Birkenstock misses profit estimates as expansion plan hits margins

(Reuters) -Birkenstock missed quarterly profit expectations on Thursday as the German sandal maker's global expansion drive and production ramp-up compressed its margins, sending its shares down 12% in premarket trading.

The company has been opening more stores in newer markets such as India and Japan amid robust demand globally and to increase sales from its own channels, where products are typically sold at full price.

Birkenstock (NYSE:BIRK ) is also building additional manufacturing capacity and ramping up existing facilities such as at Pasewalk, Germany, to ensure adequate supply of its trendy cork-based sandals and closed-toe shoes.

As a result, gross profit margin dropped 220 basis points to 59.5% in the third quarter.

"They are investing for future growth and so they have introduced different factories and facilities to ramp up," BMO Capital Markets analyst Simeon Siegel said.

He added the market dynamics suggest a play-off of a slight missed expectations due to the recent rally in shares and not the health of the brand.

The company's shares have gained 24% so far this year.

Birkenstock posted an adjusted profit of 0.49 euro per share in the third quarter, missing LSEG estimates of 0.52 euro.

The company's revenue rose 15% in the Americas, while it increased 19% in Europe. Still, revenue growth eased from the second quarter, signaling some level of caution among consumers.

Birkenstock has increased its market share at retailers such as Nordstrom (NYSE:JWN ) and Foot Locker (NYSE:FL ), as the companies stock up their shelves with top-performing and favorite brands including Roger Federer-backed On and Deckers' Hoka.

Birkenstock's revenue rose 19.3% to 564.8 million euros ($626.76 million), slightly missing estimates of 565.2 million euros.



The company maintained its annual sales and core profit forecasts.

($1 = 0.9011 euros)

Source: Investing.com