drive ASP growth, ensure healthy stock levels, and maintain strong full-price realization.
Oliver Reichert: We are entering the next chapter of growth as we tap into our white space opportunities and see a long runway for growth in all three, closed-toe shoes, own retail and APAC.
Globally, we are increasing brand awareness.
Oliver Reichert: educating the consumer on the purpose of the Birkenstock footbed and growing our retail and digital presence to gain share.
Oliver Reichert: I would now kindly ask the operator to open our Q&A session. Thank you.
Speaker Change: Thank you. At this time, we will be conducting a question and answer session. In the interest of time, we ask that participants limit themselves to one question on today's call.
Oliver Reichert: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue.
Oliver Reichert: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions.
Speaker Change: And the first question today is coming from Jay Sowell from UBS.
Jay, your line is live.
Speaker Change: Great, thank you so much. I have one question in two parts.
Speaker Change: The quarter is really strong. Why aren't you raising the guidance for the full year given the strong beat that you had in first quarter? And then secondly, can you address the strong B2B growth that you had? You know, what drove the strength and why will the growth be more balanced between channels as you look over the rest of the year? Thank you.
Thank you. I'm very pleased to be here. Thank you.
Speaker Change: Hello, Jay. Thank you for your question. Yes, we are off to a great start into 2025.
Speaker Change: But keep in mind that Q1 is the smallest quarter of the year. In 2024, it was made up only 17% of the total annual revenue, so we still have over 80% of the year ahead of us.
Speaker Change: Also, we have a very strong order book, but keep in mind that there is a lot of macroeconomic uncertainty. Interest rates, currency movement, tariffs.
Speaker Change: The inflation in the US is over 3%. In the Eurozone, we're facing an inflation of 2.5% at the moment. And all this is before the impact of any new tariffs.
Speaker Change: So, the potential impact on the global economy and global consumer is highly uncertain.
Speaker Change: And we have a big DTC business in the second half of the year, which is not that good foreseeable compared to all the book we're playing in the wholesale.
Speaker Change: So while we are off to a great start in business and strong, for all of those reasons, we think it's prudent to stick with our current guidance for the year. And coming back to your second question, or second part of the question.
Our sell-through was up around 40% full price.
Speaker Change: 40% up full price with an average price increase of around 10%. I think these are very strong metrics for the wholesale business and the average inventory was only up 10% so stock-to-sales ratio is very healthy.
Speaker Change: Our B2B business continues to be a very strong indicator of the overall end-user demand, especially in an environment where consumers, especially the younger target groups, are returning to in-person shopping.
Thank you for watching!
Speaker Change: This is a great wholesale business and we love our wholesale business. Be assured, our demand is super strong and we will never, never compromise our distribution strategy from pull to push. Don't expect such a thing from us.
Speaker Change: Going forward, B2C, we see more balanced growth as we accelerate our own global retail store growth. Our own retail business was up 70% in the quarter on a small base.
Speaker Change: But we're also seeing more global opportunities to grow our digital business in the future.
Thank you.
Great, thank you so much.
What happened today?
Speaker Change: Thank you. And the next question is coming from Laurent Vasilescu from BNP Paribas.
Laurentia Line is live.
Laurent Vasilescu: Good morning. Thank you very much for taking my question. Eric, thank you for your leadership and support over the last 18 months, and I wish you the best in the future. Lovita, welcome. As you look at the opportunity to join Birkenstock, what was it that excited you most?
Speaker Change: What do you see as the biggest challenge and how do you plan to address that? And then I have a quick follow-up on the model. Thank you
Lovita: Thanks Laurent for the question and I'm looking forward to be working with all of you in the future. It's a lot about the opportunity at Birkenstock which is very attractive to me. To state the obvious, we have significant growth opportunities for the company over the next decade and beyond.
Lovita: It's really rare to find a company with a 250-year-old legacy that still has such substantial growth ahead. And that's very exciting.
Lovita: Then culturally, I think it's a great fit for me. I love the brand. I love the history It's purpose and it's a real and just really looking forward to help to guide The company through the next leg of growth together with a great team
on the biggest challenges.
Well, the challenge with...
Lovita: Obviously, any rapidly growing company is facing, so making sure that systems, infrastructure, and team are scaling in line with the business.
Lovita: So keeping up with the growth that we're seeing is certainly a big challenge and be leading in terms of technology, processes, and communication.
Lovita: The good news is I'm coming to a company with a very, very strong foundation and the resources to ensure the proper investments are made and scale the business right away.
