BIRK

Overall Financial Performance

• Q3 2026 results exceeded management expectations, with 15% constant currency revenue growth hitting the high end of the prior 13-15% target range
• Adjusted EBITDA reached 242 million euros, up 11% year-over-year; excluding FX impacts, adjusted EBITDA grew 15% year-over-year
• Adjusted gross profit margin was 59.2%, down 130 basis points year-over-year due to 60 basis points of FX pressure and 70 basis points of incremental US tariff pressure; excluding these impacts, adjusted gross margin rose 10 basis points year-over-year
• Adjusted net profit was 134 million euros, up 15% year-over-year; adjusted EPS was 74 euro cents, up 19% year-over-year

Capital Structure and Shareholder Return

• Repurchased 230 million euros in shares during the quarter
• Completed refinancing and upsizing of long-term senior notes: repaid 428.5 million euros of 5.25% senior notes due 2029, and issued 900 million euros of new 4.5% senior notes due 2033, resulting in a 75 basis point reduction in average borrowing rate
• Ended the quarter with 694 million euros in cash and cash equivalents; excess cash from the refinancing provides flexibility for an additional 500 million euros in share repurchases or further debt refinancing, subject to market conditions
• Net leverage was 1.8x as of Q3 end, which reflects cash outflows from the accelerated share repurchase; excluding the ASR impact, net leverage was approximately 1.4x

Product Innovation and Portfolio Expansion

• Continued product innovation across both closed-toe and sandal categories, with new versions of core silhouettes (Naples, Boston, Arizona, Gizeh) launched in raffia, canvas, and premium leather as part of the premium 7074 collection
• Successful recent collaborations with Song for the Mute, Ada Error, and Repetto targeting growing consumer demand for ballet flats; the new Santa Clarita Mary Jane silhouette saw strong global demand
• Non-Boston closed-toe silhouettes grew more than 50% year-over-year, with Naples unit sales up more than 400% and Uti lace-up unit sales more than doubling; half of the company's top 20 silhouettes are now closed-toe, with 3 of these launched in the past 3 years
• In the sandal category, new seasonal silhouettes (Magyari, Madrid, Sienna) with updated designs (floral prints, new hardware) delivered strong growth

Retail and Digital Growth

• On track to hit the full year 2026 target of approximately 140 new owned store openings
• Owned retail revenue grew 50% year-over-year in constant currency, with high single-digit same-store sales growth
• Digital DTC growth accelerated, driven by improvements to the user experience (simplified checkout, enhanced content, expanded loyalty benefits) that improved conversion rates
• Maintained disciplined distribution strategy to preserve brand scarcity, protect full price realization, and manage channel growth

• Management raised full year fiscal 2026 guidance, now expecting 15% constant currency revenue growth (up from the prior 13-15% range, hitting the upper bound of the original target). A 350 basis point FX drag is expected for the full year, resulting in comparable reported growth.
• Adjusted EBITDA is now guided to be at least 710 million euros, the upper end of prior expectations. Adjusted EBITDA margin is expected to be 30.2-30.5%, which includes ~200 basis points of combined pressure from FX and US tariffs.
• Adjusted gross margin is expected to be 57-57.5%, unchanged from prior guidance.
• The expected full year effective tax rate is revised upward to 30-31%, from the prior 26-28% forecast, due to non-tax deductible one-time expenses related to the accelerated share repurchase and debt refinancing.
• Adjusted EPS guidance is maintained at €1.90-€2.05, which includes €0.15-€0.20 of FX pressure, and excludes the impact of any additional share repurchases beyond the ASR completed in June.
• Full year capital expenditure is expected to be 110-130 million euros, unchanged.
• End of fiscal 2026 net leverage is targeted at 1.6-1.7x, revised upward from the prior 1.3-1.4x target to reflect the impact of the completed ASR (excluding any additional future share repurchases).
• For Q4 2026, management expects constant currency revenue growth within the 13-15% annual range, with FX expected to be neutral (resulting in similar reported and constant currency growth). Tariff pressure is also expected to be neutral year-over-year in Q4 following the EU-US trade agreement.

Birkenstock generated total Q3 2026 revenue of 720 million euros, with 13% reported growth and 15% constant currency growth. Regional segment performance is as follows:

• Americas: 14% constant currency revenue growth. This segment is the company's most developed market, with B2B growth led by youth retailers and sporting goods channels, where partner sell-through was up over 20% year-over-year; owned retail grew 50% with 4 new U.S. stores opened, bringing the regional total to 21.
• EMEA: 15% constant currency (and reported) revenue growth, an acceleration from the prior quarter. DTC (both in-store and online) drove growth with 93% full price realization; 4 new stores were opened, bringing the regional total to 50. The Middle East conflict created localized pressure in tourism-dependent UAE, which was offset by strong domestic demand in Saudi Arabia.
• APAC: 23% constant currency revenue growth. Excluding the impact of a revenue recognition timing shift following the Birkenstock Australia acquisition, underlying growth was close to 30%. China delivered over 50% year-over-year growth with the highest global ASP for the brand; 5 new owned stores were opened, bringing the regional total to 53.

