Birkenstock Holding plc 2026 Q3 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Birkenstock reported fiscal third quarter 2026 revenues of €720 million, growing 15% in constant currency, at the high end of their 13 to 15% target.
- EMEA revenue growth accelerated to 15%, Americas grew 14%, and APAC grew 23% in constant currency, with China growing over 50%.
- Own retail revenue grew 50% in constant currency with same store sales up high single digits; digital penetration increased by 500 basis points.
- Adjusted EBITDA was €242 million, up 11% year over year, with an adjusted EBITDA margin of 33.7%, down 70 basis points due to FX and tariffs but up 60 basis points excluding these impacts.
- Adjusted net profit was €134 million, up 15% year over year, and adjusted EPS was €0.74, up 19%.
- Gross profit margin was 59.2%, down 130 basis points year over year mainly due to FX and tariffs, but up 10 basis points on a like-for-like basis.
- The company repurchased €230 million in shares and refinanced senior notes at a 75 basis points lower rate.
- Inventory to sales ratio increased to 37% from 33%, driven by capitalized tariffs, FX effects, and Australia business consolidation.
- Operating cash flow was €247 million, with CapEx of €26 million invested in production capacity and retail expansion.
- Net leverage was 1.8 times as of June 30, 2026, up from 1.5 times a year earlier, reflecting share repurchase activity.
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Transcript
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Good morning, and thank you for standing by. Welcome to Birkenstock's third quarter of fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. The company has allocated 45 minutes to this conference call and will take as many questions as time allows. I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Megan Kulick, Director of Investor Relations.
Hello, and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of the Birkenstock Group, and David Zappolo, Chief Financial Officer of the Birkenstock Group. Today, we are reporting the financial results for our fiscal third quarter ended June 30th, 2026. You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com. Results have also been filed on Form 6-K with the SEC. We would like to remind you that some of the information provided during this call is forward-looking and accordingly is subject to the safe harbor provisions of federal security laws. These statements are subject to various risks, uncertainties, and assumptions which could cause our actual results to differ materially from these statements.
These risks, uncertainties, and assumptions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website at birkenstock-holding.com. We undertake no obligation to revise or update any forward-looking statements or information except for as required by law. We will reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with IFRS. Reconciliations of non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings. Now I'll turn the call over to Oliver.
Good morning, everybody. We performed exceptionally well in Q3 and once again demonstrated the strength of our brand. Given this continued momentum for fiscal 2026, we raised our guidance for revenue growth to 15% in constant currency and adjusted EBITDA of at least EUR 710 million. We delivered another strong quarter. Our revenue grew 15% in constant currency at the high end of our annual target of 13%-15%. EMEA growth accelerated to 15%. B2C growth accelerated to 16% in constant currency. Adjusted EBITDA margin on the like-to-like basis improved 60 basis points year over year. We achieved this despite an increase in costs, especially freight rates, due to the conflicts in the Middle East. We returned capital to shareholders by repurchasing EUR 230 million in shares. We also refinanced and upsized our senior notes at a 75 basis point lower rate.
We continue to grow in our wide spaces. APAC continued its high quality and D2C-led growth, especially in China. We accelerated the pace of retail expansion. We are on track to meet our target of approximately 140 doors by the end of fiscal 2026. Importantly, own retail revenue grew 50% in constant currency. Same-store sales were up high single digits. We saw a strong acceleration in EMEA digital growth, capturing more demand in our own e-commerce channel. Close out penetration was up 500 basis points, consistent with recent trends and in line with our goal to expand usage occasions for our footbed. Product mix contributed over half of the growth in ASP. We saw double-digit growth across all of our regions. Our Americas business was up 14% in constant currency.
Youth retailers and sporting goods stores continue to lead B2B growth, with sell-out at key partners in these channels up above 20% year over year. Within the Americas B2C business, we saw very strong retail growth as we continued to open new stores to capture more in-person shopping demand in our own doors. We opened four new stores in the U.S., bringing the total to 21. Growth in EMEA was 15%. In the largest, most important quarter for EMEA, we saw accelerating consumer demand, especially in our B2C business, both online and in-store, with strong full price realization of 93%. We opened four stores during the quarter, bringing the total in EMEA to 50. APAC grew 23% in constant currency. Excluding Australia, APAC growth was close to 30%. Australia's growth in the quarter was impacted by a shift in quarterly cadence as a result of the distributor acquisition.
We are very confident in our APAC target for the full year. Importantly, we had over 50% growth in China, the country with the highest ASP, a testament to our high-quality premium brand positioning in the region. Within the APAC segment, we opened five new own stores, bringing the total to 53. On the product side, we continue to innovate and drive newness in both closed-toe and sandals. This innovation is most visible with our premium 1774 collection. We introduced new raffia, canvas, and premium leather executions in Naples, Boston, Arizona, and Gizeh. We also collaborated most recently with Song for the Mute, Ader Error, and Repetto. A very successful launch targeting the female-led and growing popularity of ballet flats. This global movement also resulted in a very strong demand for the Mary Jane style, Santa Clarita, one of the newest mainline silhouette launches.
