"Give a girl the right shoes and she can conquer the world," Marilyn Monroe once said. While the Hollywood icon was alluding to high heels, the German shoemaker Birkenstock has been conquering the world with ergonomically shaped sandals since the 18th century. Since last October, the traditional company has been trying to convince the stock market of its shoes. Initially, however, the debut on Wall Street was anything but successful, with the shares slipping on the first day of trading and dipping well below the issue price of USD 46. In the meantime, however, investors seem to be taking an increasing liking to the stock. At the end of May, the newcomer finally cracked the IPO price and is now even trading above the USD 50 mark.
Initially, investors did not find the stock market story surrounding the "eco sandals" particularly "sexy". There were also doubts about the company's growth opportunities. However, Birkenstock, founded in 1774, proved the market participants wrong. The first quarter as a listed company was already concluded with a strong increase in revenue of 22% to just under EUR 303 million, whereas analysts had only expected around USD 290 million. The operating result was a minor weak point. The adjusted EBITDA margin fell from 29.1% to 26.9%. However, this decline was due to investments in a high-growth future, such as the expansion of production capacities.
Greater diversification of its product range in the colder months ensures that Birkenstock is now also particularly buoyant in winter. In the period from October to December of the 2023/24 financial year (September 30), closed shoes, from clogs and sneakers to boots, even generated a higher share of sales than classic sandals for the first time. This strategy also bore fruit in the second quarter. From January to March, sales increased by 21.6% to EUR 481.2 million and once again exceeded estimates. Adjusted earnings per share of EUR 0.41 were also almost 14% above expectations.
But that's not all: the strong demand for the new closed shoes and the traditional cork sandals also makes Birkenstock more optimistic about the future. When presenting its interim report, the group raised its forecast for annual sales and profit slightly. The company is now forecasting sales of between EUR 1.77 and 1.78 billion, compared with EUR 1.74 to 1.76 billion previously. Adjusted EBITDA is expected to land in a range of EUR 535 to 545 million, compared with the previous forecast of EUR 520 to 530 million.
CEO Oliver Reichert, who took the helm in 2013, is encouraged by the fact that the company has been able to increase shelf space at its wholesale partners and that important retailers have bought more and brought forward volumes to an earlier delivery date. Sales through the company's own stores are also flourishing, with direct sales even increasing by more than 30% in the second quarter. The positive aspect here is that shoes can be sold well above the average retail price compared to wholesalers. According to industry experts, the Barbie boom - the sandals made an appearance in last year's hit movie - is not yet abating. According to Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, the brand is still a favorite of influencers.
In addition to focusing on its own stores, which also reduces the volatility of the business traditionally associated with wholesale, Birkenstock pursues a scarcity supply model. In order to maximize the profit margin per pair of shoes sold, demand is always at least 20% higher than the company's sales planning. This is intended to support brand health and sustainable growth. In addition, Birkenstock now caters to all consumer groups. Exclusive models such as jazzed-up versions of the Uji with the legendary cork-latex footbed cost more than EUR 400.
Leonteq has also structured two new soft-callable barrier reverse convertibles for all types of investors. With these two products, high returns can be achieved even if the stock market newcomer moves sideways. The profit opportunities are even higher than the average upside potential of the share. The analysts' consensus assigns the share a fair value of USD 61.50, which corresponds to an upside potential of 4.9%. Meanwhile, the CHF-denominated BRC on Birkenstock offers a significantly higher yield of 9.00% p.a. with a maximum term of 18 months. On the downside, the BRC leaves plenty of room for the underlying. The barrier is fixed at 59% of the starting value. The identical product in USD even promises a coupon payment of 13% p.a. Both BRCs have a soft callable function, which becomes active for the first time after 6 months and can lead to early redemption.
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