By channel:

• B2B: 15% constant currency revenue growth, consistent with recent quarters, supported by strong demand at key partner retailers.
• DTC: 16% constant currency revenue growth (an acceleration of 400 basis points from Q2 2026), outpacing B2B growth in the quarter. Within DTC, owned retail grew 50% year-over-year, with high single-digit same-store sales growth across the 124 total global owned stores after 13 new store openings in the quarter.

• The ongoing conflict in the Middle East has created higher freight and logistics costs, and negatively impacted tourism-dependent markets in the region, particularly the UAE. While the impact has been mostly offset by strong demand in other regional markets such as Saudi Arabia, management expects a slight impact in Q4 2026 following the resumption of hostilities, with full second half impact expected to be high single-digit millions of euros, below the original 10-12 million estimate.
• Currency depreciation of the US dollar, Canadian dollar, Indian rupee, and Japanese yen relative to the euro created an 180 basis point headwind to Q3 2026 revenue growth and an 8 million euro headwind to adjusted EBITDA; a 350 basis point full year FX drag is expected for fiscal 2026.
• Incremental US tariffs created 70 basis points of pressure on Q3 2026 adjusted gross margin, with combined FX and tariff pressure expected to hit adjusted EBITDA margin by ~200 basis points for the full year.
• The ongoing shift toward higher-ASP closed-toe products creates a moderate drag on gross margin percentage (40 basis points in Q3 2026) due to greater manufacturing complexity and higher labor input requirements for these silhouettes.
• The timing shift of revenue recognition for the Australia business post-acquisition created a drag on reported APAC Q3 growth, with peak Australian revenue now expected to fall in Q1 and Q4 aligned with local seasonal sell-through patterns.

Q: DTC growth outpaced B2B this quarter for the first time in two years. What drove this improvement, and is there upside to the new 15% full year revenue growth guidance? / A: DTC outperformance was driven by investments in both owned retail and digital channels. 50% owned retail growth came from an expanded store footprint and high single-digit same-store sales growth, while accelerated online growth came from product newness, better personalization and improved digital content that boosted conversion, especially in Europe where full price realization hit 93%. Both channels remain important, with B2B partners providing efficient access to new younger consumers. Management is confident in the 15% guidance, which reflects current strong momentum across all channels and markets.

Q: How did the Middle East conflict impact EMEA growth, what drove the regional acceleration, and have these positive trends continued into Q4? / A: The conflict still impacts the region, but less than in Q2, and pressure has been mitigated by shifted delivery routes and strong demand in resilient, non-tourism dependent markets like Saudi Arabia. A slight higher impact is expected in Q4 (a larger quarter for the region) after the resumption of hostilities, but full second half impact will be high single-digit millions, below the original 10-12 million estimate. Growth acceleration was driven primarily by resilient DTC demand across the region, with investments in marketing, content and in-store experience boosting traffic and conversion. Positive trends have continued into the first weeks of Q4.

Q: Pricing over inflation did not contribute to gross margin this quarter, and there is higher industry promotional activity. Is Birkenstock more promotional, and is there consumer pushback on pricing amid heightened price sensitivity? / A: Pricing decisions consistently aim to pass through inflation and protect margins, with timing differences creating the quarterly gap; there is still a 30 basis point benefit from pricing over inflation this quarter. While broader industry markdown activity has risen amid constrained consumer spending, Birkenstock maintains strong markdown discipline and continues to outperform on full price realization. Markdowns are only used to manage seasonal excess inventory, as 75-80% of the business is evergreen core product. The brand offers a broad range of price points from $50 to $1,500, remaining accessible for price-sensitive consumers, and there is no negative margin impact from current actions. Youth-driven back-to-school demand in the U.S. remains very strong.

Q: What is the gross margin difference between closed-toe and open-toe products, and what was the split of ASP vs volume growth this quarter? / A: Birkenstock does not disclose product-specific margin details, but closed-toe silhouettes require more labor and production time, leading to a slightly lower margin percentage even as they deliver higher ASP and higher total gross profit per pair. A 500 basis point increase in closed-toe share this quarter (driven by 50%+ growth in non-Boston closed-toe styles) created the 40 basis point gross margin headwind. These products are highly profitable, attract new consumers and expand usage occasions, and future margin expansion will come from insourcing production that is currently done by contract manufacturers as demand scales. ASP/volume growth split was in line with the company's 1/3 ASP, 2/3 volume target, matching planned capacity expansion.

Q: What is Birkenstock's plan for the additional $500 million in share buyback capacity, and what is the target leverage ratio for the business? / A: Management will remain responsive to market conditions when executing additional buybacks, and prefers to use available cash to purchase shares in larger transactions (such as secondary sales from the company's largest shareholder) to avoid further reducing the already small public float. However, the company will buy back shares on the open market if the board determines this is in the best interest of shareholders. There is no set fixed target leverage ratio; management will keep capital allocation options flexible to act in shareholders' best interests.