BirkenstockBIRK

Key highlights

• Asian demand surging: Revenue in the Asia Pacific region grew 30% after adjusting for currency changes, outperforming the rest of the business by growing twice as fast. This growth is important for long-term owners because the region also has the highest average selling prices and the highest share of closed-toe shoes, which carry better profits.
• Profit margins squeezed: The adjusted gross profit margin, which shows how much the company keeps after making its shoes, dropped to 54.6% from 57.7% a year ago. Most of this dip came from currency swings and 90 basis points of cost from new U.S. tariffs, which are taxes on imported goods.
• Direct sales slowing: Sales made directly to consumers grew 12% on a constant currency basis, a significant slowdown from the 30% growth seen in the same quarter last year. While the company added 5 new stores to reach 111 total locations, more of this quarter's 14% total growth came from selling to wholesale partners like sports stores.
• Closed-toe expansion: The company reported that its share of closed-toe products continued to expand this quarter, helping move the business toward its goal of having these styles make up 45% of total sales by 2027. Selling more year-round shoes helps the brand rely less on summer weather and seasonal sandal demand.
• Full year targets held: Management expects full year revenue to grow between 13% and 15% on a constant currency basis while maintaining an adjusted profit margin between 30.0% and 30.5%. Confirming these goals despite current headwinds from the Middle East conflict and U.S. tariffs suggests the company is confident in its ability to manage rising costs.

Our take: This was a resilient quarter that showed Birkenstock can still grow in a difficult environment. While higher costs from U.S. tariffs and currency swings hurt the bottom line, the 30% growth in Asia is a major win for the long-term case. The core brand remains healthy even as the business navigates temporary global trade pressures.