Q3 2026 Birkenstock Holding PLC Earnings Call

August 13, 2026

Speaker #1: Good morning, and thank you for standing by. Welcome to Birkenstock's third quarter of fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode.

Operator: Good morning, and thank you for standing by. Welcome to Birkenstock's Q3 of fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. The company has allocated 45 minutes to this conference call and will take as many questions as time allows. I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Megan Kulick, Director of Investor Relations.

Operator: Good morning, and thank you for standing by. Welcome to Birkenstock's Q3 of Fiscal 2026 Earnings Conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. The company has allocated 45 minutes to this conference call and will take as many questions as time allows. I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Megan Kulick, Director of Investor Relations.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. The company has allocated $45 minutes to this conference call and will take as many questions as time allows.

Speaker #1: I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Megan Kulick, Director of Investor Relations.

Speaker #2: Hello, and thank you, everyone, for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of the Birkenstock Group, and Ivica Krolo, Chief Financial Officer of the Birkenstock Group.

Megan Kulick: Hello, and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of the Birkenstock Group, and Ivica Krolo, Chief Financial Officer of the Birkenstock Group. Today, we are reporting the financial results for our fiscal Q3 ended 30 June 2026. You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com. Results have also been filed on Form 6-K with the SEC. 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 federal security laws. These statements are subject to various risks, uncertainties, and assumptions, which could cause our actual results to differ materially from these statements.

Speaker #2: Today we are reporting the financial results for our fiscal third quarter ended June 30, 2026. You may find the press release and a supplemental presentation related to today's discussion on our investor relations website at birkenstock-holding.com.

Speaker #2: Results have also been filed on Form 6-K with the SEC. 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 federal securities laws.

Speaker #2: 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 birkenstock-holding.com.

Megan Kulick: 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 birkenstock-holding.com. We undertake no obligation to revise or update any forward-looking statements or information except for as required by law. We will reference 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. The presentation of this non-IFRS 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 non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings. Now I will turn the call over to Oliver.

Speaker #2: We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. We will reference certain non-IFRS financial information.

Speaker #2: We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS 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 #2: Reconciliations of non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings. Now I will turn the call over to Oliver.

Speaker #3: Good morning, everybody. We performed exceptionally well in Q3, and once again, demonstrated the strength of our brand. Given this continued momentum for fiscal 2026, we raised our guidance for revenue growth to 15% in constant currency and adjusted EBITDA of at least $710 quarter.

Oliver Reichert: Good morning, everybody. We performed exceptionally well in Q3 and once again demonstrated the strength of our brands. Given this continued momentum for fiscal 2026, we raised our guidance for revenue growth to 15% in constant currency and adjusted EBITDA of at least EUR 710 million. We delivered another strong quarter. Our revenue grew 15% in constant currency at the high end of our annual target of 13% to 15%. EMEA growth accelerated to 15%. DTC growth accelerated to 16% in constant currency. Adjusted EBITDA margin on a like-for-like basis improved 60 basis points year over year. We achieved this despite an increase in costs, especially freight rates, due to the conflict in the Middle East. We returned capital to shareholders by repurchasing EUR 230 million in shares. We also refinanced and upsized our senior notes at a 75 basis point lower rate.

Speaker #3: Our revenue grew 15% in constant currency, at the high end of our annual target of 13% to 15%. EMEA growth accelerated to 15%. ETC growth accelerated to 16% in constant on the lifelike basis improved 60 basis points year over year.

Speaker #3: We achieved this despite an increase in costs especially freight rates due to the conflicts in the Middle East. We returned capital to shareholders by repurchasing $230 million in shares.

Speaker #3: We also refinanced and upsized our senior notes at a 75 basis point lower rate. We continued to grow in our white spaces. APEX continued its high-quality and DTC-led growth, especially in China.

Oliver Reichert: We continue to grow in our white spaces. APAC continued its high quality and DTC-led growth, especially in China. We accelerated the pace of retail expansion. We are on track to meet our target of approximately 140 doors by the end of fiscal 2026. Importantly, owned retail revenue grew 50% in constant currency. Same-store sales were up high single digits. We saw a strong acceleration in EMEA digital growth, capturing more demand in our own eCom channel. Closed store penetration was up 500 basis points, consistent with recent trends and in line with our goal to expand usage occasions for our footbed. Product mix contributed over half of the growth in ASP. We saw double-digit growth across all of our regions. Our Americas business was up 14% in constant currency.

Speaker #3: We accelerated the pace of retail expansion; we are on track to meet our targets of approximately $140 million by the end of fiscal 2026. Importantly, owned retail revenue grew 50% in constant currency.

Speaker #3: Same store sales were up high single digits. We saw a strong acceleration in EMEA digital growth. Capturing more demand in our own e-com channel.

Speaker #3: Gross store penetration was up 500 basis points, consistent with recent trends and in line with our goal to expand usage occasions for our footprint.

Speaker #3: Product mix contributed over half of the growth in ASP. We saw double-digit growth across all of our regions. Our Americas business was up 14% in constant currency.

Speaker #3: Youth retailers and sporting goods stores continued to lead B2B growth, with sellout at key partners in these channels up above 20% year over year.

Oliver Reichert: Youth retailers and sporting goods stores continue to lead B2B growth, with sell-out at key partners in these channels up above 20% year over year. Within the Americas DTC business, we saw very strong retail growth as we continued to open new stores to capture more in-person shopping demand in our own doors. We opened four new stores in the US, bringing the total to 21. Growth in EMEA was 15%. In the largest, most important quarter for EMEA, we saw accelerating consumer demand, especially in our DTC business, both online and in-store with strong full price realization of 93%. We opened four stores during the quarter, bringing the total in EMEA to 50. APAC grew 23% in constant currency. Excluding Australia, APAC growth was close to 30%. Australia's growth in the quarter was impacted by a shift in quarterly cadence as a result of the distributor acquisition.

Speaker #3: Within the Americas DTC business, we saw very strong retail growth as we continued to open new stores to capture more in-person shopping demand in our own doors.

Speaker #3: We opened four new stores in the US, bringing the total to 21. Growth in EMEA was 15% in the largest, most important quarter for EMEA. We saw accelerating consumer demand, especially in our DTC business.

Speaker #3: Both online and in-store with strong full-price realization of $93%. We opened 4 stores during the quarter, bringing the total in EMEA to 50. APEX grew 23% in constant currency.

Speaker #3: Excluding Australia, APEX growth was close to 30%. Australia's growth in the quarter was impacted by a shift in quarterly cadence as a result of the distributor acquisition.

Speaker #3: We are very confident in our APEX target for the full year. Importantly, we had over 50% growth in China, the country with the highest ASP—a testament to our high-quality, premium brand positioning in the region.

Oliver Reichert: We are very confident in our APAC target for the full year. Importantly, we had over 50% growth in China, the country with the highest ASP, a testament to our high-quality premium brand positioning in the region. Within the APAC segment, we opened five new owned stores, bringing the total to 53. On the product side, we continue to innovate and drive units in both closed toe and sandals. This innovation is most visible with our premium 1774 collection. We introduced new raffia, canvas, and premium leather executions in Naples, Boston, Arizona, and Gizeh. We also collaborated most recently with Song for the Mute, Ader Error, and Repetto, a very successful launch targeting the female-led and growing popularity of ballet flat. This global movement also resulted in a very strong demand for the Mary Jane style Santa Clarita, one of the newest mainline silhouettes launches.

Speaker #3: Within the APEX segment, we opened 5 new owned stores bringing the total to 53. On the product side, we continued to innovate and drive newness.

Speaker #3: In both gross store and sandals. This innovation is most visible with our premium 70/74 collection. We introduced new Ruffia, Canvas, and premium leather executions in Naples, Boston, Arizona, and Giza.

Speaker #3: We also collaborated most recently with Song for the Mute, Ada Arrow, and Repetto—a very successful launch targeting the female-led and growing popularity of ballet flats.

