Birkenstock Holding plc (BIRK) had a pretty good quarter by most measures, but Wall Street wasn't buying it. Shares tumbled Thursday as investors digested a mixed message: strong demand and impressive growth numbers on one side, tariff pain and aggressive capacity spending on the other.

The comfort footwear company reported fourth-quarter adjusted earnings per share of 60 cents, handily beating analyst expectations of 40 cents. Revenue came in at $615.4 million, up 15% year-over-year and ahead of the Street's $606.7 million estimate. So far, so good.

The growth was broad-based, too. The Americas region grew 11% (18% in constant currency terms), EMEA climbed 16% (17% constant currency), and Asia-Pacific really showed up with 33% growth (38% constant currency). Every segment delivered double-digit gains, which is exactly what you want to see from a brand riding a wave of consumer enthusiasm.

"We opened 30 net new own-retail stores, bringing our total to 97, and APAC share of business increased 120 basis points to 11%," said CEO Oliver Reichert. The company is clearly leaning into its physical retail strategy while expanding its footprint in faster-growing markets.

Adjusted EBITDA rose 17% year-over-year to 147 million euros, with the margin expanding 40 basis points to 27.8%. These are the numbers of a business that's firing on all cylinders.

The Problem: Margins Are Getting Squeezed

Here's where things get uncomfortable. Gross profit margin came in at 58.1%, down 90 basis points from the same quarter last year. Management pointed to two culprits: currency translation took a 120 basis point hit, and incremental U.S. tariffs shaved off another 100 basis points. That's real money disappearing from the bottom line, and it's not going away anytime soon.

The company warned that both pressures will persist into fiscal 2026, with each expected to drag gross margin down by about 100 basis points. When you're dealing with tariffs and unfavorable currency moves simultaneously, there's only so much you can do to offset them without raising prices or cutting costs elsewhere.

Spending Big To Keep Up With Demand

Birkenstock invested approximately 85 million euros in capital expenditures during fiscal 2025, primarily to expand production capacity. That's a necessary investment when demand is outpacing your ability to make shoes, but it's also cash that's not flowing back to shareholders right now.

For fiscal 2026, the company expects capex to climb even higher, landing somewhere between 110 million euros and 130 million euros. Add to that plans to open roughly 40 new own-retail stores globally, and you've got a company that's spending aggressively to capture future growth.

The balance sheet is in decent shape. Birkenstock ended the year with 329 million euros in cash and net leverage of 1.5 times, down from 1.8 times a year earlier. The company also repurchased 176 million euros in shares—without those buybacks, net leverage would have been just 1.2 times. In September, it made an early repayment of $50 million on its USD Term Loan.

The Outlook: Growth Continues, But At A Cost

"As we look forward into fiscal 2026, we see a continuation of the strong consumer demand and double-digit growth," Reichert said. That's the good news. The less-good news is that the forecast came in a bit light.

Birkenstock expects fiscal 2026 adjusted earnings between $2.22 and $2.40 per share, roughly in line with the analyst consensus of $2.30. Revenue is projected at $2.689 billion to $2.747 billion, just shy of the Street's $2.75 billion estimate. Gross profit margin is expected to land between 57.0% and 57.5%, reflecting those ongoing currency and tariff headwinds.

The company also announced plans to repurchase up to $200 million in shares during fiscal 2026, subject to market conditions, which suggests management believes the stock is undervalued even after the selloff.

BIRK Price Action: Birkenstock Holding shares were down 10.56% at $41.50 during premarket trading on Thursday.