This once again demonstrates our ability to create a trend within our brand. While demand for the Boston remained very strong, other growth executions also performed exceptionally well. For example, the Naples grew by more than four times in units sold year over year. We also saw very strong growth in shoes led by Utti, a lace-up moc toe which more than doubled in units sold year over year. Overall, non-Boston closed-toe executions were up more than 50%. About half of our top 20 silhouettes are closed-toe, including three that were introduced within the past three years. In our sandal business, we saw the strongest growth from our newest seasonal executions, such as flowers, rivets, buckles, prints, and textiles. Growth was especially strong in our Mayari, Madrid, and Siena silhouettes. We highlight this newness most prominently within our D2C business, driving growth in our own channels.
We remain super confident in the strength of our brand. We are purpose-driven and see strong global demand for the footbed. We target a diverse range of consumers across geography, gender, age, and income. Our total addressable market is only limited by the global population. This gives us flexibility to drive growth regardless of global or regional macro conditions. We manage our distribution with discipline to maintain scarcity, properly segment the market, manage channel growth, and protect full price realization. Now I will pass the call over to Ivica to go through the quarterly results in more detail.
Thanks, Oliver. I am happy to share with you details of Birkenstock's performance for the third quarter of fiscal 2026, which exceeded our expectations. We generated third-quarter revenues of EUR 720 million, growth of 13% on a reported basis. Growth in constant currency was 15%, at the high end of our 13%-15% expectation. The depreciation in the US dollar, Canadian dollar, and Asian currencies like the Indian rupee and the Japanese yen compared to the third quarter of 2025 cost a 180 basis points headwind to revenue growth in the quarter. For reference, in the third quarter of 2026, the average euro to US dollar rate was 116, up from 113 in Q3 of fiscal 2025. We saw strong growth across all segments in the quarter.
The Americas segment was up 14% in constant currency, continuing the trend we saw in the first half of the year and reflecting the consistent strength in our most developed market. EMEA was up 15% in both reported and constant currency, a strong acceleration from Q2, driven by particularly strong D2C in Europe in both online and retail. We continue to see some localized impact in the Middle East related to the conflicts in the Gulf region, particularly in the U.A.E., which is highly dependent on tourism and expat demand. This has been offset by strong domestic demand in markets such as Saudi Arabia. Overall, the Q3 performance was better than anticipated. APAC was up 23% in constant currency. APAC quarterly growth rates are skewed due to the changed revenue pattern from the Australia business.
Prior to the acquisition, revenues were recognized when we delivered to the distributor before the peak season. We are now realizing revenues in line with the local market dynamics and seasonality. The Australian spring summer months are September to February, and D2C and B2B sell-out peaks in these months, which aligns with our Q1 and Q4, which differs from the revenue realization pattern pre-transaction. Therefore, Q3 Australia growth was lower versus last year, which, as one of our top markets in the region, had an impact on the APAC growth rate. Excluding the impact from Australia timing shifts, our APAC growth was close to 30%. We continue to expect APAC to grow at twice the pace of the other segments for the full year.
By channel for the year, B2B was up 15% in constant currency, consistent with the trends of the last few quarters on the back of continued strong demand at our key partners. D2C accelerated strongly to 16% in constant currency, up 400 basis points from 12% growth in Q2, and outpaced B2B in the quarter. Our digital growth accelerated very nicely compared to the first half of the year. Many of the actions we are taking to drive improved conversion are beginning to show results. This includes improved content, enhanced user experience, including simplified checkout options and expanded loyalty and member benefits. Retail was up 50% as we continued to see very strong performance from our new and existing doors. We added 13 new owned stores, bringing our total to 124. Same-store sales growth was up high single digits.
Adjusted gross profit margin for the third quarter was 59.2%, down 130 basis points year over year, mainly driven by 60 basis points of pressure from FX and 70 basis points of pressure from incremental U.S. tariffs. Adjusted gross profit margin excluding these effects was up 10 basis points year over year. While we continue to benefit from better capacity absorption, which contributed 50 basis points to adjusted gross profit margin, product mix cost saved 40 basis points drag on margin. The ongoing shift to closed-toe silhouettes comes with a slight margin drag due to the manufacturing complexity and higher consumption of production minutes. However, the shift is very beneficial for us as it yields higher ASP and higher gross profit per pair, despite the slightly lower than average gross margin percentage. Selling and distribution expenses were EUR 186 million in the third quarter, representing 25.9% of revenue.
This was up 30 basis points from the prior year, primarily due to accelerated retail expansion and some higher logistics costs as a result of the conflicts in the Middle East. General and administration expenses were EUR 33 million, or 4.5% of revenue, down 40 basis points year over year due to lower IT expenses and fixed cost leverage. Adjusted EBITDA in the third quarter of EUR 242 million was up 11% year over year. The flow-through of FX effects reduced adjusted EBITDA by EUR 8 million. Excluding this FX impact, EBITDA was up 15%. Adjusted EBITDA margin of 33.7% was down 70 basis points year over year due to 130 basis points of pressure from FX and tariffs. Excluding these impacts, adjusted EBITDA margin would have been up 60 basis points. This improvement is despite the increase in freight and logistics cost.
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