Speaker #3: This global movement also resulted in a very strong demand for the Mary Jane style, Santa Clarita, one of the newest mainline silhouettes launches. This once again demonstrates our ability to create a trend within our brand.

Oliver Reichert: This once again demonstrates our ability to create a trend within our brand. While demand for the Boston remains very strong, other clog executions also performed exceptionally well. For example, the Naples grew by more than four times in units sold year over year. We also saw very strong growth in shoes led by Utti, a lace-up moc toe, which more than doubled in units sold year over year. Overall, non-Boston closed toe executions were up more than 50%. About half of our top 20 silhouettes are closed toe, including three that were introduced within the past three years. In our sandal business, we saw the strongest growth from our newest seasonal executions, such as flowers, rivets, buckles, prints, and textiles. Growth was especially strong in our Mayari, Madrid, and Siena silhouettes. We highlight this newness most prominently within our D2C business, driving growth in our own channels.

Speaker #3: While demand for the bust remains very strong, other clock executions also performed exceptionally well. For example, the Naples crew by more than 4 times the units sold year over year.

Speaker #3: We also saw very strong growth in shoes, led by Uti, a lace-up moc toe, which more than doubled in units sold year over year.

Speaker #3: Overall, non-Boston close store executions were up more than 50%. About half of our top 20 silhouettes are close toe. Including 3 that were introduced within the past 3 years.

Speaker #3: In our sandal business, we saw the strongest growth from our newest seasonal executions, such as flowers, rivets, buckles, prints, and textiles. Growth was especially strong in our Mayari, Madrid, and Sienna silhouettes.

Speaker #3: We highlight this newness most prominently within our DTC business, driving growth in our own channels. We remain super confident in the strength of our brand.

Oliver Reichert: We remain super confident in the strength of our brand. We are purpose-driven and see strong global demand for the footbed. We target a diverse range of consumers across geography, gender, age, and income. Our total addressable market is only limited by the global population. This gives us flexibility to drive growth regardless of global or regional macro conditions. We manage our distribution with discipline to maintain scarcity, properly segment the market, manage channel growth, and protect full price realization. Now I will pass the call over to Ivica to go through the quarterly results in more detail.

Speaker #3: We are purpose-driven and see strong global demand for the footprint. We target a diverse range of consumers across geography, gender, age, and income. Our total addressable market is only limited by the global population.

Speaker #3: This gives us flexibility to drive growth regardless of global or regional macro conditions. We manage our distribution with discipline to maintain scarcity, properly segment the market, manage channel growth, and protect full-price realization.

Speaker #3: Now I will pass the call over to Ivica, to go through the quarterly results in more detail.

Speaker #1: Thanks, Oliver. I'm happy to share with you details of Birkenstock's performance for the third quarter of fiscal 2026, which exceeded our expectations. We generated third quarter revenues of $720 million euros, growth of 13% on a reported basis.

Ivica Krolo: Thanks, Oliver. I am happy to share with you details of Birkenstock's performance for Q3 of fiscal 2026, which exceeded our expectations. We generated Q3 revenues of EUR 720 million, growth of 13% on a reported basis. Growth in constant currency was 15%, at the high end of our 13% to 15% expectation. The depreciation in the US dollar, Canadian dollar, and Asian currencies, like the Indian rupee and the Japanese yen, compared to Q3 of 2025, caused a 180 basis points headwind to revenue growth in the quarter. For reference, in Q3 of 2026, the average euro to US dollar rate was 116, up from 113 in Q3 of fiscal 2025. We saw strong growth across all segments in the quarter.

Speaker #1: Growth in constant currency was 15%, at the high end of our 13% to 15% expectation. The depreciation in the US dollar, Canadian dollar, and Asian currencies like the Indian rupee and the Japanese yen compared to the third quarter of 2025 caused a 180 basis point headwind to revenue growth in the quarter.

Speaker #1: For reference, in the third quarter of 2026, the average euro to U.S. dollar rate was 1.16, up from 1.13 in Q3 of fiscal 2025.

Speaker #1: We saw strong growth across all segments in the quarter. The Americas segment was up 14% in constant currency, continuing the trend we saw in the first half of the year and reflecting the consistent strength in our most developed market.

Ivica Krolo: The Americas segment was up 14% in constant currency, continuing the trend we saw in the first half of the year and reflecting the consistent strength in our most developed market. EMEA was up 15% in both reported and constant currency, a strong acceleration from Q2, driven by particularly strong D2C in Europe in both online and retail. We continue to see some localized impact in the Middle East related to the conflict in the Gulf region, particularly in the UAE, which is highly dependent on tourism and expat demand. This has been offset by strong domestic demand in markets such as Saudi Arabia. Overall, the Q3 performance was better than anticipated. APAC was up 23% in constant currency. APAC quarterly growth rates are skewed due to the changed revenue pattern from the Australia business.

Speaker #1: EMEA was up 15%. In both reported and constant currency, a strong acceleration from Q2, driven by particularly strong DTC in Europe in both online and retail.

Speaker #1: We continue to see some localized impact in the Middle East related to the conflicts in the Gulf region, particularly in the UAE, which is highly dependent on tourism and expat demand.

Speaker #1: This has been offset by strong domestic demand in markets such as Saudi Arabia. Overall, the Q3 performance was better than anticipated. APEX was up 23% in constant currency.

Speaker #1: APEX quarterly growth rates are skewed due to the changed revenue pattern from the Australia business. Prior to the acquisition, revenues were recognized when we delivered to the distributor before the peak season.

Ivica Krolo: Prior to the acquisition, revenues were recognized when we delivered to the distributor before the peak season. We are now realizing revenues in line with the local market dynamics and seasonality. The Australian spring summer months are September to February, and D2C and B2B sellout peaks in these months, which aligns with our Q1 and Q4, which differs from the revenue realization pattern through transaction. Therefore, Q3 Australia growth was lower versus last year, which as one of our top markets in the region, had an impact on the APAC growth rate. Excluding the impact from Australia timing shifts, our APAC growth was close to 30%. We continue to expect APAC to grow at twice the pace of the other segments for the full year.

Speaker #1: We are now realizing revenues in line with the local market dynamics and seasonality. The Australian spring-summer months are September to February, and DTC and B2B sell-out peaks in these months.

Speaker #1: Which aligns with our Q1 and Q4, which differs from the revenue realization pattern pre-transaction. Therefore, Q3 Australia growth was lower versus last year, which, as one of our top markets in the region, had an impact on the APEX growth rate.

Speaker #1: Excluding the impact from Australia timing shifts, our APEX growth was close to 30%. We continue to expect APEX to grow at twice the pace of the other segments for the full year.

Speaker #1: By channel for the year, B2B was up 15% in constant currency, consistent with the trends of the last few quarters, on the back of continued strong demand at our key partners.

Ivica Krolo: By channel for the year, B2B was up 15% in constant currency, consistent with the trends of the last few quarters on the back of continued strong demand at our key partners. D2C accelerated strongly to 16% in constant currency, up 400 basis points from 12% growth in Q2 and outpaced B2B in the quarter. Our digital growth accelerated very nicely compared to the H1 of the year. Many of the actions we are taking to drive improved conversion are beginning to show results. This includes improved content, enhanced user experience, including simplified checkout options and expanded loyalty and member benefits. Retail was up 50% as we continue to see very strong performance from our new and existing doors. We added 13 new owned stores, bringing our total to 124. Same-store sales growth was up high single digits.

Speaker #1: DTC accelerated strongly to 16% in constant currency, up 400 basis points from 12% growth in Q2, and outpaced B2B in the quarter. Our digital growth accelerated very nicely compared to the first half of the year.

Speaker #1: Many of the actions we are taking to drive improved conversion are beginning to show results. This includes improved content, enhanced user experience— including simplified checkout options— and expanded loyalty and member benefits.

