Birkenstock Holding plc Price & Performance (BIRK)

Hello, and thank you, everyone, for joining us today.

On the call are Oliver Reichert, Director of Birkenstock Holding Plc and Chief Executive Officer of the Birkenstock Group.

Eric Mossman, the outgoing Chief Financial Officer of the Birkenstock Group and Avizza Krollo, Chief Financial Officer of the Birkenstock Group, as of February 1. Klaus Baumann, Chief Sales Officer David Kahn, President Americas President EMEA Alexander Hoff, Vice President Global Finance will also join us for the Q and A. Today, we are reporting the financial results of our fiscal first quarter of twenty twenty five ending 12/31/2024.

You may find the press release and a supplemental presentation connected to today's [indiscernible] on our Investor Relations website at berkenstockholdings.com Birkenstock. We would like to remind you that some of the information provided during this call is forward looking and accordingly is subject to the Safe Harbor provisions of the federal securities laws.

These statements are subject to various risks uncertainties and assumptions, which could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release as well as in our filings with the SEC which can be found on our website at berkenstockholdings.com. We undertake no obligation to revise or update any forward looking statements or information except as required by law. During the call, all revenue growth rates will be cited on a constant currency basis unless otherwise stated. [indiscernible] will also refer to certain non IFRS financial information. We use non IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non IFRS financial information is not intended to be considered by itself or as a substitute for the financial information for prepared and presented in accordance with IFRS. Reconciliations of IFRS to non IFRS measures can be found in this morning's press release and in our SEC filings. The Americas, EMEA, and APAC, We filed a six ks on January 16 with a recast of fiscal twenty twenty three and 2024 segment results to align with the new reporting structure and to aid in your analysis of our results.

With that, I'll turn it over to Oliver.

Good morning, everybody. And thank you for joining today's call. Before I start the quarterly review, I want to thank Eric for his strong leadership and guidance over the past two years as we navigated the IPO process and first year as a public company, Eric, I wish you all the best in your future personal and professional life. And of course, I want to welcome Iitza Krollo, to the Berenstok family. EBITDA brings the operational background we need as we allocate our resources to the most attractive opportunities for both revenue growth and cost containment. EBITDA also brings the technical background to print Eric's efforts to level up our finance functions across [indiscernible] Including audit, [indiscernible] and FP and A. I look forward to working with you as we ride the next chapter of our success. Welcome, Ibita. We are proud to report very strong start to our fiscal 2025 with record first quarter results. Which came in ahead of our expectations, driven by very strong holiday demand for Birkenstock products. We delivered 19% revenue growth in the first quarter. Above the high end of our 15% to 17% target for the full year. Revenue growth was supported by double digit volume growth and mid single digit Growth in our B2B business benefited from very strong sell through throughout the holiday season.

And our DTC business also strengthened during the critical holiday shopping period as strong gifting demand for styles such as the Boston clock led to record traffic to our website. We are starting fiscal twenty twenty five much in the same way we exited fiscal twenty twenty four. With strong and growing demand from our core markets and products leaning into the white space growth opportunities we have identified, [indiscernible] the 600 basis points. Accounting for well over half of the revenue in the quarter. Our peak winter quarter During the first quarter, 12 of our top 20 selling silhouettes were closed toe. And six in traditional and boot category. We are very successfully turning Britain Birkenstock into a four season brand. Our APAC business grew at 47%. 2.5 times the pace of the overall business. And we opened four new owned retail doors during the first quarter. Bringing the total to 71 stores By channel, as expected saw continued strength in our wholesale business which grew by 30% during the first quarter of twenty twenty five. Once again, over 90% of the growth came from within existing doors as our partners continue to allocate more shelf space to the Bitnostock brands.

Our DTC business grew 10% a strong result when compared to the 30% growth in the year ago quarter. As we look to Q2 and the remainder of 2025, we expect more balanced growth between our DTC and B2B businesses. With D2C likely to grow slightly faster than B2B in the second half of the year we continue to add additional stores and invest in our digital business globally. Our membership base continued to grow nicely. Reaching 8,800,000 loyal members up nearly 30% year over year. Now let's move to a brief discussion of segment performance for the year. Within our largest segment, The Americas, we experienced strong consumer demand for our brand throughout the quarter. Especially around the peak holiday shopping periods. Revenue in the region was up 16% compared to the first quarter of twenty twenty four. Closed toe share of business reached nearly two thirds driven by the incredibly strong demand for clocks [indiscernible] like sandals that is becoming synonymous with the name Birkenstock and making us a year around wardrobe staple. B2B was especially strong as many of our strategic partners allocated more space to Birkenstock and experienced very strong holiday sell through many high demand styles.

