Shares in sandal maker Birkenstock plunged more than 15 percent on Thursday after the company reported weaker-than-expected quarterly profit and its global expansion plans hit profit margins.
The Germany-based company reported adjusted earnings per share of 54 cents, below the 58 cents LSEG analysts had expected.
The retailer reported sales of $624.6 million, up 19% from a year ago but slightly below expectations of $625.6 million.
“Some of the Barbie craze from last year may have faded and some shoppers are clearly becoming more cautious,” said Susanna Streeter, head of money and markets at Hargreaves Lansdown. “Still, I don't see this being the start of a recession. Birkenstock is still alive and kicking in the fashion industry.”
Birkenstock said the lower-than-expected profit was due to a temporary squeeze on its profit margins caused by its rapid international expansion plans.
Birkenstock CEO Oliver Reichert said the company is focused on expanding its retail footprint as customers shift to in-store purchases.
Retailers are opening stores in new markets such as India and Japan to boost sales.
Birkenstock is also building new manufacturing routes and upgrading existing facilities, including a new factory in Pasewalk, Germany, which began operations last year.
Gross margins fell 220 basis points to 59.5% in the third quarter as the company focused on expanding production.
“They're investing for future growth, so they've brought in various factories and facilities to expand production,” said Simeon Siegel, an analyst at BMO Capital Markets.
The company's revenue grew 15% in the Americas and 19% in Europe.
Birkenstock continues to gain market share at major retailers such as Nordstrom and Foot Locker as demand for its trendy cork sandals and closed-toe “Boston Clogs” remains strong.
“We delivered our highest quarterly sales ever, driven by unwavering, growing demand across all segments, channels and categories,” Reichert said in a statement. “As a super brand, we are capturing the attention of our key retail partners and their consumers, who are becoming increasingly selective and more intentional with their spending.”
The company maintained its full-year sales and profit forecasts.
With post wire