Speaker #1: Retail was up 50% as we continue to see very strong performance from our new and existing doors. We added 13 new owned stores, bringing our total to 124.

Speaker #1: Same store sales growth was up high single digits. Adjusted gross profit margin for the third quarter was 59.2%, down 130 basis points year over year, mainly driven by a 60 basis points of pressure from FX and 70 basis points of pressure from incremental US tariffs.

Ivica Krolo: Adjusted gross profit margin for Q3 was 59.2%, down 130 basis points year over year, mainly driven by 60 basis points of pressure from FX and 70 basis points of pressure from incremental US tariffs. Adjusted gross profit margin excluding these effects was up 10 basis points year over year. While we continue to benefit from better capacity absorption, which contributed 50 basis points to adjusted gross profit margin, product mix cost saved 40 basis points drag on margin. The ongoing shift to closed sole silhouettes comes with a slight margin drag due to the manufacturing complexity and higher consumption of production minutes. However, the shift is very beneficial for us as it yields higher ASP and higher gross profit per pair, despite the slightly lower than average gross margin percentage. Selling and distribution expenses were EUR 186 million in Q3, representing 25.9% of revenue.

Speaker #1: Adjusted gross profit margin, excluding these effects, was up 10 basis points year over year. While we continue to benefit from better capacity absorption, which contributed 50 basis points to adjusted gross profit margin, product mix cost saved a 40 basis point drag on margin.

Speaker #1: The ongoing shift to close-store silhouettes comes with a slight margin drag due to the manufacturing complexity and higher consumption of production minutes. However, the shift is very beneficial for us as it yields higher ASP and higher gross profit per pair, despite the slightly lower than average gross margin percentage.

Speaker #1: Selling and distribution expenses were $186 million in the third quarter, representing 25.9% of revenue. This was up 30 basis points from the prior year, primarily due to accelerated retail expansion and some higher logistics costs as a result of the conflicts in the Middle East.

Ivica Krolo: This was up 30 basis points from the prior year, primarily due to accelerated retail expansion and some higher logistics costs as a result of the conflict in the Middle East. General and administration expenses were EUR 33 million, or 4.5% of revenue, down 40 basis points year over year due to lower IT expenses and fixed cost leverage. Adjusted EBITDA in Q3 of EUR 242 million was up 11% year over year. The flow-through of FX effects reduced adjusted EBITDA by EUR 8 million. Excluding this FX impact, EBITDA was up 15%. Adjusted EBITDA margin of 33.7% was down 70 basis points year over year, due to 130 basis points of pressure from FX and tariffs. Excluding these impacts, adjusted EBITDA margin would have been up 60 basis points. This improvement is despite the increase in freight and logistics costs.

Speaker #1: General and administration expenses were 33 million, or 4.5% of revenue, down 40 basis points year over year, due to lower IT expenses and fixed cost leverage.

Speaker #1: Adjusted EBITDA in the third quarter of 242 million was up 11% year over year. The flow-through of FX effects reduced adjusted EBITDA by 8 million.

Speaker #1: Excluding this FX impact, EBITDA was up 15%. Adjusted EBITDA margin of 33.7% was down 70 basis points year over year, due to 130 basis points of pressure from FX and tariffs.

Speaker #1: Excluding these impacts, adjusted EBITDA margin would have been up 60 basis points. This improvement is despite the increase in freight and logistics costs. Adjusted net profit was $134 million in the third quarter, up 15% year over year.

Ivica Krolo: Adjusted net profit was EUR 134 million in Q3, up 15% year over year. Adjusted EPS for Q3 was EUR 0.74, up 19% from EUR 0.62 a year ago. The debt refinancing triggered an EUR 11.7 million expense from the accelerated amortization of the transaction cost and the derecognition of the embedded derivative of the original senior notes. The ASR triggered an EUR 10.6 million expense from fair value changes due to fair price movements during the term of the ASR. These one-time non-cash expenses were recognized on finance costs and were excluded from adjusted net profit. We generated EUR 247 million in operating cash during the quarter, compared to EUR 261 million in the prior year, due to higher income tax payments totaling EUR 77 million. We ended the quarter with cash and cash equivalents of EUR 694 million after the share repurchase of EUR 230 million and the refinancing and upsizing of our long-term senior notes.

Speaker #1: Adjusted EPS for Q3 was 74 euro cents, up 19% from 62 euro cents a year ago. The debt refinancing triggered a 11.7 million expense from the accelerated amortization of the transaction cost and the de-recognition of the embedded derivative of the original senior notes.

Speaker #1: The ASR triggered a $10.6 million expense from fair value changes due to price movements during the term of the ASR. These one-time, non-cash expenses were recognized in finance costs and were excluded from adjusted net profit.

Speaker #1: We generated $247 million in operating cash during the quarter compared to $261 million in the prior year, due to higher income tax payments totaling $77 million.

Speaker #1: We ended the quarter with cash and cash equivalents of 694 million, after the share repurchase of 230 million and the refinancing and upsizing of our long-term senior notes.

Speaker #1: As a reminder, in June we repaid 428.5 million of 5.25 senior notes due 2029 and issued 900 million new senior notes due 2033 at 4.5.

Ivica Krolo: As a reminder, in June, we repaid $428.5 million, five and a quarter senior notes due 2029 and issued $900 million new senior notes due 2033 at four and a half. The remaining excess cash added to the balance sheet gives us flexibility to further enhance shareholder value with an additional $500 million share repurchase or the refinancing of other existing debt, subject to market conditions. Our inventory to sales ratio was 37% in the quarter, up from 33% a quarter ago. The increase from last year is largely driven by the increase in capitalized tariffs and FX effects. Our DSO for the quarter were a healthy 45 days, up slightly from 43 a year ago. During the quarter, we spent EUR 26 million in CapEx, adding to our production capacity in Arouca, Görlitz, and Pasewalk, beginning the build-out of Wittichenau, and continuing our investments in retail and IT.

Speaker #1: The remaining excess cash added to the balance sheet gives us flexibility to further enhance shareholder value with an additional 500 million share repurchase or the refinancing of other existing debt, subject to market conditions.

Speaker #1: Our inventory to sales ratio was 37% in the quarter, up from 33% a quarter ago. The increase from last year is largely driven by the increase in capitalized tariffs and FX effects.

Speaker #1: Our DSO for the quarter were a healthy 45 days, up slightly from 43 a year ago. During the quarter, we spent $26 million in CapEx, adding to our production capacity in Aruka, Berlitz, and Wittegenau, and continuing our investments in retail and IT.

Speaker #1: We also paid the second tranche of the purchase price for Birkenstock Australia of $9 million. Our net leverage was 1.8 times as of June 30, 2026, up from 1.5 times at September 30, 2025, reflecting the cash outflows from the ASR.

Ivica Krolo: We also paid the second tranche of the purchase price for Birkenstock Australia of EUR 9 million. Our net leverage was 1.8 times as of 30 June 2026, up from 1.5 times at 30 September 2025, reflecting the cash outflows from the ASR. Excluding the ASR, net leverage would have been approximately 1.4 times. Turning to our outlook for Q4 and fiscal 2026. In Q4, we expect revenue growth in constant currency within our annual guidance range of 13% to 15%. We expect FX to be relatively neutral in Q4, resulting in similar growth rate on a reported and constant currency basis. On margins for Q4, we expect FX to be neutral.

Speaker #1: Excluding the ASR, net leverage would have been approximately 1.4 times. Turning to our outlook for the fourth quarter and fiscal 2026: In the fourth quarter, we expect revenue growth in constant currency within our annual guidance range of 13% to 15%.

Speaker #1: We expect FX to be relatively neutral in Q4, resulting in similar growth rate on a reported and constant currency basis. On margins for Q4, we expect FX to be neutral.

Speaker #1: On tariffs, given the recently announced agreement with the European Union and the implementation of Section 301 tariffs, we now expect a blended tariff rate for Q4 of just over 15%, below what we have experienced under the Section 122 tariffs.