Such as the Boston clock, selling out at most retail partners.

Americas D2C was is almost entirely from our digital business, strengthened late the quarter as shoppers sought out high demand holiday gifting items. Including clocks, home shoes and our Shielding executions. Especially at the cold weather Search for Birkenstock locks was up 70% over the critical holiday shopping period versus last year. Driving increased traffic to bitinstock.com Birkenstock. We expanded our physical reach out presence opening our Boston Newbury Street store during the quarter. The ninth location in The U. S. And we plan to add several additional stores later this year. In EMEA, we delivered growth of 17%. Which was growth based across all countries. This result stands out in the current market environment. Characterized by flat market growth macroeconomic challenges and uncertainty. As consumers switch to their winter wardrobe, they remained loyal to the Burton Stock brand. [indiscernible] 2.5 times faster than Sandals. Driving ASP Lace up, shoes and boots were up over 50% and increased share of business by 300 basis In our online channel, 16 of our top 20 selling styles were closed door. Shoes became the number two category in EMEA. Showcasing strong growth in this important expansionary category. In our B2B channel, we doubled share of business in shoes compared to last year.

And continue to see strong growth in our olive for springsummer twenty twenty five. We were pleased to see that Bitterschok was a top choice in holiday wish list. With sell throughs at our key retail partners increasing up to 30% year over year during gifting season. We opened a new store in Amsterdam, Netherlands during the quarter. Bringing our store count in EMEA to 35 and identified key locations throughout Europe for additional owned retail stores through 2025. The APAC region was again the fastest growing segment in [indiscernible] Growing 47%. 2.5 times the pace of the overall business and now representing 13% of total revenue up from 10.5% a year ago. Growth in the quarter benefited from an accelerated pace of store openings and earlier shipments to some B2B partners as we continue to make progress toward penetrating this significant white space for the Aligned with our roadmap and commitment to the region, we added two new owned retail stores bringing our total to 27 in the APAC region. We also expanded our strategic partnerships increasing our mono brand partner doors by 19 We expect the pace of openings to moderate the coming quarters. Leading to a more normalized APAC growth rate of double the group average.

Greater China made up about revenue and grew above segment average. We are still in the early stages of our market rollout there but are steadily building brand awareness [indiscernible] through our increased retail and online presence. It is a market where we see a tremendous opportunity for strong brands to take share. We opened our first owned store in Chengdu in October and will turn our successful pop up store in Shanghai into a permanent store later this year. I will now turn it over to Eric to discuss our financial results in more detail. Thanks, Oliver, and good morning, everyone.

Before I jump into the quarterly results, I want to thank you all for your partnership support and patience as we navigated the IBO process and first year as a public company together. I wish Ivesa and the entire Biggestog family continued success in the Now I'm happy to share with you one last time Wiproshark's exceptional performance for the first quarter of twenty twenty five which came in ahead of our expectations.

First quarter revenue were EUR $362,000,000 grew of 19% in both reported and constant currency. Above the high end of our 15% to 17% annual guidance for the year. B2B was up 30% and our B2C was up by 10% a strong result. E2C share of business was 49% in the quarter, down 400 basis points from a year ago. And B2B for the remainder of 2025. Gross margin for the quarter was 60.3%, slightly down 70 basis points year over year, primarily due to the higher B2B mix This year. Selling and distribution expenditures EUR118 million in the first quarter. Representing 32.7% of revenue down 130 basis points primarily due to the lower D2 penetration compared to last year. General and administration expenses were EUR 24,000,000 or 6.7% of revenue in the quarter down 120 basis points year over year. Primarily due to the operating leverage from strong revenue growth and lower IPO related expenses. EBITDA in Q1 of EUR102 million was up 25% year over year and margin of 28.2% was up 130 basis points year over year due to the strong improvement in SG and A. Adjusted net profit of EUR 33,000,000 in the first quarter was up 99% and earnings per share was up 100% from the year ago.

