Birkenstock Holding PLC Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jay Sole - UBS Investment Bank - Analyst : Great. I have one question in two parts. The first question is, Oliver, the the quarter was really strong. Why aren't you raising the guidance for the full year given the strong beat that you had in the first quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call And then secondly, can you address the strong B2B growth that you had? 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.

Question: Jay Sole - UBS Investment Bank - Analyst : Great. Thank you so much.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Good morning. Thank you very much for taking my question, Erik, thank you for your leadership and support over the last 18 months, and I wish you the best in the future. Ivica, welcome, as you looked at the opportunity to joined Birkenstock, what was it that excited you most? 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.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Very clear. And then it's good to hear that DTC and B2B should be balanced growth going forward. Should we assume that for the second quarter? And should we overall assume overall sales to be roughly in line in that -- of that revenue range of 15% to 17%? Or should we see it a little bit higher or a little bit lower. Thank you.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : I'm sorry to hear that. Okay. Hopefully, there's no fire. Yes. So the quick question here is, it's break to hear that B2B and DTC will be will have balanced growth for the year. I think that's a 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 1Q to be on the slightly higher range of 15% to 17% growth. Should we assume a certain range for 2Q for overall sales. Thank you very much.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Okay, thank you very much. Best of luck.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Great. Thank you for taking my question And Erik, we wish you well. 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 here and the implications for the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call 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.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Thank you. And maybe just a quick follow-up there related to gross margin then. For the first quarter, you did not call out incremental pressure related to the facility expansion. 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.

Question: Mark Altschwager - Robert W. Baird & Co. Incorporated - Analyst : Great thanks again.

Question: Matthew Boss - JPMorgan Chase & Co - Analyst : Thanks, congrats on another nice quarter. So Oliver, maybe could you elaborate on key drivers of the revenue upside in the first quarter, maybe

Question: Randy Konik - Jefferies - Analyst : Hey, good morning, maybe give us some perspective on the amount of allocation improvement or space -- shelf-space gains that you got 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 top line? And then relatedly, maybe just give us some perspective on APAC. It's obviously growing extremely well, and it's early days. Just maybe give us some -- again, some perspective on where you are with allocation there, wholesale partners, et cetera, just the building blocks of that business or that geography would be super helpful. Thanks guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call

Question: Matthew Boss - JPMorgan Chase & Co - Analyst : -- just on Asia.

Question: Randy Konik - Jefferies - Analyst : Just give us some -- just further give us some perspective on where we are with that. Obviously, we're early days. where are we with distribution? Where can we expect to go with distribution over the next couple of years that would be super helpful.

Question: Louise Singlehurst - Goldman Sachs Group, Inc. - Analyst : Hi, good morning, everyone. Thank you for taking my question. Just wanted to have some commentary regard lots of new products 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. And the new products, are they -- 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.

Question: Paul Lejuez - Citigroup Inc. - Analyst : Hi, This is Kelly on for Paul. Just wanted to clarify a comment from earlier on the gross margin. Did you say the capacity rands of your Pasewalk facility was still a drag in 1Q? Any way to quantify that? I believe it was only a 50 basis point drag in 1Q last year. And just given it was a pretty significant headwind to gross margin in 2Q last year, should we expect that to flip to a tailwind beginning in this year? And then just any other -- if you could just give us any more detail on the puts and takes of the gross margin in 1Q. How much did pricing benefit gross margin and what we should expect for pricing going forward? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call

Question: Paul Lejuez - Citigroup Inc. - Analyst : Just on pricing?

Question: Paul Lejuez - Citigroup Inc. - Analyst : Got it. And just one follow-up on just the flow of the year from the top line perspective. Is it fair to assume that given we're coming up on some of your biggest quarters here and the share of close-toe, I assume, given as we move to spring becomes a lower penetration of assortment. Would we assume 2Q, 3Q or sort of towards the low end of the guidance range? Just any color you could provide there would be helpful. Thank you.

Question: Paul Lejuez - Citigroup Inc. - Analyst : Alright thanks.

