Birkenstock Holding PLC Q3 2024 Earnings Call Transcript

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

Question: Simeon Siegel - BMO Capital Markets - Analyst : Thanks. Hey, everyone. Because I know the stock may not reflect it right now, but congrats on really impressive top line growth online, really ongoing margin, strengthen the brand health there. I mean that was very impressive. Oliver, could you speak to how units in like for like ASP performed versus your expectations, the revenue show that you're clearly enjoying really strong customer demand. And if I'm thinking about it correctly, I think the overall number may still overshadow some of important channel nuance that you're talking about. So revenues basically hit consensus while beating adjusted EBITDA margins and this was on the strong B2B outperformance. So I'm just wondering, could you help me understand, as I guess, in line revenues on higher wholesale mix suggest you're actually outperforming your internal units. And then maybe just reflect on the strong customer demand, you beat the profit margin. So perhaps remind us how you're thinking about both channels, health and trajectory. And then just lastly, if I can, maybe for Eric, any color you can share just on comfort for guidance, perhaps both Q4 and beyond. It's tough macro out there, but you're still posting industry-leading growth. So curious any puts and takes to keep in mind. Thank you.

Question: Simeon Siegel - BMO Capital Markets - Analyst : Great. Thanks a lot, guys. Nice job again and best luck for the rest of year.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Good morning. Thank you very much for taking my question. Erik, you ended the quarter with over EUR400 million in cash on the balance sheet, generated EUR229 million of free cash flow in the quarter. Leverage is down to 2.1 times, well on your way to 2 times target for year end. How should we think about use of cash in the future, especially with the bulk of your large capital investments in production expansion behind you? And then I have a quick follow-up after that.

Question: Laurent Vasilescu - BNP Paribas Exane - Analyst : Erik, that's very clear and great to hear. And then as a follow-up, Oliver, David, there are obviously a lot of questions about the US consumer. Can you maybe shed light on what you're seeing with your US consumer? How did trends progress in the quarter? And more importantly, any color on quarter-to-date trends? And then going forward, should we expect a double-digit growth in the Americas region for 4Q and then high level for next year if you can share on that?

Question: Paul Lejuez Lejuez - Citigroup, Inc. - Analyst : Hey, thanks, guys. Curious if maybe you could talk about your sell-through within the B2B business, maybe compare that to how each region performed in terms of what you reported on B2B revenue increases. And then second, would love to hear more about your traffic versus ticket trend within the Americas DTC channel? Thanks.

Question: Paul Lejuez Lejuez - Citigroup, Inc. - Analyst : All right. David, just a follow-up on the sell-through. Can you maybe talk about what your order books look like for the spring?

Question: Jay Sole - UBS - Analyst : Great. Thank you so much. Maybe if you can update us a little bit about the factory capacity at this point. Like what percentage of factory capacity are you using? Is it a constraint at all on your ability to deliver the units you want to the marketplace to meet the demand that you feel is appropriate? If you can just kind of review where you are from that standpoint, that would be super helpful? 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. AUGUST 29, 2024 / 12:00PM, BIRK.N - Q3 2024 Birkenstock Holding PLC Earnings Call

Question: Matthew Boss - JPMorgan Chase & Co. - Analyst : Great. Thanks. So Oliver, maybe if you put all this together, could you elaborate on current demand trends for the brand globally, across geographies? Maybe so far in the fourth quarter just relative to the mid-teens implied revenue growth forecast for the fourth quarter? And then larger picture, just demand signals that you're seeing from your wholesale partners across categories?

Question: Micheal Binetti Binetti - Evercore ISI - Analyst : Hey guys, thanks for taking our question here. So I had just a couple. First, I guess, on Americas, total market up 15%. So to sum it up, you feel great on wholesale, the stores, I think you gave a large growth rate, maybe 60%, I think, you said, Oliver. And you mentioned a bunch of times though separately that shopping in-store is a big trend. It seems like the math on maybe why Americas decelerated from one quarter to the next, was it related to the digital business in the Americas. But I think, David, you said you are pretty happy with the traffic to the website. So I was a little confused on where maybe the slowdown was, maybe, on the digital side, if you could square that for us. And I'd be curious to hear if you guys were actively prioritizing inventory towards the wholesale channel or if there were stock outs on any places in DTC due to the engineered distribution strategy?