Cash flows used in operating activities during the first quarter was EUR 12,000,000, improvement of €34,000,000 year over year. This was driven by the strong EBITDA growth combined with improved working capital efficiency. We ended the quarter with cash and cash equivalents of EUR $299,000,000 down from EUR $356,000,000 at the end of fiscal twenty twenty four. Due to the normal seasonality of our working capital usage. We improved our inventory to sales ratio to 39% down from 42% in Q1 twenty twenty four Our DSO for the quarter were 15% down from 19% a year ago, despite the higher B2B mix. During the quarter, we spent €90,000,000 in capital expenditures Due to the seasonality of our working capital, I'll now hand the call over to Ivesa discuss the outlook for the second quarter and remainder of fiscal twenty twenty five. Thank you, Erik, and I appreciate your support during this transition. As we look forward to the remainder fiscal twenty twenty five, we believe we are well positioned to meet our stated growth and profitability objectives For the remainder of 2025, we see more balanced and healthy growth from both. E2C and B2B with B2C coming in slightly ahead of B2B overall for the year.

We are reiterating our growth and margin targets for the year. We forecast revenue growth of 15% to 17% constant currency gross profit margin should improve year over year as we increase utilization and efficiency at our production facility moving closer to our 60% target. And we expect adjusted EBITDA margin in the range of 30.8% to 31.3% an increase of up to 50 basis points compared with 2024. CapEx are expected in the range of €80,000,000 and we see net leverage of approximately 1.5 times year end. As you know, the second quarter is an important quarter [indiscernible] To our partners for the 15% to 17%. The mix in Q2 is more heavily weighted to B2B so we expect the usual seasonal decline in gross margin and increased EBITDA margin when compared to the fiscal first quarter but all within the context of our full year margin guidance. And now I'll hand it back to Oliver for his closing remarks. Thanks, Ibita.

We are off to an excellent start in 2025 with strong double digit revenue growth. Excellent margins and success leaning into the white space areas we highlighted over a year ago.

Our brand strength was evident as Britain's Birkenstock proved to be one of their clear winners this holiday season that strength continues with a very strong order book into the important spring summer season. We are leaning into the strong consumer demand in both our B2B and D2C channels. And continue to carefully execute our proven engineered distribution strategy to drive ASP growth, ensure healthy stock levels and maintain strong full price realization. We are entering the next chapter of growth as we tap into our white space opportunities and see a long runway for growth in all three. Closed toe shoes, owned retail and ABAC.

Globally, we are increasing brand awareness. Educating the consumer [indiscernible] and growing our retail and digital presence to gain share. I would now kindly ask the operator to open our Q and A session. Thank you. Thank you. At this time, we'll be conducting a question and answer session. And the first question today is coming from Jay Sole from UBS.

Jay, your line is live.

Great. Thank you so much. I have one question in two parts. The first question is, Albert, the quarter was really strong. Why aren't you raising the guidance for the full year given the strong beat that you had in first quarter?

Secondly, can you address the strong B2B growth that you had What drove the strength? And why will the growth be more balanced between channels as you look over the rest of the year.

Thank you.

Hello, Jay. Thank you for your question. Yes, we are off to a great start into 2025. But keep in mind that Q1 is the smallest quarter of the year. In 'twenty four, it was made up only 17% of the total annual revenue, So we still have over 80% of the year ahead of us.

Also, we have a very strong order book But keep in mind that there is a lot of macroeconomic uncertainty Interest rates, currency movement, tariffs, the inflation in The U. S. Is over 3%. In the Eurozone, we're facing an inflation of 2.5% at the moment. And all this is before the impact of any new tariffs.

So the potential impact on the global economy in global consumer is highly uncertain.

And we have a big DTC business in the second half of the year which is not that good foreseeable.

Compared to other book we're playing in the wholesale.

So while we are off to a great start in business, it's strong [indiscernible] [indiscernible] We think it's prudent to stick with our current guidance for the year [indiscernible] coming back to your second question or second part of the question, our sell through was up around 40% full price. 40% full price.

With an average price increase of around 10% I think these are very strong metrics for the wholesale business.

And the average inventory was only up 10% So stock to sales ratio is very healthy. Our B2B business continues to be a very strong indicator of the overall end user demand especially in an environment where consumers especially the younger target groups, are returning to in person shopping.

So this is a great wholesale business. And we love our wholesale business Be assured our demand is super strong and we will never, never compromise our distribution strategy pull to push.

Don't expect Going forward, B2C, we see more balanced growth as we accelerate our own global retail store growth our own retail business was up 70% in the quarter on a small base But we're also seeing more global opportunities to grow our digital business Thank you. Great. Thank you so much.