Lovita: Very clear. And then it's good to hear the DTC and B2B should be balanced growth.
Lovita: are going forward. Should we assume that for the second quarter, and should we overall over-assume
Lovita: to your overall sales, to be roughly in line of that revenue range of 15 to 17, or should we assume it's a little bit higher or a little bit lower? Thank you.
Hi, Lauren. It's Megan.
Lovita: going to have to ask you to repeat that question. We had a siren going by right when you were in the middle. Sorry to hear that. Yeah. Okay. Hopefully there's no fire. Yeah. Thank you, Megan. Yeah. So the quick question here is it's great to hear that B2B and B2C will have balanced growth for the year. I think that's the big debate out there in the investment community. But just curious to know, should we assume that for the second quarter? And overall, I think last quarter you called out for 1-2 to be on the slightly higher range of 15-15.
Lovita: 17% growth. Should we assume a certain range for 2Q for overall sales? Thank you very much.
Thank you.
Hey everyone, this is Alexander speaking.
Lovita: Yeah, overall we said we want to achieve a balanced growth between the channels B2B and D2C on a full year level 2025. We also called out that there are some fluctuations between the quarters. This can always happen depending on how we ship.
Lovita: But overall with that outperformance in B2B in the first quarter, it is fair to assume that we expect over the next quarter cumulative stronger growth in D2C compared to B2B.
Okay, thank you very much. Best of luck.
Speaker Change: Thank you. The next question will be from Mark Altschwager from Baird. Mark, your line is live.
Mark Altschwager: Great. Thank you for taking my question, and Eric, we wish you well.
Mark Altschwager: So, you delivered some nice EBITDA margin expansion in Q1, well ahead of the run rate for the annual guide with improvement in SG&A.
I was hoping you could talk us through the drivers.
Mark Altschwager: here and the implications for the balance of the year. And could you see upside to the guidance for 50 basis points of EBITDA margin expansion given the strong start that you delivered? Thank you.
Thank you.
Mark Altschwager: Essentially, the biggest driver of the improvement in the EBDA margin was really the shift in channels in the quarter. So as you recall, we have always said that our B2B channel has a significant lower growth margin compared to D2C.
Mark Altschwager: But it has a slightly higher EBTO margin, and this is what we are now seeing as a result in the...
Mark Altschwager: first quarter because it's those channels the D2C channels have a much higher selling distribution expenses
Mark Altschwager: compared to B2B. So with the stronger B2B growth in the first quarter compared to D2C, this had an impact on the S and A comparison year over year. And as I said in the first question,
Mark Altschwager: As we look into the full year 2025 and the more balanced growth between the channels, we expect the upcoming quarters not to be impacted in that way, how it was in the...
Mark Altschwager: First quarter, based on those trends, there should be less an impact on SG&A as well as EVTA margin year over year in the next quarters.
Mark Altschwager: So, we stick here with our guidance in EVTA margin of up to 50 basis points for the full year and you shouldn't assume that the 130 basis points improvement in the first quarter carries through the remainder of the year.
Speaker Change: Thank you. And maybe just a quick follow-up there related to gross margin then.
Speaker Change: For the first quarter, you did not call out incremental pressure related to the facility expansion.
Speaker Change: So, it sounds like that ramp must be going well. And then with the channel dynamics you talked about, perhaps less of a pressure on gross margin in the second quarter. So, I guess as we put all that together, should we expect gross margin expansion beginning in the second quarter? Thank you.
Speaker Change: It's quite the same than last year, so it has not an incremental margin impact in the first quarter of this financial year.
Speaker Change: And as we said before, we are expecting that in the second half of the year, we expect a positive impact.
Speaker Change: from the utilization of our factories. So you can at a full year basis expect a modest improvement in gross margin.
Speaker Change: Great, thanks again. Thank you. The next question is coming from Matthew Boss from JP Morgan. Matthew, your line is live.
Thanks, congrats on another nice quarter.
So Oliver, maybe, could you elaborate on key drivers?
Speaker Change: of the revenue upside in the first quarter, maybe particularly the direct-to-consumer acceleration that you cited to exit the quarter. And then just relative to the larger picture comments on macro uncertainty, I guess, have you seen any softening at all in demand momentum post-holiday and in the second quarter? And just anything you're seeing in terms of visibility for the back half aside from just the larger picture macro uncertainty?
Speaker Change: Hi, Matt. Thank you. Thank you for the question. I'll take the first part.
