Shares of Birkenstock declined by 9% on Thursday following a warning from the German sandal manufacturer that tariffs will significantly impact its profit margins. The company, renowned for its iconic cork sandals, indicated that it anticipates a reduction in its annual gross margins by one full percentage point in the upcoming fiscal year, which ends on September 30, 2026.
Birkenstock projected adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least €700 million (approximately $821.8 million), with a margin between 30% and 30.5%. This represents a decrease from last year’s EBITDA margin of 31.8%. The company, which went public in New York in 2023, continues to conduct most of its production in Germany, making it vulnerable to a 15% tariff imposed by the Trump administration on goods from the European Union, established after a trade agreement with the bloc last summer.
Challenges and Strategic Responses
In response to the tariff impacts, Birkenstock has been implementing strategies to mitigate effects through targeted price increases, vendor negotiations, enhanced manufacturing efficiency, and product optimization. For the new fiscal year, the company expects revenue growth to slow to between 10% and 12%, translating to approximately $2.7 billion to $2.8 billion, factoring in some negative currency impacts.
Adjusted earnings per share are forecasted to fall between €1.90 and €2.05, slightly below the anticipated €2.08. In the previous fiscal year, tariffs negatively affected both the adjusted EBITDA margin and gross margin by around 30 basis points. Despite these challenges, the company reported a revenue increase of 16% to roughly $2.5 billion, surpassing estimates of 15%, which Birkenstock attributed to strong consumer demand.
The latest quarterly revenue reached approximately $617.2 million, exceeding expectations of $612.9 million. Oliver Reichert, CEO of Birkenstock, expressed optimism about the future, stating, “As we look forward into fiscal 2026, we see a continuation of the strong consumer demand and double-digit growth.” He noted that the company’s growth is currently limited by its production capacity and a desire to maintain product scarcity.
Future Plans and Analyst Concerns
To keep pace with demand, Birkenstock plans to open around 40 new stores globally in 2026 and initiate a share buyback program worth $200 million. Despite these initiatives, analysts at Bernstein advised caution regarding the company’s momentum. They highlighted that while Birkenstock has performed well in wholesale, its direct-to-consumer sales growth was only 11% in the last fiscal year, compared to 20% in wholesale.
“Lower fiscal 2026 guidance compounds these concerns,” Bernstein noted in a recent report, emphasizing the need for investors to remain vigilant about the company’s performance in the retail sector.
