From
Bloomberg
Published
29 August 2024
Shares of Birkenstock Holding Plc have gained about a third since its $1.5 billion IPO and are now under heavy pressure as it announces earnings on Thursday.
Investors have taken the prospect of a sell-off by private equity owner L Catterton in their stride. Despite a turbulent US debut in October, shares in the German sandal maker have risen 34 percent.
Analysts including Michael Binetti of Evercore ISI said expectations were high for the company’s quarterly report, with the Birkenstock brand shining in its post-summer talks with stores in the U.S. and Europe.
“It’s the only name we can call to many, many retailers, and no one says there’s a mistake here. We can’t find one,” Binetti said.
Birkenstock’s sales numbers will be crucial. Binetti, who has an above-average sales forecast for the quarter ending June 30, expects the company to increase its sales and adjusted Ebitda forecast for the fiscal year ending in September.
Citigroup analyst Paul Lejuez also expects Birkenstock to raise its annual outlook. He believes that growth in all regions will help quarterly results exceed consensus estimates for sales and profits.
Following the German sandal maker’s last report in May, shares posted a record one-day gain after earnings beat estimates and raised forecasts. The stock has since gained another 10%.
There is reason for caution ahead of the report.
“If you’re in the financial markets and you hear someone say there are no problems at all, you have to be skeptical,” said Binetti of Evercore ISI.
Despite the increase, Birkenstock shares are lagging behind those of other footwear makers. The stock has gained 26 percent this year, while Deckers Outdoor Corp. has gained 42 percent and On Holding AG has gained 76 percent.
Further sales by L Catterton, which still holds over 60 percent of Birkenstock’s outstanding shares, could hurt the stock. The company and a group of employees of the sandal manufacturer raised $756 million in a share sale in June.
“I would expect them to try to sell and the market will have to work its way through that,” said Binetti. He assumes that Birkenstock and L Catterton are in close contact and would carefully plan any possible deal.
Birkenstock’s gains follow positive results from its competitors. Earlier this month, On reported quarterly sales that rose 28 percent year over year as consumers flocked to the company’s running shoes. In late July, Deckers reported better-than-expected quarterly sales and raised its full-year profit forecast.
Strong results from other trendy footwear brands bode well for Birkenstock, said Dana Telsey, an analyst at Telsey Advisory Group, who raised her fiscal third-quarter sales forecast based on the resilience of brands like On, Hoka and Ugg this earnings season and their positive store traffic.
“Consumers are shopping for brands that offer newness,” Telsey said. “Birkenstock is one of those brands.”