Speaker Change: We don't see any softening at all. I mean, you know, we believe that the brand demand is super strong globally, by the way.
I think the ultimate
Speaker Change: Truth is in Wholesale. If you perform as we do perform in Wholesale...
Speaker Change: It's an unbelievable strong demand out there and the people and the customers they should decide where they want to shop our product.
Speaker Change: and they do it especially the younger target groups, but Nico and David can give you some more detailed color than this on the We see a very strong order book. We see very strong demand Globally, so we're fine on this
Speaker Change: Thank you for your question. I'll touch a bit on the growth drivers in Q1. So as we heard in the earlier part of this call, it is really a broad-based demand across all regions. So that's something that we have to consider and that we're very pleased with.
Speaker Change: particularly we had a very strong holiday and gifting season so as consumers even in the areas of our globe where it was getting colder as they switched into the winter wardrobe they really remained loyal to us. We are becoming much more of a full year brand.
Speaker Change: Furthermore, I'd really like to share that we see a very strong growth contribution from the wide space opportunities we shared during our IPO.
Speaker Change: Gross total, as we shared earlier, is growing at twice the speed as compared to our overall growth and the share of business is up 600 basis points and now making up more than 50% of revenues.
Speaker Change: In the Americas region, it's two-thirds of the business driven by closed-toe. In EMEA, our online business is the same, two-thirds of the business is closed-toe.
Speaker Change: Retail is our fastest growing channel, and be reminded that we just opened four new stores, totaling now at 71 stores globally.
Speaker Change: And the bigger part of expansion is still to come. So we're bringing the 71 stores closer to 100 in this fiscal year. So you see us opening many more stores again across all the regions. And finally, I want to touch on the APAC.
Speaker Change: Again, a very, very strong growth. Strong results with accelerated partner store openings. We opened 19 partner stores.
Speaker Change: and that's also paying into the B2B revenue recognition. And we generally see an increase in brand awareness in that region that results in strong demand, especially in higher price points. That's also something really worth mentioning compared to other brands.
Thank you.
Speaker Change: Thank you and the next question is coming from Randy Koenig from Jeffries. Randy, your line is live.
Randy Koenig: Hey, good morning. Maybe give us some perspective on the amount of allocation improvement or space.
Randy Koenig: in 2024, maybe dimensionalize that for us and maybe give us some perspective on what you see in 2025 and maybe kind of characterize how you also see pricing versus units.
looking into the year.
to come up with your guidance on overall pipeline.
Randy Koenig: And then relatedly, maybe just give us some perspective on AIPAC. It's obviously growing extremely well in its early days. Just maybe give us some, again, some perspective on where you are with allocation there, you know, wholesale partners, etc. Just the building blocks of that business or that geography would be super helpful. Thanks, guys.
Randy Koenig: Hey, Randy, this is David. Thanks for the question. As you know, the word allocation ties to the term engineer distribution we use. We are a true
Randy Koenig: sell through company, not a sell in company. So as we take share, we manage
Randy Koenig: the allocation to make sure the stock-to-sales ratios are always healthy.
Oliver Reichert: As Oliver said when he answered the opening question, when you're delivering selling results in an aggregate of retail partners that's 30% to 40% and above 40% increases on an average stock level that's only up 10%, your stock-to-sales ratios are incredibly healthy.
Oliver Reichert: and where we're taking share goes beyond our traditional sandal category. I think that's the beauty of this.
Oliver Reichert: The growth rate in closed-toe shoes is twice the rate of the rest of the collection.
In the Americas, closed-toe shoes was two-thirds.
Oliver Reichert: of the revenue in the quarter. So you're seeing a much broader-based acceptance of the brand.
manage that very strictly.
Oliver Reichert: This is Alexander. Second part of the question is brief and quite straightforward. So we expect and reiterate two-thirds unit growth and one-third in ASP.
Oliver Reichert: and ASP were continuously driven on the one hand by product mix
Oliver Reichert: with consumers continuously buying into more higher price points and secondly, like-for-like pricing. And with a balanced growth between channels, for 2025 you should not expect an impact from channel mix.
just on Asia.
Hi, can you just repeat the question on Asia?
Oliver Reichert: Just further give us some perspective on where we are with that. Obviously, we're early days. You know, where are we with distribution? Where can we expect to go with distribution over the next couple of years? That'd be super helpful.
Hello, Andy. This is Klaus.
Oliver Reichert: running monobrand stores. As you have seen, we are very strong in opening our own fleet in B2C.