Ivica Krolo: On tariffs, given the recently announced agreement with the European Union and the implementation of Section 301 tariffs, we now expect a blended tariff rate for Q4 of just over 15%, below what we have experienced under the Section 232 tariffs. As a result, tariffs should also be relatively neutral year over year in Q4. For the full year, we now expect revenue growth of 15% at the high end of our guidance range of 13% to 15%. For the full year, the FX drag is expected to be 350 basis points. For the full year, we continue to expect adjusted gross margin of 57% to 57.5% and adjusted EBITDA margin of 30.2% to 30.5%, inclusive of approximately 200 basis points of pressure from FX and US tariffs combined. Adjusted EBITDA is now expected to be at least EUR 710 million for the fiscal year.

Speaker #1: As a result, tariffs should also be relatively neutral year over year in Q4. For the full year, we now expect revenue growth of 15% at the high end of our guidance range of 13 to 15 percent.

Speaker #1: For the full year, the FX drag is expected to be 350 basis points. For the full year, we continue to expect adjusted gross margin of 57% to 57.5% and adjusted EBITDA margin of 30.2% to 30.5%, inclusive of approximately 200 basis points of pressure from FX and U.S. tariffs combined.

Speaker #1: Adjusted EBITDA is now expected to be at least 710 million euros for the fiscal year. Our expected tax rate is 30 to 31 percent, up from our prior forecast of 26 to 28 percent, due to the non-tax deductible expenses largely associated with the ASR and debt issuance.

Ivica Krolo: Our expected tax rate is 30% to 31%, up from our prior forecast of 26% to 28%, due to the non-tax-deductible expenses largely associated with the ASR and debt issuance. Including the tax impacts of the accelerated share repurchase, as well as the refinancing and upsizing of our senior notes, adjusted EPS is expected to be €1.90 to €2.05, in line with our prior forecast. This includes approximately 15 to 20 euro cents of pressure from FX. This does not include the impact of any additional share repurchase beyond the ASR completed end of June. CapEx should be in the range of EUR 110 to 130 million. We have a net leverage target for the end of fiscal 2026 of approximately 1.6 to 1.7 times, up from our previous forecast of 1.3 to 1.4 times after the impact of the ASR, but excluding any additional share repurchases.

Speaker #1: Including the tax impact of the accelerated share repurchase, as well as the refinancing and upsizing of our senior notes, adjusted EPS is expected to be 1 euro 90 cents to 2 euro 5 cents, in line with our prior forecast.

Speaker #1: This includes approximately 15 to 20 euro cents of pressure from FX. This does not include the impact of any additional share repurchase beyond the ASR completed end of June.

Speaker #1: CapEx should be in the range of €110 to €130 million. We have a net leverage target for the end of fiscal 2026 of approximately 1.6 to 1.7 times, up from our previous forecast of 1.3 to 1.4 times, after the impact of the ASR, but excluding any additional share repurchases.

Speaker #1: With that, I'll turn it back to Oliver to close.

Ivica Krolo: With that, I will turn it back to Oliver to close.

Speaker #2: Thanks, Ivica. We are super happy, increasing our revenue growth target to 15% in constant currency. And adjusted EBITDA to at least 710 million euro.

Oliver Reichert: Thanks, Ivica. We are super happy increasing our revenue growth target to 15% in constant currency and adjusted EBITDA to at least EUR 710 million. Our Q3 results once again prove that demand for our beloved brand remains strong. Even in times of inflationary pressure on consumer wallets, we remain an accessible and desired brand. We are excited about the opportunities in the fast-growing and under-penetrated APAC markets, in expanding our own retail fleet, and in the newness and innovation within our brand.

Speaker #2: Our third quarter results once again prove that demand for our beloved brand remains strong. Even in times of inflationary pressure on consumer wallets, we remain an accessible and desired brand.

Speaker #2: We are excited about the opportunities in the fast-growing and underpenetrated APEC market. In expanding our own retail fleet and in the newness and innovation within our brand.

Speaker #2: As we look toward the final quarter of our fiscal 2026 and beyond, we plan to continue to grow our share and expand our following within our new, younger target group.

Oliver Reichert: As we look toward the final quarter of our fiscal 2026 and beyond, we plan to continue to grow our share and expand our following within our new, younger target group, building lifetime connections with our consumers across regions and channels; drive innovation and create newness in both our closed toe and in our sandal business; actively steer product between geographies and channels to optimize margins, maintain scarcity, and protect brand equity; continue to use our strong balance sheet and capital allocation decision to drive shareholder returns. Our organic growth generates substantial cash flow. Over the past two years, our operating cash flow totaled EUR 774 million. Our first priority remains to invest in the business. Of this EUR 774 million, EUR 189 million was invested in CapEx. Given our currently undervalued shares, we will look for opportunities to continue our buybacks. We will now take your questions.

Speaker #2: Building lifetime connections with our consumers across regions and channels. Drive innovation and create newness in both our closed-toe and in our sandal business. Actively steer product between geographies and channels to optimize margins maintained scarcity and protect brand equity.

Speaker #2: Continue to use our strong balance sheet and capital allocation decision to drive shareholder returns. Our organic growth generates substantial cash flow. Over the past two years, our operating cash flow totaled 774 million euros.

Speaker #2: Our first priority remains to invest in the business. Of this 774 million, 189 million was invested in CapEx. Given our currently undervalued shares, we will look for opportunities to continue our buybacks.

Speaker #2: We will now take your questions.

Speaker #3: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Boss with JPMorgan. Your line is open. Please go ahead.

Speaker #3: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Boss, with JPMorgan.

Speaker #3: Your line is open. Please go ahead.

Speaker #2: Thanks and congrats on a nice quarter. So Oliver, nice recovery in direct-to-consumer growth this quarter. Came in above B2B for the first time in two years.

Matthew Boss: Thanks, and congrats on a nice quarter. Oliver, nice recovery in direct-to-consumer growth this quarter. Came in above B2B for the first time in 2 years. Can you speak to drivers of the improvement at direct-to-consumer and what you're seeing in B2B relative to D2C? Relative to the raised top-line guide for the year, could you talk to trends in Q4, and do you think there's potential upside to your 15% top-line forecast for the year?

Speaker #2: Can you speak to drivers of the improvement at direct-to-consumer and what you're seeing in B2B relative to D2C? And then, relative to the raised top-line guide for the year, could you talk to trends in the fourth quarter, and do you think there's potential upside to your 15% top-line forecast for the year?

Speaker #4: Hey, Matt. Thank you for your question. I'm maybe a bit hard to understand because I'm dialing in from Saint-Tropez. I'm heavy selling shoes here, as you can imagine.

Oliver Reichert: Hey, Matt. Thank you for your question. I'm maybe a bit hard to understand because I'm dialing in from Saint-Tropez. I'm heavily selling shoes here. As you can imagine, it's quite hot. Hopefully, you can hear me loud and clear. To come back to your question, we delivered strong growth across both channels, of course. D2C outpaced B2B, supported by the investments we're making in both own retail and in our own digital business. Both channels are and will remain important drivers for our business. The D2C performance was driven by own retail, where our expanded footprint and faster store opening pace delivered 50% growth. Same-store sales were also strong, up high single digits, which reflects the continued demand for our brand across our existing store fleet. We also saw accelerating online growth.

Speaker #4: It's quite hot. But hopefully you can hear me loud and clear. So to come back to your question, we delivered strong growth across both channels, of course.

Speaker #4: D2C outpaced B2B, supported by the investments we're making in both our own retail and our own digital business. Both channels are, and will remain, important drivers for our business.

Speaker #4: The D2C performance was driven by own retail, where our expanded footprint and faster store openings delivered 50% growth. Same store sales were also strong, up high single digits.

Speaker #4: With which reflects the continued demand for our brand across our existing store fleet. We also saw accelerating online growth, newness on the product side, greater personalization and stronger storytelling are making the digital experience more compelling and driving the conversion.

