Birkenstock Holding PLC Q4 2024 Earnings Call Transcript

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

Question: Matthew Boss - JPMorgan - Analyst : Great. Thanks and congrats on another nice quarter. So Oliver, you cited 15% to 17% growth is the right pace for a healthy long-term business. I guess why do you think that's the right pace going forward? Or any structural change in drivers relative to the past decade of 20%-plus growth? And just near term, could you give us some color on what you're seeing in the first quarter relative to that 15% to 17% pace as you are cycling the toughest compare at 26% growth a year ago.

Question: Matthew Boss - JPMorgan - Analyst : I'd agree. Great color. Best of luck.

Question: Paul Lejuez - Citi - Analyst : Hey, thanks, guys. Oliver, can you give a little bit more color on 1Q, just how B2C versus B2B is performing? And how are you thinking about B2B versus B2C in F25 overall, how are you planning the business around that 15% to 17% in each of those segments? And then can you maybe talk about gross margin by quarter, assuming is not up year-over-year, but just wondering when you're looking for gross margin to inflect positive? Thanks.

Question: Paul Lejuez - Citi - Analyst : Thanks. And then, Erik, maybe any color on the gross margin?

Question: Paul Lejuez - Citi - Analyst : Thank you guys. Good luck.

Question: Michael Benetti - Evercore - Analyst : Hey guys, thanks for the detail here. Let me keep going on the gross margin and how we should think about it going forward into 2025. Are there any other unusual items we need to think about as we look out at the quarterly trends? I know there was a big reclassification in 4Q as we roll into 1Q, 2Q? Is that an appropriate baseline to think about a year ago? And then on revenues, I guess, to double click a little bit. Thanks for the color on first quarter. You mentioned the tough compares in the quarter. But obviously, the B2C compare is obviously very tough in the first quarter. Anything to think about between the two channels in the fourth quarter as that obviously affects margins. And then finally, on SG&A, I'm just curious if you could speak to the cadence spend this year? Is it hasn't really aligned very closely with revenue growth in the past and can have a pretty material difference on earnings quarter-to-quarter. It started growing in the mid-20s last year and ended the year much, much lower. So I'm curious as SG&A snapped back to mid- to high teens in the first half? Or is it best to think about it as like a high single-digit growth rate in the first half and it accelerates its revenues through the year?

Question: Michael Benetti - Evercore - Analyst : Okay. The SG&A? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Michael Benetti - Evercore - Analyst : Okay. Thank you very much. Appreciate it guys.

Question: Dana Telsey - Telsey Group - Analyst : Hi, good morning, everyone. As you think about, I believe, the payers were up 14% this year, ASP up around 8% this year. How are you thinking of that going forward, especially given the production capacity that's coming more online? What are you looking at? And it also sounds like the traffic in stores, did it continue to accelerate in the current quarter? What are you seeing, given the increased penetration of stores and the new store openings. And just anything more on wholesale in the Americas, what you're seeing on order trends? Is it still more from existing accounts? Or are there new ones, too? Thank you.

Question: Dana Telsey - Telsey Group - Analyst : 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. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Laurent Vasilescu - BNP Paribas - Analyst : Oh, good morning, Oliver and Team. Thanks very much for taking my questions. I wanted to ask a three part question, if I may. Last year, for fiscal year '24, you opened 20 stores. How many stores should we assume for this year? And should it be really weighted to Asia? That kind of leads us to the second question. I think, Oliver, you mentioned China is only 15% of your APMA region, so about EUR30 million still very small, but can you talk about the positioning of the brand in China and what do you think is the longer-term opportunity? And then lastly, you mentioned that the closed tote offering was roughly one-third of the business. Where do you think that goes for FY25 and longer term. Thank you very much.

Question: Laurent Vasilescu - BNP Paribas - Analyst : That's great to hear. And on a closed to offering, where do you think that goes for this year and over time?

Question: Laurent Vasilescu - BNP Paribas - Analyst : Very helpful. Thank you very much.

Question: Randy Konik - Jefferies - Analyst : Yeah, thanks a lot. Good morning. Just to unpack closed-toe a little more. Can you give us some a little flavor on the drivers within that category. Is that the Boston just getting a lot more breadth in the assortment that's driving a lot of that? Or are there other kind of views that are kind of driving. Can you give us a little more flavor of what's driving closed-toe? And again, do you think that, that could approach 40%, 50% of the mix going forward? And lastly, what is the difference in ASP on average of close to versus sandal? Thanks, guys.

Question: Randy Konik - Jefferies - Analyst : Great. Can I ask one more follow-up, maybe more for Erik. In an effort to help us properly calibrate our thoughts between B2C and B2B recognizing that in the first half of '24 B2C (inaudible) B2B, but in the back half, B2B-led B2C. In the 15% to 17% guide, can you just give us some, may qualify, do you think B2B is higher in growth than B2C? At least for the first half or for the whole year. Just give us just any kind of flavor you can give us between the channels and how they should grow relative to the 15% to 17% or higher or lower would be super helpful.

Question: Lorraine Hutchinson - Bank of America - Analyst : Thank you. Good morning. I just wanted to step back and talk about the APMA region over the longer term. What percentage of sales do you think it could grow to over time? And can you just talk about your progress on putting the distribution and partnerships in place for continued outsized growth?

Question: Lorraine Hutchinson - Bank of America - Analyst : I was just hoping for an update on your progress on building the partnerships and distribution that you need to continue that growth.

