Q & A Highlights

Q: Can you speak to the drivers of the improvement in direct-to-consumer (D2C) growth, which outpaced B2B for the first time in two years, and the potential upside to the raised 15% top-line forecast? A: Oliver Reichert (CEO) stated that D2C outperformed B2B, driven by investments in owned retail and digital. Owned retail delivered 50% growth due to an expanded footprint and faster store openings, with same-store sales up high single digits. Online growth accelerated due to improved product newness, personalization, and storytelling, particularly in Europe, which saw a clear step-up in performance with 93% full-price realization. He emphasized that both channels remain important, with B2B providing efficient access to new, younger consumers. The 15% constant currency revenue growth guidance reflects the strength seen across channels and markets, and the company feels very confident about its momentum.

Q: Can you provide additional color on the key drivers behind the acceleration in EMEA growth, the impact from the Middle East conflict, and whether these trends have continued into Q4? A: Ivica Krolo (CFO) explained that while the Middle East conflict continued to have an impact, it was less pronounced than in Q2. The company mitigated pressure through adjusted delivery routes and strength in other markets like Saudi Arabia. The growth acceleration was largely driven by resilient D2C demand in both retail and online, benefiting from investments in upper-funnel marketing, content, and in-store experience. While warmer weather was favorable, improved trends were seen ahead of it and have continued into the first weeks of Q4. The total second-half impact from the conflict is now expected to be below the original EUR10-12 million estimate, at high single-digit millions.

Q: Pricing over inflation was not a contributor to gross margin this quarter. Were you more promotional, and how should we think about your ability to pass inflation through with pricing given consumer price sensitivity? A: Ivica Krolo (CFO) clarified that all pricing decisions are made to pass through inflation and protect gross margin, noting a 30-basis-point benefit from pricing over inflation this quarter. While the industry saw higher markdown activity, Birkenstock continued to deliver superior full-price realization and gross margin, which underscores brand strength and markdown discipline. Any selective discounting is for managing seasonal excess stock, centered on prior-season merchandise and broken size runs. The brand's broad price range (from $50 to $1,500) keeps it accessible, and actions taken have not negatively impacted margins, with gross margin up 10 basis points on a like-for-like basis.

Q: Can you help quantify the gross margin pressure from the shift toward closed-toe silhouettes and provide more color on the components of growth between ASPs and volume? A: Ivica Krolo (CFO) stated that while specific product-level margins are not disclosed, higher-ASP non-Boston closed-toe shoes and boots require more labor and production minutes. The over 500-basis-point increase in closed-toe share, driven by over 50% growth in non-Boston silhouettes (Naples units up 4x, Utti more than doubling), impacted gross margin. However, these products generate higher ASP and gross profit per pair. On growth components, the quarter was in line with the one-third ASP, two-thirds volume target, reflecting the continued build-out of production capacity.

Q: Is the elevated tax rate of 30% to 31% the new baseline, and why isn't the strong EBITDA outlook flowing through to EPS? What is the normalized finance cost with the new debt? A: Ivica Krolo (CFO) said the 30% to 31% rate is not the new baseline, expecting a recurring rate in the high 20s. This year's rate is elevated due to non-deductible, non-recurring, non-cash finance expenses from the refinancing and ASR. With a normalized tax rate, adjusted EPS growth would have been 23% in Q3, with a full-year impact of about EUR0.08 per share. Finance costs were impacted by one-time expenses (EUR11.7 million from refinancing, EUR10.6 million from ASR), which will not recur. However, the new EUR900 million notes will increase recurring interest expense by approximately EUR4.5 million per quarter, normalizing finance costs at around EUR25 million per quarter.

Q: Can you speak to the spread between inventory and sales, the composition of inventory, and clarify the Australia timing shift? A: Ivica Krolo (CFO) explained that over 70% of finished goods inventory is contracted, mostly core, evergreen products. More than half of the increase in the stock-to-sales ratio is attributable to FX and capitalized tariffs, with the other half largely from consolidating the Australia business and the timing of revenue recognition. The Australia shift is due to the transition from a distributor model to an on-floor business, which is now more bound to local selling cadence, with the spring/summer peak season aligning with Q1 and Q4.

Q: How is the order book performing in the US, and are you confident there is no buildup of inventory in the wholesale channel? A: Ivica Krolo (CFO) confirmed continued strong youth-led demand in the US B2B channel, with sell-through up over 20% year over year in Q3. Birkenstock remains a must-have brand for back-to-school, driving this youth-led growth. He reiterated that there is no change to the markdown approach; any increase in markdown activity would be immediately visible in gross margin, but instead, the company saw an increase on a like-for-like basis, indicating no inventory buildup issues.

Q: Can you update us on your plan to continue growing in China, and when will you start building new factories given the sustained CapEx investment? A: Ivica Krolo (CFO) noted that China was the largest market in APAC in Q3, with business up 50%, representing high-quality, retail-led growth with the highest ASP globally. The company will follow its Capital Markets Day roadmap, including raising brand awareness through new stores, local activations, and brand-building events. On capacity, the company is on track to deliver 10% unit growth, with the build-out of the manufacturing network in Wittichenau, Arouca, and Gorlitz progressing according to plan.

Q: How do you anticipate executing the additional EUR500 million buyback program, and do you have a target leverage ratio? A: Ivica Krolo

For the complete transcript of the earnings call, please refer to the full earnings call transcript .