Oliver Reichert: Newness on the product side, greater personalization, and stronger storytelling are making the digital experience more compelling and driving the conversion. This was most impactful in Europe, where we saw a clear step-up in online performance with 93% full price realization, even as the broader market became more promotional, as you know. We're focused on growing the business where we can and create the most value. That means continuing to invest in D2C while maintaining a strong, disciplined B2B business. Our wholesale partners are an important part of our growth strategy. They give us efficient access to new customers, particularly younger consumers, while helping us maintain high-quality distribution across our markets. Our 15% constant currency revenue growth guidance reflects the strength we are seeing today across channels and markets.

Speaker #4: This was most impactful in Europe, where we saw a clear step-up in online performance, with 93% full-price realization—even as the broader market became more promotional, as you know.

Speaker #4: So we're focused on growing the business. We can and create the most value. That means continuing to invest in D2C while maintaining a strong, disciplined B2B business.

Speaker #4: Our wholesale partners are an important part of our growth strategy. They give us efficient access to new customers, particularly younger consumers, while helping us maintain high-quality distribution across our markets.

Speaker #4: Our 15% constant currency revenue growth guidance reflects the strengths we're seeing today across channels and markets. And last part of your question, we feel very confident about the momentum in the business and our long-term revenue growth target is 13 to 15.

Oliver Reichert: Last part of your question, we feel very confident about the momentum in the business and our long-term revenue growth target is 13% to 15%. Thank you.

Speaker #4: Thank you.

Matthew Boss: Great color. Best of luck.

Speaker #2: Great color. Best of luck.

Speaker #4: Thank you.

Oliver Reichert: Thank you.

Speaker #3: Your next question comes from the line of Laurent Vasilevsku from BNP Paribas. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open. Please go ahead.

Speaker #5: Good morning, Oliver and team. I wanted to ask about Amaya. Amaya Growth Accelerated nicely versus Q2. Did you see any impact from the conflict in the Middle East?

Laurent Vasilescu: Good morning, Oliver and team. I wanted to ask about EMEA. EMEA growth accelerated nicely versus Q2. Did you see any impact from the conflict in the Middle East? Could you provide additional color on key drivers behind the acceleration in growth? To what extent did favorable weather conditions contribute to the growth relative to the underlying trends in the business? Curious, are you seeing any continuation of these trends into Q4 within EMEA? Thank you so much.

Speaker #5: Could you provide additional color on the key drivers behind the acceleration and growth? And to what extent did favorable weather conditions contribute to the growth relative to the underlying trends in the business?

Speaker #5: And curious, are you seeing any continuation of these trends into 4Q within Amaya? Thank you so much.

Speaker #4: Hey, Laurent. Thank you for your question. It's Ivica. So, indeed, we did continue to see an impact from the conflict in the Middle East, although certainly it was less pronounced than in Q2.

Ivica Krolo: Hey, Laurent. Thank you for your question. It's Ivica. Indeed, we did continue to see an impact from the conflict in the Middle East, although certainly it was less pronounced than in Q2, basically at the onset of the conflicts back then. We were able to mitigate much of the pressure through adjustments in the delivery routes and strength in the other parts of the region. For instance, if you think of Saudi Arabia, a very resilient market and less dependent on tourism and expats. In general, Q4 is a larger quarter in the Middle East, so we expect slightly more of an impact also due to the resumption of hostilities in the region itself. That said, we expect the total H2 impact to be below the EUR 10 to EUR 12 million we originally estimated. We now see this totaling high single-digit millions.

Speaker #4: Basically at the onset of the conflict back then. We were able to mitigate much of the pressure through adjustments in the delivery routes. And strengths in the other parts of the region.

Speaker #4: For instance, if you think of Saudi Arabia, it's a very resilient market and less dependent on tourism and expats. So, in general, Q4 is a larger quarter in the Middle East.

Speaker #4: So, we expect slightly more of an impact, also due to the resumption of hostilities in the region itself. That said, we expect the total second half impact to be below $10 to $12 million.

Speaker #4: We originally estimated. We now see this totaling high single-digit millions. Overall, the growth acceleration was largely driven by D2C demand. As Oliver already mentioned, demand proved very resilient across the region.

Ivica Krolo: Overall, the growth acceleration was largely driven by D2C demand, as Oliver already mentioned. Demand proved very resilient across the region, and we saw nice growth in both retail and online. We're also seeing the benefits of the investments and actions we've taken to drive traffic and improve conversion. This is also something we spoke about in January at our Capital Markets Day, and this includes enhanced upper funnel online marketing, stronger content, and optimization of the inside experience, and this is all contributing positively. On the weather, definitely warmer temperatures are generally favorable to our business. However, we are already seeing improved trends ahead of that, and those trends have continued into the first weeks of our fiscal Q4. Finally, to note, there was bad weather in some of our other markets in Q3 as well.

Speaker #4: And we saw nice growth in both retail and online. We're also seeing the benefits of the investments and actions we've taken to drive traffic and improve conversion.

Speaker #4: This is also something we've spoke about in January at our capital markets day and this includes enhanced upper funnel online marketing, stronger content, and optimization of the inside experience.

Speaker #4: And this is all contributing positively. So, on the weather, definitely, warmer temperatures are generally favorable to our business. However, we are already seeing improved trends ahead of that.

Speaker #4: And those trends have continued into the first weeks of our fiscal Q4. And finally, to note, there was bad weather in some of our other markets in Q3 as well.

Speaker #3: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is open. Please go ahead.

Speaker #5: Thank you. Good morning. So, pricing over inflation was not a contributor to gross margin this quarter, as it has been for the past few.

Lorraine Hutchinson: Thank you. Good morning. Pricing over inflation was not a contributor to gross margin this quarter as it has been for the past few. Were you more promotional? How should we think about your ability to pass inflation through with pricing when customers are a little more price sensitive? Are you seeing any signs of consumer pushback on pricing, particularly in early back to school?

Speaker #5: Were you more promotional? Did you pass inflation through with pricing when customers are a little more price sensitive? Are you seeing any signs of consumer pushback on pricing, particularly in early back-to-school?

Speaker #4: Hey Lorraine, it's Ivica. So, our pricing decisions are made with the goal of passing through inflation and protecting gross margins—something that we do very consistently.

Ivica Krolo: Hey, Lorraine, it's Ivica. All pricing decisions are made with the goal of passing through inflation and protecting gross margin, something that we do very consistently. There can be timing differences from when we take pricing and when the inflation works its way through the inventory and flows through the COGS. Please keep in mind here to date, the pricing over inflation benefit to gross margin is 30 basis points. On promotion, at an overall industry level, we see indeed a higher markdown activity as retailers compete for a more constrained consumer wallet. In this context, we continue to deliver a superior full price realization and gross margin. This basically underlines the strength of our brand and our markdown discipline, which remains unchanged. We are and will selectively discount as we always have.

Speaker #4: There can be timing differences between when we take pricing and when the inflation works its way through the inventory and flows through the COGS.

Speaker #4: And please keep in mind year to date, the pricing over inflation benefit to gross margin is 30 basis points. On promotion, at an overall industry level, we see indeed a higher markdown activity as retailers compete for a more constrained consumer wallet.

Speaker #4: In this context, we continue to deliver a superior full price realization and gross margin. This basically underlines the strength of our brand and our markdown discipline, which remains unchanged.

Speaker #4: We are and will selectively discount, as we always have. Any active markdown we do is to effectively manage our seasonal access stock, as our business continues to grow.

Ivica Krolo: Any active markdown we do is to effectively manage our seasonal excess stock as our business continues to grow. As you know, 75% to 80% of our business is core products and evergreen styles. Our markdown assortment is centered very much around prior season merchandise, seasonal colorways, and broken size runs. The beauty of our brand is we serve a broad range of price points from $50 to $1,500 and remain accessible when consumers are tightening up their spending. For those consumers who are more price sensitive, we offer executions in Birko-Flor, EVA, or textile, for example. Importantly, any action we have taken are not negatively impacting our margin. As you can see from our results, gross margin was even up 10 basis points on a like for like basis.

