We came across a bullish thesis on Birkenstock Holding plc (BIRK) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on BIRK. Birkenstock Holding plc (BIRK)’s share was trading at $51.80 as of Feb 21st. BIRK’s trailing and forward P/E were 42.49 and 28.99 respectively according to Yahoo Finance.
A customer browsing a retail store, finding the perfect footwear for their casual outfits.
Birkenstock (BIRK) has positioned itself as a compelling investment for 2025, demonstrating strong financial performance and significant growth potential. The German shoemaker, known for its high-margin orthopedic footwear, has seen its share price rise approximately 20% since its IPO, slightly underperforming the S&P 500. However, its aggressive expansion strategy, particularly in Asia, and improvements in manufacturing efficiency make it an attractive opportunity for investors.
The company recently reported strong Q4 2024 results, exceeding expectations with revenue growth of 22% year-over-year to €455.8 million, beating Wall Street’s estimate of €445.8 million. Revenue growth also accelerated from 19% in Q3, defying broader retail sector struggles. Particularly notable was the company’s performance in Asia, where revenue increased 37% year-over-year (38% in constant currency), nearly doubling growth rates in the Americas and Europe. This signals the brand’s successful penetration into low-penetration, high-growth markets.
Birkenstock has also successfully expanded its production facilities, a move that initially compressed gross margins by about three percentage points in FY24. However, as utilization of these facilities increases, margins are expected to improve in FY25, pushing the company closer to its long-term gross margin target of ~60%. For context, Birkenstock’s FY24 gross margin stood at 58.8%, significantly outperforming industry leader Nike, which recorded a gross margin of just 43.6% in its most recent quarter. In addition to manufacturing efficiencies, Birkenstock has benefited from an 8% year-over-year increase in average selling price (ASP), with roughly half of the increase driven by product mix and the other half by price hikes.
Looking ahead, Birkenstock is projecting an adjusted EBITDA margin expansion of up to 50 basis points in FY25, with a target range of 30.8% to 31.3%, compared to 30.8% in FY24. This expansion is expected to be accompanied by high-teens revenue growth, reinforcing the company’s strong profitability trajectory. Additionally, the company’s disciplined retail strategy—prioritizing brand exclusivity over rapid store expansion—has led to a 26% increase in business-to-business (B2B) revenue as existing retail partners allocate more shelf space to Birkenstock products.
CEO Olivier Reichert emphasized on the Q4 earnings call that Birkenstock’s disciplined distribution strategy has enabled the company to maintain scarcity and achieve a 90%+ full-price realization globally. The company increased unit sales by 14% in FY24, with wholesale business growing 23%, primarily from increased order sizes and expanded product categories within existing retail doors. This suggests that Birkenstock is not only growing its footprint but also deepening its presence within its current sales channels.
On the profitability front, adjusted EBITDA for Q4 2024 rose 31% year-over-year to €125.0 million, with adjusted EBITDA margins increasing 190 basis points to 27.4%. While adjusted gross margins declined by 190 basis points to 59.0% due to production inefficiencies, operational efficiencies in sales and marketing offset these pressures.
The company has also made significant progress in deleveraging, with net debt falling to €1.01 billion, reducing its leverage ratio to 1.8x LTM adjusted EBITDA—1.5x lower than the previous year. This improved financial position enhances Birkenstock’s flexibility to invest in future growth while mitigating risk.
Beyond financials, consumer trends support Birkenstock’s long-term potential. A study by Civic Science revealed that Birkenstock fans are also luxury brand enthusiasts, with 29% showing interest in Burberry, 26% in Prada, and 22% in Versace, far outpacing non-fans. Additionally, 40% of Birkenstock consumers prioritize environmentally friendly products, nearly double the rate of non-fans (21%). This brand positioning aligns with broader shifts toward premium, sustainable fashion.
Birkenstock (BIRK) remains a compelling investment despite trading at a high-teens EBITDA multiple. At a share price near $55, it holds a market capitalization of $10.78 billion, with an enterprise value of $11.82 billion when including €1.01 billion in net debt. The company projects 15-17% year-over-year revenue growth, translating to €2.09 billion ($2.16 billion), and an adjusted EBITDA margin of 31.1%, leading to $672 million in EBITDA, reflecting an 18% increase. This places Birkenstock’s valuation at 5.7x EV/FY25 revenue and 17.6x EV/FY25 adjusted EBITDA.
While not a deep value play, its strong fundamentals justify this multiple. Revenue growth is driven by an expanding average selling price (ASP) and aggressive expansion in Asia, particularly China. Additionally, gross margin recovery is expected as new production facilities reach optimal utilization. However, a key risk lies in wholesale dynamics—Q4 wholesale revenue grew faster than direct-to-consumer (DTC), suggesting retailers may have overstocked ahead of the holidays. If sell-through disappoints, replenishment orders could weaken, impacting future quarters. Nonetheless, with a strong brand, pricing power, and geographic expansion, Birkenstock presents a well-balanced opportunity at its current valuation, offering steady growth and margin improvement potential.
Birkenstock Holding plc (BIRK) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held BIRK at the end of the third quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of BIRK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BIRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.