Oliver Reichert: and also this season we had the first holiday season with this setup and we said that's coming in very strong so we will keep the pace of opening but in a very good premium way and
Oliver Reichert: important is to really do the brand, building the brand awareness and being strong on spreading the word of the brand in the territory and consumers really getting the right message here.
Speaker Change: Thank you. The next question will be from Louise Singlehurst from Goldman Sachs.
Luis Gerlain is life.
Louise Singlehurst: Hi, good morning everyone. Thank you for taking my question. Just wanted to have some commentary with regards to lots of new product coming through on the new launches and the opportunities for price mix that that might provide for you as you work your way through 25 but also looking further down the line.
Louise Singlehurst: And the new products, can you just give us a bit of color in terms of the appetite from the consumer? Is that more of a loyal customer coming in and broadening out the Birkenstock range at home or is that a good new customer acquisition tool as well? That would be very helpful. Thank you.
Louise Singlehurst: Hey Luis, this is Nico again. I can give you some color on the latest launches in Q1 in EMEA.
Speaker Change: So, we are very pleased to see that in EMEA's shoes, one of our expansionary categories had a record quarter.
Speaker Change: So, as Oliver was referring to, the majority of the top 20 and the top 10 selling styles was closed shoes, but also boots, at a price point of 200 Euro.
Speaker Change: So how we usually spearhead that success is we venture into our DTC business where we have the most loyal customers and what we see is we can easily migrate them into new styles, into higher price points, and that's also what we saw with the shoes category.
Speaker Change: Now, you might recall that we also doubled the order intake, because what we do is, for B2B, we take the success from B2C and bring it into B2B, and we doubled the order intake for autumn-winter 24 on shoes, and we just see now very promising sell-through results.
Speaker Change: So this is how we expand with our expansionary categories, starting with DTC, with our most loyal customers, and then going into B2B to reach a more critical mass and drive penetration in the market. And there's more to come on this one.
Thank you.
Thank you.
Thank you for watching!
Speaker Change: Thank you. The next question will be from Paul Lejouez from Citi. Paul, your line is live.
Speaker Change: Hi, this is Kelly on for Paul. Thanks for taking your question. Just want to clarify a comment from earlier on the growth margin. Did you say the capacity of your passive walk facility was still a drag in 1Q?
Speaker Change: Any way to quantify that, I believe it was only a 50 basis point drag at 1Q last year. And just given it was a pretty significant headwind to growth margin.
Speaker Change: in 2Q last year. Should we expect that to flip to a tailwind beginning in 2Q?
Speaker Change: this year, and then just any other, if you could just give us any more detail on the puts and takes, the gross margin, 1Q, how much did pricing benefit, gross margin?
and what we should expect for pricing going forward. Thanks.
Speaker Change: Hey Kelly, this is Alexander speaking. Yes, on the gross margin in the first quarter you're right, it was still an impact, but the same impact than the previous year's first quarter, so not an incremental
Speaker Change: pressure on margin and we expect in the back half of the year, so starting second, third, fourth quarter to be a little bit positive against that 150 basis points on full year for the year 24.
Speaker Change: And we confirm also that we want to completely offset this 150 Bezos points margin pressure in the third quarter of 2016.
Just on pricing.
Yeah, I'm pricing...
Speaker Change: I mean we are regularly reviewing our pricing structure. I mentioned before that ASP will be not only driven by product mix but also by like-for-like pricing. We are doing it very surgically, those kind of adjustments.
Speaker Change: So it will be in the single-digit, low single-digit amount each year. We are doing it style by style, not on average for all of those products, depending on how we want to price each of the products.
Speaker Change: And yeah, on inflation, so clearly the goal is to offset inflation by pricing, but we are also working internally on cost structures and supply chain to further gain shares here.
Speaker Change: Now just one follow-up on just the flow of the year from the top line perspective Is it fair to assume that you know, given we're coming up on some of your biggest quarters here and and the share of closed-toe
Speaker Change: I assume given as we move to spring becomes a lower penetration of the assortment. Will we assume 2Q, 3Q are sort of towards the low end of the guidance range? Just any color you can provide there would be helpful. Thank you.
Speaker Change: Yeah, we're not guiding specifically for quarters, Kelly. I think we've given a little bit of guidance around how we see margins in the next quarters, but we are not specifically guiding quarters.
Thanks. That's a lot.
Speaker Change: Thank you. The next question will be from Simeon Siegel from BMO. Simeon, your line is live.