Speaker #4: So as you know, 75 to 80% of our business is core products and evergreen styles. Our markdown assortment is centered very much around prior season merchandise, seasonal colorways, and broken size runs.

Speaker #4: And the beauty of our brand is we serve a broad range of price points, from $50 to $1,500, and remain accessible when consumers are tightening up their spending.

Speaker #4: For those consumers who are more price sensitive, we offer executions in bigger floor, EVA, or textile, for example. And importantly, any action we have taken are not negatively impacting our margin.

Speaker #4: As you can see from our results, gross margin was even up 10 basis points on a like-for-like basis. And finally, on back-to-school, we continue to be a must-have brand for the school year.

Ivica Krolo: Finally, on back to school, we continue to be a must-have brand for the school year, and we continue to see a very strong youth-driven demand in the US.

Speaker #4: And we continue to see a very strong youth-driven demand in the US.

Speaker #3: Your next question comes from the line of Christina Katai. An equity research analyst. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Krisztina Katai, an equity research analyst. Your line is open. Please go ahead.

Krisztina Katai: Hi. Thank you for taking the question and congrats on a good quarter. You have provided helpful color that the shift towards closed toe silhouettes created, I think, roughly 40 basis point pressure on gross margin. Can you help us quantify that further? What is the difference in gross margin between closed toe and open toe? Secondly, maybe if you could provide more color on the components of growth this quarter, just across ASPs and volume. Thank you.

Speaker #5: Hi. Thank you for taking the question and congrats on a good quarter. You provided helpful color that the shift toward close to still that's created, I think, roughly 40 basis points pressure on gross margin.

Speaker #5: Can you help us quantify that further? What is the difference in gross margin between close to and open to? Then secondly, maybe if you could provide more color on the components of gross this quarter, just across ASPs and volume.

Speaker #5: Thank you.

Speaker #4: Hi, Christina. It's Ivica. Thank you for your question. And first, on the margin impact. So as you know, we don't disclose specific margin on a product level.

Ivica Krolo: Hi, Krisztina. It is Ivica. Thank you for your question. First, on the margin impact. As you know, we do not disclose specific margin on a product level. The complexity of higher ASP, non-Boston closed toe shoes and boots executions require more labor input and consume more production minutes. This quarter, we saw an over 500 basis points increase in our closed toe share, and this is driven by over 50% growth in the non-Boston silhouettes. With Naples units up more than four times and Utti more than doubling year-over-year in Q3. That impacted the gross margin. These are great, highly profitable products, which are helping us to attract new consumers and broaden the usage occasions for the footbed. They generate a higher ASP and profit dollars per pair, although a slightly lower but still very strong margin.

Speaker #4: But the complexity of higher ASP, non-Boston close to shoes and boots executions, require more labor input and consume more production minutes. So this quarter, we saw an over 500 basis points increase in our close to share.

Speaker #4: And this is driven by over 50% growth in the non-Boston silhouettes, with Naples, units up more than four times, and Uti more than doubling year over year in Q3.

Speaker #4: That impacted the gross margin. These are great, highly profitable products, which are helping us to attract new consumers and broaden the usage occasions for the footbed.

Speaker #4: And they generate a higher ASP and profit dollars per pair although a slightly lower but still very strong margin. And we use contract manufacturers in Portugal for some of their production so insourcing parts of this production now that demand is scaling as the future margin opportunity for us definitely.

Ivica Krolo: We use contract manufacturers in Portugal for some of their production. Insourcing parts of this production now, the demand is scaling, is a future margin opportunity for us, definitely. On the second part of your question on ASP versus volume, it was very much in line with our one-third, two-thirds target and reflects the continued build-out of our production capacity across the network, which is progressing according to plan.

Speaker #4: And then on your second the second part of your question on ASP versus volume, it was very much in line with our one-third, two-thirds target.

Speaker #4: And reflects the continued build-out of our production capacity across the network, which is progressing according to plan.

Speaker #3: Your next question comes from the line of Michael Benetti with Evercore ISI. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Michael Binetti with Evercore ISI. Your line is open. Please go ahead.

Speaker #6: Hey guys. It's Carson. I'm here from Michael. Thanks for taking our question here. Sorry to get into the nitty-gritty of the model, but can you walk us through the tax rate?

[Analyst] (Evercore ISI): Hey, guys. It's Carson. I'm here for Michael. Thanks for taking our question here. Sorry to get into the nitty-gritty of the model, but can you walk us through the tax rate? It's coming in above the original guidance of 27% to 28%. Is this 30% to 31% the new baseline for taxes? Why aren't we seeing the flow-through to EPS, given the strong EBITDA outlook and share repurchase? Related to that, what's the normalized finance cost on a quarterly basis with the new debt issued? Should we expect to see less volatility in total finance costs going forward? Thanks.

Speaker #6: It's coming in above the original guidance of 27 to 28%. Is this 30 to 31% the new baseline for taxes? And then I would have expected more upside to EPS for the year given the strong EBITDA outlook and share repurchase.

Speaker #6: Why aren't we seeing the flow through to EPS and then related to that? What's the normalized finance cost on a quarterly basis with the new debt issued?

Speaker #6: And then should we expect to see less volatility in total finance costs going forward? Thanks.

Speaker #4: Hi, Carson. Thank you for your question. The first one, on tax: no, we do not believe that 30 to 31 is the new baseline.

Ivica Krolo: Hi, Carson. Thank you for your question. The first one on tax, no, we do not believe that 30% to 31% is the new baseline. Going forward, we expect a recurring tax rate in the high 20s. This year it is elevated due to the non-deductible, non-recurring, non-cash finance expenses associated with the refinancing that we have completed over the course of Q3, the ASR, and the mark-to-market valuations in the embedded derivative expenses. On EPS, this year will be impacted by this higher effective tax rate with a normalized tax rate. Adjusted EPS growth would have been 23% in the third quarter. For the full year, the impact is about EUR 0.08 per share. To your last part of your question on the finance cost.

Speaker #4: Going forward, we expect a recurring tax rate in the high 20s. This year, it is non-deductible, non-recurring, non-cash finance expenses associated with the refinancing that we have completed.

Speaker #4: Over the course of Q3, the ASR and the mark-to-market valuations in the embedded derivative expenses. On EPS, this year will be impacted by this higher effective tax rate, with a normalized tax rate adjusted EPS growth would have been 23% in the third quarter.

Speaker #4: For the full year, the impact is about 8 euro cents per share. Your last part of your question on the finance cost, this quarter finance costs were impacted by, again, one-time non-cash expenses related to the refinancing, of 11.7 million.

Ivica Krolo: This quarter, finance costs were impacted by, again, one-time non-cash expenses related to the refinancing of EUR 11.7 million and the ASR of EUR 10.6 million. So we do not expect to incur these expenses going forward. What will result, however, in a recurring way and recurring change, is the issuance of the new EUR 900 million senior notes and the repayment of the original close to EUR 430 million notes. This will increase interest expense within finance costs by approximately EUR 4.5 million per quarter, and finance costs should normalize at around EUR 25 million per quarter. Overall, we expect volatility to decrease due to lower fluctuations in the embedded derivatives, resulting from the longer time to optional redemption of the new senior notes.

Speaker #4: And the ASR of 10.6 million. So we do not expect to incur these expenses going forward. What will result, however, in a recurring way and recurring change is the issuance of the new 900 million senior notes and the repayment of the original close to 430 million notes.

Speaker #4: This will increase interest expense within finance costs by approximately $4.5 million per quarter. Finance costs should normalize at around $25 million per quarter.

Speaker #4: Overall, we expect volatility to decrease due to lower fluctuations in the embedded derivative, resulting from the longer time to optional redemption of the new senior notes.