Question: Simeon Siegel - BMO Capital Markets Equity Research - Analyst : Thanks everyone. Nice broad-based growth. Erik, it's been great getting to know you best of luck on the next chapter and if you go welcome board. Looking forward to meeting you in the future. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call So we can hear your comfort and the health of the B2B business in the qualitative comments, but you also offered some quantitative color. I mean you brought up the improving DSOs near mark. 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 with existing doors 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.

Question: Simeon Siegel - BMO Capital Markets Equity Research - Analyst : That's great. That's great. And then would you guys be willing to quantify the gross margin drivers this quarter at all anymore, just digging through product, geo, channel mix shifts, higher ASP, et cetera. So anything in terms of how Q1 played out? Thank you.

Question: Simeon Siegel - BMO Capital Markets Equity Research - Analyst : Great, thanks a lot guys, best of luck for the rest of the year.

Question: Dana Telsey - Telsey Advisory Group - Analyst : 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, any more perspective on e-commerce versus owned stores how you're seeing current store opening performance versus the base? And how are you thinking about store openings by region this year? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call

Question: Lorraine Hutchinson - BofA Securities - Analyst : Thank you. Good morning. As you run scenarios around potential tariffs into the U.S. What levers are you considering? Do you plan to offset any potential tariffs with pricing?

Question: Michael Benetti - Evercore Inc. - Analyst : Hey guys, thanks for taking our question and for all the detail on the call here. Congrats on a great quarter. 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 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 -- are there any puts or takes that are unusual that we should think about on the gross margin in the second quarter? That holds you back from saying, 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 a bigger picture one for David, as you look across some of the parts of the wholesale channel in the U.S. that's stocked out, which we saw 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 for next holiday. I know you're always balancing this, David, with managing the corporate first principles at Birkenstock for managing scarcity? Just any thoughts you have as you look across the results on this holiday.

Question: Michael Benetti - Evercore Inc. - Analyst : Okay. And 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call

Question: Michael Benetti - Evercore Inc. - Analyst : Okay, thanks again guys. Congrats.

Question: Anna Andreeva - Piper Sandler & Co. - Analyst : Great, thank you so much for all the color and taking our questions. 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.

Question: Anna Andreeva - Piper Sandler & Co. - Analyst : That's awesome. That was very exciting. And just as a follow-up, so APAC was up 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 should affect the current quarter?

Question: Anna Andreeva - Piper Sandler & Co. - Analyst : Got it. Well, thank you so much.

Question: Sam Poser - William Trading - Analyst : 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 is going to grow faster is do you 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?

Question: Sam Poser - William Trading - Analyst : And so that also would be a balance of the gross margin. Another reason for the gross margin in the second quarter while it may increase year-over-year to being the biggest wholesale quarter to keep it well underneath Q1 and underneath the full year average I would think. Is that a good way to think about it?

Question: Erwan Rambourg - HSBC - Analyst : And best of luck to the outgoing and incoming CFO, if I can put it that way. Two little follow-ups. First of all, on close-toe shoes being comfortably above 50% of the business in Q1. Where do you see this going in Q2 and maybe for the full year? I think you mentioned 600 basis points of 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 last year. And can you -- I don't know if you've said what difference the ASP is relative to average? And then secondly, a follow-up on wholesale for David or possibly Nico and Klaus as well. 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 can you actually -- 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 to increase the visibility of the brand? Thank you.

Question: Erwan Rambourg - HSBC - Analyst : And maybe just on the ASP point, how much more expensive in terms of ASP is close to versus the average of the business?

Question: Jim Duffy - Stifel - Analyst : Oh, thank you. Very clear momentum in the B2B. Following up on that last question, very interested in the evolving product mix at wholesale. You speak to what you're seeing in the order book by product type and ASP mix within the orders, specifically interested in whether the wholesale channel partners are embracing more premium offerings until that's balancing interest in EVA offerings like the Burkey. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call

Question: Jeanine Stichter - BTIG - Analyst : Hey, thanks so much for all the color and for taking our questions. One more on B2B 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 just maybe what you see in terms of shelf space potential. Thank you.

Question: Jeanine Stichter - BTIG - Analyst : Great thanks so much for the caller. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, BIRK.N - Q1 2025 Birkenstock Holding PLC Earnings Call