Birkenstock Holding plc (Birkenstock (BIRK)) shares took a beating on Wednesday after the German sandal maker reported fiscal second-quarter earnings that fell short of Wall Street's expectations. The culprit? A messy cocktail of unfavorable currency moves, evolving U.S. tariffs, and ongoing instability in the Middle East that left a clear footprint on margins.
The company posted adjusted earnings per share of $0.59, missing the analyst consensus of $0.70. Revenue came in at $724.1 million, just a hair above the $723.9 million estimate. On a reported basis, sales grew 8%, but strip out currency effects and the number jumps to 14% — a sign that demand for those iconic cork-footbed sandals remains strong globally.
“In an overall challenging environment, we continue to see strong opportunities,” said CEO Oliver Reichert. “Despite the ongoing instability in the Middle East, persistent inflationary pressures, US tariff policy evolving unfavorably for us and continued F/X headwinds, we delivered constant currency revenue growth of over 14%.”
That constant-currency growth was broad-based. The Asia-Pacific region led the charge with 30% growth, followed by the Americas at 14% and EMEA at 11%. On a reported basis, APAC revenue rose 22%, EMEA 10%, and the Americas just 4% — a reminder of how much currency translation is weighing on reported results.
The margin story was less cheerful. Gross profit margin came in at 53.9%, down 380 basis points from a year ago. The breakdown: unfavorable currency translation accounted for 230 basis points of the decline, incremental U.S. tariffs added 90 basis points, and channel mix contributed another 30 basis points. Adjusted EBITDA margin also slipped to 32.1% from 34.8%.
Birkenstock isn't sitting still. The company invested about €21 million in capital expenditures during the quarter, mainly to expand production capacity and grow its retail footprint globally. It ended the period with €201 million in cash and cash equivalents, and net leverage ticked up to 1.7x from 1.5x at the end of September, which management attributed to normal cash seasonality.
Looking ahead, Birkenstock reaffirmed its full-year 2026 guidance. It still expects adjusted EPS of $2.22 to $2.40 (analysts are looking for $2.39) and sales of $2.759 billion to $2.808 billion (versus estimates of $2.740 billion). That suggests management sees the headwinds as temporary and is confident in the underlying demand.
Investors, however, weren't in a forgiving mood. Shares fell 13.74% to $32.73 on Wednesday, touching a new 52-week low. The market is clearly focused on the near-term margin pain, even if the long-term growth story remains intact.