Speaker #3: Your next question comes from the line of Simon Siegel with Guggenheim Securities. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Simeon Siegel with Guggenheim Securities. Your line is open. Please go ahead.

Speaker #6: Thanks. Hey everyone, hope you're having a nice summer, and nice job. Ivica, can you just speak to the spread between inventory and sales? How are you thinking about the composition of your inventory now?

Simeon Siegel: Thanks. Hey, everyone. Hope you are having a nice summer and nice job. Ivica, can you just speak to the spread between inventory and sales? How are you thinking about the composition of your inventory now, maybe how is it changing units versus euros, and how are you thinking about the go-forward inventory levels? Then just to clarify on the Australia timing shift. Did sales shift earlier into Q2 or later into Q4, and is that change now behind us? Just curious how to think about the underlying comment you made, or the underlying trends comment you made, and the go-forward expectations. Thanks, guys.

Speaker #6: Maybe how's the change in units versus euros? And how are you thinking about the go-forward inventory levels? And then just clarify on this Australia timing shift.

Speaker #6: Did sales shift earlier into 2Q or later into 4Q? And is that change now behind us? Just curious how to think about the underlying comment you made or the underlying trends comment you made.

Speaker #6: And the go-forward expectations. Thanks, guys.

Speaker #4: Hey, Samir, and it's Ivica again. Thank you for your question. The first part on the inventory—so, as you are well aware, over 70% of our finished goods inventory is already contracted.

Ivica Krolo: Hey, Simon. It is Ivica again. Thank you for your question. The first part on the inventory. As you are well aware, over 70% of our finished goods inventory is already contracted. Most of this inventory is core, basically evergreen products which do not go out of style, and definitely allowing us for better pre-production and production balancing, and definitely also helps our planning. More than half of the increase in our stock to sales ratio is attributable to FX and capitalized tariffs, and this is something that we have spoken about already in our earnings call in Q2. The other half is largely attributable to the consolidation of the Australia business and the timing of revenue recognition and sell-through of the inventory there, we are now running an on-flow business and are more bound to the cadence of selling in the region itself.

Ivica Krolo: Hey, Simeon. It is Ivica again. Thank you for your question. The first part on the inventory. As you are well aware, over 70% of our finished goods inventory is already contracted. Most of this inventory is core, basically evergreen products which do not go out of style, and definitely allowing us for better pre-production and production balancing, and definitely also helps our planning. More than half of the increase in our stock to sales ratio is attributable to FX and capitalized tariffs, and this is something that we have spoken about already in our earnings call in Q2. The other half is largely attributable to the consolidation of the Australia business and the timing of revenue recognition and sell-through of the inventory there, we are now running an on-flow business and are more bound to the cadence of selling in the region itself.

Speaker #4: Most of this inventory is core, basically evergreen products, which don't go out of style. It definitely allows us better pre-production and production balancing, and also helps our planning.

Speaker #4: More than half of the increase in our stock-to-sales ratio is attributable to FX and capitalized tariffs. And this is something that we've spoken about already in our earnings call in Q2.

Speaker #4: The other half is largely attributable to the consolidation of the Australia business. And the timing of revenue recognition and sell-through of the inventory there we're now running an on-for business and are more bound to the cadence of selling in the region itself.

Speaker #3: Your next question comes from the line of Adrian Duvergé with Goldman Sachs. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Adrien Duverger with Goldman Sachs. Your line is open. Please go ahead.

Speaker #5: Hey, good morning, good afternoon, Oliver, Ivica, and Megan. Thank you very much for taking my question. Could you please comment a bit more on the performance in the U.S.?

Adrien Duverger: Hey, good morning, good afternoon, Oliver, Ivica, and Megan. Thank you very much for taking my question. Could you please comment a bit more on the performance in the US? More specifically, how is the order book performing? Could you please comment maybe on the sell-in versus sell-outs at your wholesale partners? I think you commented already that you have seen very good growth from these youth department stores and sporting goods. Also, I guess following up on the prior question, are you confident that there is no buildup of inventory anywhere in your wholesale channel? Is there anything you are seeing in terms of wholesale appetite for your products? I guess as well in terms of consumer feedback, that would be super helpful. Thank you very much.

Speaker #5: More specifically, how is the order book performing? Could you please comment maybe on the sell-in versus sell-out at your wholesale partners? I think you commented already that you had seen very good growth from these youth department stores and sporting goods.

Speaker #5: And also, yeah, I guess following up on the prior question, are you confident that there is no buildup of inventory anywhere in the wholesale channel?

Speaker #5: And is there anything you're seeing in terms of wholesale appetite for your products? I guess as well on in terms of consumer feedback. That would be super helpful.

Speaker #5: Thank you very much.

Speaker #4: Thank you very much, Adrian. It's Ivica again. So, on your question with regards to US B2B, and indeed as Oliver said earlier in this call, we're continuing to see strong youth-led demand.

Ivica Krolo: Thank you very much, Adrien. It's Ivica again. On your question with regards to US B2B, indeed, as Oliver said earlier in this call, we're continuing to see strong youth-led demand. Basically, this is the cohort that is highly growing and effectively being new to the brand. This is what we call the footbed newbies. Sell-through across these channels in Q3 was up by 20% plus year over year. So continued strength we've observed for the last couple of quarters, and very similar to what you have seen already before. With regards to back to school, as mentioned, we are one of the must-have brands. We are continuing to see this youth-driven growth. And with regards coming back again to the markdown activity, there is no change to our approach.

Speaker #4: And basically, this is the cohort that is highly growing and effectively being new to the brand. So this is what we call the footbed newbies.

Speaker #4: Sell-through across these channels in Q3 was up by 20% plus year over year. So a continued strength we've observed for the last couple of quarters.

Speaker #4: And very similar to what you have seen already before. With regards to back to school, as mentioned, we are one of the must-have brands.

Speaker #4: We have or continuing to see this youth-driven growth. And with regards coming back again to the markdown activity, there is no change to our approach.

Speaker #4: And if we would be marking down, you would immediately see it in our gross margin. But you don't see it. It's just the opposite.

Ivica Krolo: If we would be marking down, you would immediately see it in our gross margin, but you don't see it. It's just the opposite. You see an increase on a like for like basis, and this is what we'll continue to build on.

Speaker #4: You see an increase on a like-for-like basis. And this is what we will continue to build on.

Speaker #3: Your next question comes from the line of Ed Ullman with Morgan Stanley. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Edouard Aubin with Morgan Stanley. Your line is open. Please go ahead.

Speaker #7: Yeah, good afternoon. So just a question on China, actually. Obviously, your exposure to China is small; I think it was about 2% last year.

Edouard Aubin: Yeah, good afternoon. Just a question on China, actually. Obviously, your exposure to China is small. I think it was about 2% last year, but you mentioned on the call that you're growing about 50% year over year. Could you just update us on your plan to continue to grow in that market? And then just on production capacity, because Oliver mentioned your sustained CapEx investment. I think on my estimates, you're going to be selling about 42 million pairs this year. When will you start to be thinking about building new factories or with the existing capacity, what could be potentially the number of pairs you could be producing every year? Thank you.

Speaker #7: But you mentioned on the call that you're growing about 50% year over year. Could you just update us on your plan to continue to grow in that market?

Speaker #7: And then just on production capacity, because I know you’ve mentioned your sustained capex investment. I think, by my estimates, you’re going to be selling about 42 million pairs this year.

Speaker #7: When will you start to be thinking about building a new factories? Or with the existing capacity, what could be the potentially the number of pairs you could be producing every year?

Speaker #7: Thank you.

Speaker #4: Hi, Eduardo. It's Ivica. So the first part of your question on China so the business there was up 50% in the quarter. And was our largest market in APEC in Q3.