Simeon Siegel: Thanks everyone. Nice broad-based growth. Eric, it's been great getting to know you. Best of luck in the next chapter. And Aviko, welcome aboard. Looking forward to meeting you in the future.
Simeon Siegel: So, we can hear your comfort and health of the B2B business in the qualitative comments, but you also offer some quantitative color. I mean, you brought up the improving DSOs in the remarks. Any further color you could share on composition of receivable health, maybe talk about how much of the B2B growth has come from deeper, going deeper within existing doors.
Speaker Change: versus new. David, I assume from your comments safe to say your retail partners would still love to take more if you're willing to give them more. So anything further on that would be helpful. Thanks guys.
Speaker Change: Yeah, hey Simeon, just a quick comment on that. As we've said, 90 plus percent of our wholesale growth is coming from existing partners and existing doors.
Speaker Change: So that indicates that on this growth level, it's clearly taking share, and it's clearly expansion from our basis business. So, you know, the stronger the business is, the more we continue to expand.
Speaker Change: slowly and very deliberately. We had a very, very strong holiday sell-through, and the business was strong going into the holiday season.
Speaker Change: So, you know, obviously results, you know, correspond to future order book and demand. And clearly, you're absolutely right, there's probably not a retailer out there that would not want more product.
Speaker Change: and then it's contingent upon us to determine how much they get and in what quantities and how the brand shows up at retail. So we can be very intentional right now about where we're taking our business and continue what we've been doing based on the results.
Thank you. Thank you. Thank you.
Speaker Change: That's great. And then would you guys be able to quantify the gross margin drivers this quarter at all anymore? Just thinking through product, geo, channel mix shifts, higher ASP, etc. So anything in terms of how Q1 played out. Thank you.
Speaker Change: Hey Simeon, this is Alexander again. Yeah, I think I touched a little bit already on the first quarter growth margin. So it's it's quite straightforward in this quarter. So the the really the biggest part of the 70-bit decline is relating to the change
Speaker Change: of the channel mix with 400 basis points less P2C penetration. That gives you approximately the gap you're looking for.
all.
Speaker Change: Yeah, all other drivers have been not material. So we managed to offset inflation, so this was not a big driver by targeted price actions. Product mix was not a big driver. So essentially it's... I called also out Parzivar, so essentially it's only then the channel mix.
Speaker Change: Great. Thanks a lot, guys. Best of luck for the rest of the year.
Speaker Change: Thank you and we would like to remind participants in the interest of time today to please limit yourself to one question. The next question is coming from Dana Telsey from Telsey.
Dana Yearline, NETLIFE
Speaker Change: Thank you. Good morning, everyone. Nice to see the progress. As you've touched on, faster DTC growth than B2B as we go through the year.
Speaker Change: Any more perspective on e-commerce versus owned stores, how you're seeing current store opening performance versus the base, and how you're thinking about store openings by region this year. Thank you.
Hey Dana, this is Nico speaking.
It's a great question. I'm happy to take the question.
Speaker Change: So, as I touched on, retail is the fastest-growing channel and will remain the fastest-growing channel when we look into the future.
Speaker Change: We operate 71 stores. We just opened four stores in this quarter, and we're going to bring the total number closer to 100 this year. So we will be opening many, many stores.
Speaker Change: What we see is the newly opened stores, they deliver higher ASP, a better conversion rate.
Speaker Change: and a better square meter productivity. So it's a proven storm model that, you know, we are not looking for locations at a triple A location. We are going to this.
Speaker Change: side street next to the AAA location. We operate stores at 120, 150 square meters. The capex payback is and will be at between 12 and 18 months, so it's a really highly proven store model and we definitely see success.
Speaker Change: on some locations that we have secured. So there will be locations across all three regions where we open new stores. There will be a new store in London, another store in Paris. We'll also look into the Spanish region, but you'll see opening every quarter, dynamically growing into every region.
Speaker Change: So, on the online business, we do believe we have a very strong online business. As you know, it's 90% of our DTC, and we still do see a significant growth opportunity from a regional perspective, but also from a customer perspective. Just be reminded, in our Asia region, in the APEC region, we just opened four new countries.
Speaker Change: as new dot-com destinations. Our business in dot-com in Middle East Africa is just two years old, so really in its infancy, and you see further growth coming from those regions.
Speaker Change: and just to close off with the new customer audiences as we expand with expansionary categories in our online business and we just shared the great results there we also acquire new customers and and that's going to continue also into the next quarters and the next two years.
Speaker Change: So we are very, very positive about the DTC and the outlook that we have with this channel.