Question: Micheal Binetti Binetti - Evercore ISI - Analyst : Okay. And then just to help us with our models here as we look at the fourth quarter, I want to make sure I heard something you said on the -- two questions on the gross really quick. I think you said maybe the implied factory deleverage for the year at about 150 basis points, I think that would imply a pretty meaningful step up in the year-over-year deleverage in the gross margin in the fourth quarter relative to the third quarter if I'm right. And then maybe is it a good rule of thumb to use going forward? You said I think you said that the DTC versus B2B mix in the quarter was about 100 basis point drag to your gross margin in third quarter. Is that about right? Two points of year-over-year mix shift is about 100 basis points of gross margin or 50 basis points per point of mix shift?

Question: Micheal Binetti Binetti - Evercore ISI - Analyst : I appreciate it. We're still trying to learn how your model moves with the different lines here. So thanks for hanging with us on some of the details here.

Question: Micheal Binetti Binetti - Evercore ISI - Analyst : You can send yours over.

Question: Mark Altschwager - Robert W. Baird & Co. - Analyst : Great. Thank you for taking the question. Great to see the ongoing momentum. I guess, first, I was hoping you could provide us some updated thoughts on the pricing actions you're planning for the 2025 products. And then separately, really nice momentum in closed-toe. I was hoping you could give us some more detail on the trends you're seeing in some of the other product adjacencies, including some early reads from the recent EVA clog launch and this athlete recovery positioning. I think that's opening up some opportunities for new distribution. So just any more color on what you're seeing there would be very helpful. Thank you.

Question: Sharon Zackfia - William Blair & Company, L.L.C. - Analyst : Hi. Thanks for taking the question. I wanted to ask about Europe where you've seen kind of accelerating momentum with the wholesale transformation you've done there. Can you talk about what you're seeing with ASPs as a result, particularly kind of with a more premium-priced product and with closed-toe? And I think you took some pretty decent price increases in Europe as well. Are you seeing any kind of consumer sensitivity to those increases? Thanks.

Question: Dana Telsey - Telsey Group - Analyst : Hi. Good morning, everyone. You've mentioned a number of times, all of you, about the increase in physical touch points that consumers are making -- where they're making their purchases. As you think about it globally, where did you see the biggest differential that way? On your store opening plan, are there any changes that you're looking at to accelerate this? And what are the learnings from your stores that you're putting into some of the B2B and wholesale that helped to drive that conversion? Thank you.

Question: Louise Singlehurst - The Goldman Sachs Group, Inc. - Analyst : Hi. Good afternoon, everyone. Thank you for taking my question. I know we're short on time, so I'll keep it brief. You must be delighted with the B2B in the US, particularly that 90% growth coming from existing doors. I just wanted to check, and I know you've had a few questions on the channel mix, should we be expecting as we go into the back end, the fourth quarter and, obviously, early '25, for this same kind of shift in mix between B2B and DTC? And then I also wanted to check did DTC have any impact from product shortages? And should that get easier as the new capacity comes on board? 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. AUGUST 29, 2024 / 12:00PM, BIRK.N - Q3 2024 Birkenstock Holding PLC Earnings Call

Question: Jim Duffy - Stifel Financial Corp. - Analyst : Thank you. I wanted to talk about product and assortment. Really encouraging to see the uptake of closed-toe styles. As you look into next year, can you talk about SKU count and color proliferation? And I'm curious how you manage that complexity in your B2B channel.

Question: Jim Duffy - Stifel Financial Corp. - Analyst : I wasn't accusing you of naughty things. I'm more curious about as you grow the closed-toe.

Question: Jim Duffy - Stifel Financial Corp. - Analyst : I'm more curious, as you grow the closed-toe franchise and you work with specific B2B channel partners, do you have allocation strategies where you're segmenting distribution of certain products with some retailers and not others? Could you just please speak about that a little bit and how that works as the product range expands? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 29, 2024 / 12:00PM, BIRK.N - Q3 2024 Birkenstock Holding PLC Earnings Call