Ivica Krolo: Hi, Ed. It's Ivica. The first part of your question on China, the business there was up 50% in the quarter and was our largest market in APAC in Q3. It's very much a premium market for us. It's high quality, retail-led growth with the highest ASP globally. We'll continue to follow the roadmap we outlined for the market at our Capital Markets Day in January. This is including raising brand awareness through new stores, both company-owned and partner doors, local activation, brand building events. Events do play a key role in increasing the brand awareness through the region, and this will be built up further. The second part on your question, Ed, with regards to build-out of capacity, especially with regards to production.

Speaker #4: And it’s very much a premium market for us. It’s high-quality, retail-led growth with the highest ASP globally. We’ll continue to follow the roadmap.

Speaker #4: We outlined for the market at our capital market day in January so this is including raising brand awareness through new stores both company-owned and partner doors.

Speaker #4: Local activation and brand-building events play a key role in increasing brand awareness throughout the region. This will be built up further.

Speaker #4: So the second part on your question, Eduardo, with regards to build out of capacity, especially with regards to production, so we are on track to deliver 10% unit growth as we've said at our capital markets day.

Ivica Krolo: We are on track to deliver 10% unit growth, as we've said at our Capital Markets Day, and the build-out of the entire manufacturing network, especially with regards to Wittichenau, but also Arouca in Portugal. Görlitz is progressing according to plan, and we are well on track to deliver the target unit growth.

Speaker #4: And the build out of the entire manufacturing network, especially with regards to Vittchenau, but also Aruka in Portugal, and Gurlitz, is progressing according to plan.

Speaker #4: And we are well on track to deliver the target unit growth.

Speaker #3: Your next question comes from the line of Mark Altzberger. With Baird. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Mark Altschwager with Baird. Your line is open. Please go ahead.

Speaker #6: Great. Thank you for taking my question. Wanted to have capital allocation you have another I believe 500 million of liquidity for buybacks. How do you anticipate executing the additional buyback program going forward?

Mark Altschwager: Great. Thank you for taking my question. I wanted to hit on capital allocation. You have another, I believe, EUR 500 million of liquidity for buybacks. How do you anticipate executing the additional buyback program going forward? This last one was ASR, obviously. How are you thinking about that versus a regular ongoing buyback program? And relatedly, net leverage 1.8x today, guiding to 1.6x, 1.7x by year-end. Do you have a target leverage ratio or what is the leverage level you're going to run in order to complete the buyback program? Thank you.

Speaker #6: This last one was ASR. Obviously, how are you thinking about that versus a regular ongoing buyback program? And relatedly, net leverage, 1.8 times today, diving to 1.6, 1.7 by year-end.

Speaker #6: Do you have a target leverage ratio or what is the leverage level you're going to run in order to complete the buyback program? Thank you.

Speaker #4: Hi, Mark. Thank you for your question. It's Ivica again. And you are right. We have a significant cash balance from which we can execute additional buybacks.

Ivica Krolo: Hi, Mark. Thank you for your question. It's Ivica again. You are right, we have a significant cash balance from which we can execute additional buybacks, and we plan to do so. We will be responsive to capital market activity and make the decision how and when to utilize that cash based on a number of factors, including potential liquidity events for our largest shareholder, the timing, naturally, of which we do not control. Ideally, we would utilize the cash as we did the EUR 200 million last year and buy shares as part of a larger transaction so we do not further reduce our public float, which is, as you know, already very low.

Speaker #4: And we plan to do so. We will be responsive to capital market activity. And make the decision how and when to utilize that cash based on a number of factors, including a potential liquidity events by our largest shareholder, the timing, naturally, of which we do not control.

Speaker #4: Ideally, we would be utilized the cash as we did the 200 million last year. And buy shares as part of a larger transaction. So we do not further reduce our public float.

Speaker #4: Which is, as you know, already as we did this year with our most recent ASR, we don't have to wait for a bigger transaction.

Ivica Krolo: That said, as we did this year with our most recent ASR, we don't have to wait for a bigger transaction, and we'll buy back from the public float if our board decides that it's in the best interest of our shareholders. With regards to leverage, we do not have a specific leverage target set. We will keep our options open to allocate capital, however it is in the best interest of our shareholders.

Speaker #4: And we'll buy back from the public float if our board decides that it's in the best interest of our shareholders. With regards to leverage, we do not have a specific leverage target set.

Speaker #4: We will keep our options open to allocate capital. However, it is in the best interest of our shareholders.

Speaker #3: Your next question comes from the line of Anna Andreeva with Piper Sandler. Your line is open. Please go ahead. Anna, you may need to unmute your device locally.

Operator: Your next question comes from the line of Anna Andreeva with Piper Sandler. Your line is open. Please go ahead. Anna, you may need to unmute your device locally. For now, we will move on to Dana Telsey from Telsey Advisory Group. Your line is open. Please go ahead.

Speaker #3: For now, we will move on to Dana Tulsey y from Tulsey Advisory Group. Your line is open. Please go ahead.

Speaker #5: Hi. Congratulations on the nice results. Oliver, can you talk about the closed-toe penetration, which is up so nicely in the quarter? Typically, this is a summer quarter that's usually more sandals-heavy.

Dana Telsey: Hi. Congratulations on the nice results. Oliver, as you think about the closed-toe penetration, which was up so nicely in the quarter, which typically is a summer quarter that's usually more sandals heavy, what was the growth in the sandals category? The go forward, how do you think about product innovation and newness, whether in sandals or closed-toe and pricing? Thank you.

Speaker #5: What was the growth in the sandals category? And the go-forward, how do you think about product innovation and newness, whether in sandals or closed-toe?

Speaker #5: And pricing. Thank you.

Speaker #6: Hi, Dana. It's Oliver again. Thank you for your question. As you know, our sandal business remains very strong. Up with high single-digits in constant currency year over year.

Oliver Reichert: Hey, Dana. It's Oliver again. Thank you for your question. As you know, our sandal business remains very strong, up mid-high single digits in constant currency year-over-year. Sandals were particularly strong in our own DTC channel, driven by newness. There's no one else with the footbed and its benefits. This is a category we own. It's not just Arizona, which is still growing and benefiting from newness. The Mayari, the Madrid, and the Siena silhouettes performed particularly well this summer. The success of our closed-toe business, especially clogs, has created true four-season demand, reducing the seasonal dependence on sandals. This is not just the Boston, it includes the Naples, the Lutry, Amsterdam, and others. All of which are doing very well in building on our momentum in clogs. We are constantly driving newness and innovation in both open-toe and closed-toe, growing our global fan base.

Speaker #6: So, sandals were particularly strong in our own DTC channel, driven by newness. There's no one else with the footbed, and it benefits. So, this is a category we own.

Speaker #6: It's not just Arizona, which is still growing and benefiting from newness. The Mayari, the Madrid, and the Siena silhouettes performed particularly well this summer.

Speaker #6: The success of our glove store business, especially clocks, has created true four-season demand. Reducing the seasonal dependence on sandals this is not just the Boston it includes the Naples, the luxury Amsterdam, and others.

Speaker #6: All of which are doing very well in building on our momentum in clogs. We are constantly driving newness and innovation in both open-toe and closed-toe, growing our global fan base.

Speaker #6: We create new trends from within our brand to build and expand our archive and extend usage occasions. I mentioned two good examples of this in my opening comments.

Oliver Reichert: We create new trends from within our brand to build and expand our archive and extend usage occasions. I mentioned two good examples of this in my opening comments, like the Santa Clarita and the Repetto collaboration to capture the increasing global demand for ballerinas. Don't forget this will be the trend for the next 3 to 5 years, the ballerinas for ladies.

Speaker #6: Like the Santa Clarita and the Repetto collaboration to capture the increasing global demand for ballerinas. This will be don't forget this. This will be the trend for the next three, five years.

Speaker #6: The ballerinas for ladies.

Speaker #3: And with that, we have reached the end of the Q&A session. This concludes today's call. Thank you so much for attending. You may now disconnect.

Operator: With that, we have reached the end of the Q&A session. This concludes today's call. Thank you so much for attending. You may now disconnect.