Thank you. Thank you.
Speaker Change: Thank you. The next question will be from Lorraine Hutchinson from Bank of America. Lorraine, your line is live.
Lorraine Hutchinson: Thank you, good morning. As you run scenarios around potential terrorists into the U.S., what levers are you considering? Do you plan to offset potential terrorists with pricing?
Thank you, Lorraine, for your question. That's Ivica speaking.
Lorraine Hutchinson: As you know, our final assembly is entirely in Germany, so we would only be impacted by tariffs on imports from Germany.
Lorraine Hutchinson: And the good news is here that we have historically had the ability to take pricing action globally that offsets these inflationary pressures, including tariffs, without any impact on our business.
Lorraine Hutchinson: This is something that we will obviously monitor closely and do whatever we can do to mitigate the impact through cost initiatives and pricing adjustments. So it's not about just pricing adjustments, but it's overall for us to gain efficiency through cost initiatives.
Lorraine Hutchinson: One point I want to mention in addition is that besides we may see a couple of indirect impacts as terrorists may drive inflation generally.
Lorraine Hutchinson: and may impact also consumer sentiment, which certainly adds to the uncertainty Oliver mentioned in his initial statement. But overall, we're watching that closely.
Thank you.
Speaker Change: Thank you. The next question is coming from Michael Benetti from Evercore ISI. Michael, your line is live.
Michael Benetti: Hey guys, thanks for taking our question and for all the detail on the call here. Congrats on a great quarter.
Michael Benetti: Just to double click on the earlier question on gross margin, I think in second quarter last year there was a pretty big step up in the gross margin pressure.
Michael Benetti: from the factory to leverage relative to 1Q. I know you did speak to it. I can hear your confidence in the gross margin in the second half. Is there any puts or takes that are unusual that we should think about on the gross margin in the second quarter?
Michael Benetti: That holds you back from saying, you know, there's a step up in the gross margin there, or is it just conservatism given it's a bigger wholesale quarter, I guess, and then maybe bigger picture one for David as you look across some of the parts of the
Michael Benetti: wholesale channel in the U.S. that's stocked out, which we saw in a lot of our work, stocked out of key gifting items this Christmas. How do you think about adjusting the strategy relative to that level of unmet demand?
Michael Benetti: for next holiday. I know you're always balancing this, David, with, you know, managing the corporate first principles at Birkenstock for managing scarcity. Just any thoughts you have as you look across the results from this holiday.
Michael Benetti: Hi Michael, Alexander here speaking for the first part of the question regarding gross margin.
Michael Benetti: Yeah, the puts and takes. Again, we are not guiding specifically quarters, but what I can say is that
Michael Benetti: We are not seeing a substantial impact from channel mix in the second quarter.
Michael Benetti: and on the Pasewak impact, as I said before, we are not expecting additional pressure. But quarter by quarter you will see now that 150 bps from last year turning into a positive impact quarter by quarter.
Michael Benetti: Michael, I'll take the second part of that. This is David. As you know from following our brand in the market, allocation and distribution is, you know, half art and half science.
Michael Benetti: I mean, we do it with a lot of data, we have planners, we have analysts, on a door-by-door, on a style-by-style basis.
Michael Benetti: We're always going to make sure that the stock-to-sales ratios are always healthy.
Michael Benetti: So, while we don't want, you know, stockouts all over the market, clearly some of that unrequited love and the demand that it creates for the brand is part of this flywheel impact that we get. And that's why demand keeps increasing. And what we keep finding continually is...
Michael Benetti: The more we put additional product into the wholesale market, the more the demand continues to increase.
Michael Benetti: And again, just remember our D to C base is already at 40% penetration with 90 plus percent of it.
Michael Benetti: being digital. So as we open more of our own doors, the white space category that we've been talking about, that's just more points of distribution where we can fulfill that demand. So it's all really part of one ecosystem.
Michael Benetti: Suffice to say, the stock-to-sales ratios that are maintained very healthy in the wholesale market are basically the foundation for the entire business model.
Speaker Change: Okay, maybe just one quick follow-up on the model. Is there, related to your very last comment there, is there anything in the guidance for the year assuming a price increase that's directly earmarked for tariffs or would that be incremental if tariffs happen and it's not included in the guidance at this point?
Speaker Change: Hey, this is Oliver. You know, I think there's no big sense in discussing the possible tariffs up and down because it's really impossible to foresee this.