Question: Lorraine Hutchinson - Bank of America - Analyst : Thank you.

Question: Simeon Siegel - BMO Capital Markets - Analyst : Thanks. Hey guys, morning or good afternoon. Hope your families have a very happy holidays. Erik or Alexander, just as we think about the model that we can see from the outside, are you comfortable that we're past the restatements, regional P&L, et cetera? And then just higher level. Really great revenue, strong brand residents. Can you share some thoughts on how you're thinking about promotional environment at large, maybe its competition versus what you're seeing for you guys? And then just, maybe speak to the, how you clear the last chance on your side versus wholesale clearance. I know there's a breath step element there that we can see versus that you can see. So any color there, promo environment clearance approaches on relevant. And then how you're thinking about the progression of gross margin next year in the context of lapping (inaudible) when that becomes a good guide to gross margin. Thanks.

Question: Simeon Siegel - BMO Capital Markets - Analyst : That's really great. Really helpful. And then just, Erik, any way to think about when (inaudible) we ramp, we work through that ramp and it starts becoming a benefit to the line item?

Question: Simeon Siegel - BMO Capital Markets - Analyst : Great. Thanks a lot guys. Best of luck for the year ahead and great job.

Question: Mark Altschwager - Baird - Analyst : Thanks for taking my question and congrats on the strong quarter and year. I wanted to ask about pricing. It looks like price accounted for about half of the 8% ASP increase in 2024. Call it, 4%. Is that a good way to think about 2025 as well? And a similar question on mix. That was also a big driver. Should we expect much of a change there for 2025. 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. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Mark Altschwager - Baird - Analyst : Great. Thank you.

Question: Sam Poser - William Trading - Analyst : Thank you. Good morning, everybody. Thank you for taking my question and happy holidays. I just want to dig into the B2C business a little bit more, especially in the Americas, but in total. When, in the Americas, the B2C business represents probably around 40-plus percent of the sales. And of that, over 90% is digital. Will most of the B2C growth that happens in fiscal '25 happen out of Asia and Europe ex the stores and then those stores that open later drive incrementally. Is that the way to think about it?

Question: Sam Poser - William Trading - Analyst : And what would you call a mature digital penetration, I guess, in total. Is 40-plus percent mature? Is that like going to be a tough number to get ahead of higher than digitally and you really just need these stores, you need to just open the stores and have them really start producing. And I guess, over the long term, you're going to open 30-plus stores this year. In the long term, how many stores do you foresee owned stores do you foresee globally? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Sam Poser - William Trading - Analyst : Thanks and a subtle dig to your, to other companies. David, happy holidays again.

Question: Jeanine Stichter - BTIG - Analyst : Hi, thanks for taking my question. I just wanted to get more color on what you're seeing from a customer lens. Is there any change you're seeing in either repeat purchase behavior or a number of pairs owned? And also curious what you're seeing in terms of the customer demographic. Are you seeing a younger audience? Or I'm just curious what you're seeing there.

Question: Jeanine Stichter - BTIG - Analyst : Great. Thank you for the color and best of luck. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Jim Duffy - Stifel - Analyst : Thank you. I want to ask on cash flow and capital allocation. The 1.5 times net leverage guide at the midpoint of adjusted EBITDA implies just modest improvement in the net debt. Can you talk about free cash flow objectives? You've given us CapEx. Is there some sort of offset to cash generation in the working capital lines? Or does that imply some use of cash such as share repurchases? Thanks.

Question: Jim Duffy - Stifel - Analyst : Erik, at the midpoint of the EBITDA guide, 1.5 times net leverage guide implies like [EUR980 million] in net debt. at year-end. That's just [EUR25 million] or so better than fiscal '24 year-end. What are you thinking in terms of free cash flow? You've given us the CapEx I'm curious, is there some sort of offset that's impeding the progress on the net debt.

Question: Jim Duffy - Stifel - Analyst : Understood. Thank you so much.

Question: Erwan Rambourg - HSBC - Analyst : Hi, good afternoon, everyone. Thanks for taking my question and congrats on a great year. I just wanted to come back on APAC to understand if, what are the P&L implications of APAC? Is it gross margin accretive? Is it operating margin dilutive? And just maybe an anecdotal but moving from REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call APM to APAC, is that linked to particular managers or particular synergies by regrouping regions or countries together in a different manner than in the past? Thank you.

Question: Erwan Rambourg - HSBC - Analyst : Thank you. And just to check, I think you said China was a mid-teens contribution to APMA sales. So that's about 2%. Is that Mainland China? Or is that Greater China?

Question: Erwan Rambourg - HSBC - Analyst : Thank you.

Question: Jay Sole - UBS - Analyst : Great. Thank you so much. You talked a lot about closed-toe shoes and some of the newer products. You just talked about your injection molded sandal business and how that performed in 4Q and what you expect to see in that business next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 18, 2024 / 1:00PM, BIRK.N - Q4 2024 Birkenstock Holding PLC Earnings Call

Question: Jay Sole - UBS - Analyst : Got it. Thank you so much.

Question: Adrien Duverger - Goldman Sachs - Analyst : Hey, good morning and thank you for taking my question. Just a follow-up on the manufacturing that you just mentioned. In terms of your investments and the factory expansion plans, how are they progressing versus your expectation? And how do you expect the additional supply to evolve over the next two to three years. Thank you very much.