Speaker Change: I think the tariffs will have more of an impact on overall inflation and overall macroeconomic because, you know, as I mentioned in my first question and the answer, it was, you know,
Speaker Change: Inflation in the U.S. is above 3% and that's before, you know, all the tariffs kicks in. So, this is why we are concerned about the tariffs.
Speaker Change: very, very precisely, style by style. It's the opposite of what you can see from the luxury industry, where they raise pricing all over by 10, 20, 15, 30 percent. We go step by step.
Speaker Change: Then, of course, we try to balance it out within our collection, but don't expect an overall price increase to happen with us.
Okay. Thanks again, guys. Congrats.
Speaker Change: The next question will be from Anna Andreeva from Piper Sandler. Anna, your line is live.
Anna Andreeva: Great, thank you so much for all the color and taking our questions.
Anna Andreeva: Could you provide a little bit more color on your loyalty program? I think you said 8.8 million people this quarter, so nice growth versus, I think, 8 million you called out last quarter. Just curious, how is it performing versus expectations, and what are some of the recent KPIs of how you measure how success is going to look like in 25? And then we had a quick follow-up.
Speaker Change: Yeah thanks, great question. Our members are very important to us. As you know people who wear Birkenstock aren't just consumers, they become our fans, they become our brand missionaries.
Speaker Change: and the more we wrap our arms around them, the better the return on investment is for us.
Speaker Change: Our membership at over 8 million right now is 30% higher year-on-year. I can certainly see it moving to 10 million quite quickly when you do the math on it.
Speaker Change: Marketing to our members has been very successful. I believe almost 50% of our D2C business came from members in the past quarter. And just remember, our members tend to spend 30% higher per transaction.
Speaker Change: So, the return on investment as we market to them and as we share new products.
Speaker Change: If you've worn Birkenstock in any product, if you came to us by way of the sandal or the clog, and you've experienced the footbed, odds are, much higher, you're going to adapt for another use occasion, a closed-toe shoe, or an outdoor shoe, or recovery, or if you work in healthcare, or hospitality, or professional shoes.
Speaker Change: So, as our membership grows, we see that as a key driver for our D2C business, and just remember also, the more touch points we have as we open retail stores around the world, those retail stores also become vehicles for membership.
Speaker Change: That's awesome. That was very exciting. Thank you, David. And just as a follow-up, so APAC was up a very nice 47% in 1Q. And you mentioned accelerated pace of door openings and also deliveries during the quarter. Should we think there's a timing shift which could negatively impact the second quarter growth rate in the region, or that shouldn't affect the current quarter?
www.mustwatch.eu
Speaker Change: Hello, Anastas Klaus. You know, we always said we are very fine with the growth rates in APEC having double of our mature markets and this is also what we keep so
I think that answers the question, right?
Got it. Well, thank you so much.
Speaker Change: The next question is coming from Sam Poser from Williams Trading. Sam, your line is live. Thank you. Thank you for taking my question. Just quickly, you mentioned that Q2 is another big sell-in quarter, and I'm just trying to balance out how the DTC for the year
Sam Poser: is going to grow faster, is to anticipate DTC to grow faster than wholesale in Q2, or is that DTC growth going to be driven a lot by these new stores that are going to open and impact the second half of the year?
Hi Sam, this is Alexander speaking.
Sam Poser: We cannot be that specific. What we said is that we want to.
Sam Poser: grow in the remaining quarters, more in D2C to come than on a full year basis.
Sam Poser: to a balance number. Will it be quarter 2, 3, 4? That would be really too specific and it's also depending on how we ship into the wholesale accounts.
Sam Poser: In general, as you know, Sam, because you know the business best, probably the first half is wholesale heavy and the second half of the year is more DTC heavy. So that probably gives you the best direction how to think about this.
Sam Poser: and so that also would be a balance off the gross margin. Another reason
Sam Poser: for the gross margin in the second quarter, while it may increase year over year to being the biggest wholesale quarter to keep it
Absolutely, that's correct.
Thanks very much.
Speaker Change: Thank you. The next question will be from Erwin Ramborg from HSBC. Erwin, your line is live.
Erwin Ramborg: Yeah, hi, good afternoon and best of luck to the outgoing and incoming CFOs, if I can put it that way.
Erwin Ramborg: in Q1. Where do you see this going in Q2 and maybe for the full year? I think you mentioned 600 basis points of
Erwin Ramborg: incremental contribution in Q1. How should we think about the full year? I think you were a bit above 30% contribution for the full year of the last year. I don't know if you've said what difference the ASP is relative to average.
And then secondly...
Speaker Change: A follow-up on Wholesale for David, or possibly Nico and Klaus as well.
Erwin Ramborg: It's quite stunning that you're growing 30% given that 90% of the growth is with existing doors. So, sorry for the naive question, but how much more space...
Erwin Ramborg: Can they actually accommodate, and at some stage, even though I understand you're more pull than push, will you not need to sign up with new partners at some stage to increase the visibility of the brand? Thank you.
Erwin Ramborg: Hey everyone, this is Nico. Thank you for your question. I'll take the first part and then I guess we're going to share a bit the second part of your question.
Erwin Ramborg: So yes, you're right. So close to increased by 600 basis points. It's two times faster than the rest of the business.
Erwin Ramborg: why our open-tool business is also growing double-digit, and I think that's really worth mentioning.
Erwin Ramborg: Be reminded that this quarter is probably one of the quarters with the highest closed-toe penetration due to seasonality, so don't expect us to deliver the same share of business in the coming quarters. We have given not ourselves a specific target for quarter, but we see great opportunity coming out of this quarter in the closed-toe business.
Erwin Ramborg: and also specifically in close shoes, as I just shared early on with the great results we achieved in close shoes.
Thank you.
Erwin Ramborg: And maybe just on the ASP point, how much more expensive, you know, in terms of ASP if closed, so versus the average of the business?
Erwin Ramborg: So just as you can imagine closed shoes is a much higher ASP than sandals so I refer to the boots example that we had great success in Q1 with boots and they are sold at 200 euro price point and that's adopted by the consumer so you can imagine what's the sort of potential difference in ASP between those categories between sandals and closed shoes.
all right
Speaker Change: Thank you. The next question will be from Jim Duffy from Stifel. Jim, your line is live.
Speaker Change: Thank you. Very clear momentum in the B2B. Following up on that last question, very interested in the evolving product mix at Wholesale.
Speaker Change: Can you speak to what you're seeing in the order book by product type and ASP mix within the orders, specifically interested in, you know, whether the wholesale channel partners are embracing more premium offerings and how that's balancing with interest in EVA offerings like the Berkey. Thanks.
Speaker Change: Thank you, Jim, for your question. Great question. What we do definitely see is, I'll start with the consumer. Consumer continue to seek our premium product. The leather share is increasing. Clocks category is doing extremely well, not just the Boston, but also Clocks Derivatives. So that's another premium category that is doing extremely well. And what we also just shared is the great adoption of boots in Q1. So yes, the consumer is seeking for our most premium product,
Speaker Change: B2B buys in the B2B order book as retailers are expanding their assortment and widening their assortment with us beyond just sandals.
Thank you.
Speaker Change: Thank you. And the next question will be from Janine Stitcher from BTIG.
Janine Stitcher: Thanks so much for all the color and for taking our questions. One more on B2B. I was hoping you could comment on what you're seeing in some of the newer doors within adjacent categories like outdoor, professional, and run specialties. So how penetrated are you in these categories and maybe what you see in terms of shelf space potential? Thank you.
Janine Stitcher: Hey Janine, it's David. In the new distribution, which again is a little bit limited to our traditional base,
We're seeing immediate adoption of the brand.
Janine Stitcher: whether we show up as a recovery sandal, a recovery product and run specialty.
Janine Stitcher: It's the exact same place that we were in when we went into some of these other accounts ten to twelve years ago.
The expansionary categories in our heritage business
have been adopted very quickly.
Janine Stitcher: I mean, again, when we talk about over half of our business being non-sandals.
Janine Stitcher: That's pretty substantial compared to a couple of years ago. When you see the brand out at retail, you're certainly no longer seeing a sandal-based brand.
Janine Stitcher: So as we go into some of these other categories, where it's a different use occasion, but it's the same footbed, whether you're outdoors, whether you're wearing house slippers, whether you're a professional and wearing it in a work environment, it's the footbed. And the more we bring the footbed to different use occasions, the more it's being adopted.
Janine Stitcher: So, I think it's more a matter of how many use occasions do we continue to...
Janine Stitcher: expand into, and what's the share of closet? I mean, as you remember, the average Birkenstock...
Janine Stitcher: consumer has owned 3.4, 3.6 pairs of our product. Anecdotally, we think that's even higher. So I don't think there's a limit to how many Birkenstock products our fans can own in their closet. And the more they see it out in those environments where it's validated, the quicker it's being adopted.
Great, thanks so much to the caller.
Speaker Change: Thank you. There were no other questions and this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.