Thank you. And the next question is coming from Laurent Vasilescu from BNP Paribas.

Laurent, your line is live. Good morning. Thank you very much for taking my question. Eric, thank you for your leadership and support over the last eighteen months. And I wish you the best in the future. Avita, welcome As you look at the opportunity to join Birkenstock, what was it that excited you most What do you see as the biggest challenge and how do you plan to address that And then I have a quick following up on the model. Thanks, Laurent, for the question and I'm looking forward to be working with all of you in the future. It's a lot about the opportunity at Bergenstock, which is very attractive to me. To state the obvious, we have significant growth opportunities for the company over the next decade and beyond. It's really rare to find a company with a two fifty year old legacy that still has such substantial growth ahead. And that's very exciting. [indiscernible] think it's a great fit for me I love the brand. I love the history. Its purpose and it's a real and just really looking forward. To help to guide the company through the next leg of growth together with a great team.

On the biggest challenges well, the challenges obviously any rapidly growing company is facing. So making sure that systems, infrastructure, and team are scaling in line with the business. So keeping up with the growth, that we're seeing is certainly a big challenge. Be leading in terms of technology, processes, and communications. We did use this I'm coming to a company with a very, very strong foundation and the resources to ensure the proper investments are made and scale the business right away. Very clear. And then it's good to hear that DTC and B2B should be balanced growth going forward. Should we assume that for the second quarter? And should we overall assume 2Q overall sales could be roughly in line of that revenue range of $15,000,000 to $17,000,000 or should we assume it's a little bit higher or a little bit lower?

Hi, Lauren. It's Megan. I'm going to have to ask you to repeat question. We had a siren going by right when you were in the middle of the call. I'm sorry to hear that. Yes.

Okay. Hopefully, there's no fire. Yes.

So the quick question here is, it's great to hear that B2B and DTC will have balanced growth for the year. I think that's a big debate out there in the investment community. But just curious to know should we assume that for the second quarter? And overall, I think last quarter you called out for 1Q to be on the slightly higher range of 15% to 17% growth. Should we assume a certain range for 2Q for overall sales Thank you very much.

Hey, Laurent. This is Alexander speaking. [indiscernible] Overall, we said we want to achieve a balanced growth between the channels B2B and B2C on a full year level 2025. We also called out that there are some fluctuations between the quarters. This can always happen depending on how we ship But overall, with that, outperformance in B2B in the first quarter, it is fair to assume that we expect over the next quarters cumulative stronger growth in B2C compared to B2B.

Okay. Thank you very much. Best of luck. Thank you. The next question will be from Mark Altschwager from Baird.

Mark, your line is live.

Great. Thank you for taking my question. And, Eric, we wish will. So, you delivered some nice EBITDA margin expansion in Q1.

Well ahead of the run rate for the annual guide with improvements in SG and A. I was hoping you could talk us through the drivers here and the implications for the balance of the year. And could you see upside to the guidance for 50 basis points of EBITDA margin expansion given the strong start that you delivered? Thank you.

Hey, Mark. This is Alexander. Great question, first of all. And let me guide you a little bit through the first quarter as a starting point. Essentially, the biggest driver of the improvement in the EBITDA margin was really the shift in channels in the quarter. So as you recall, we have always said that our B2B channel has a significant lower gross margin compared to D2C. But it has a slightly higher EBITDA margin. And this is what we are now seeing as a result in the First quarter because those channels, the D2C, it channels have a much higher selling and distribution expenses compared to B2B. So with the stronger B2B growth in the first quarter compared to B2C, this had an impact on the S and A comparison year over year. And as I said in the first question, as we look into the full year, 25% and the more balanced growth between the channels we expect the upcoming quarters not to be impacted in that way how it was in the first quarter. Based on those trends, there should be less an impact on SG and A as well as EBITDA margin year over year in the next quarters guidance in EBITDA margin of up to 50 basis points for the full year, and you shouldn't assume that the 130 basis points improvement in the first quarter carries through the remainder of the year.

Thank you. And maybe just a quick follow-up there related to gross margins then. For the first quarter, you did not call out incremental pressure related to the facility expansion. So it sounds like that ramp must be going well. And then with the channel dynamics you talked about, perhaps less of a pressure on gross margin in the second quarter. So I guess as we put all that together, should we expect gross margin expansion beginning in the second quarter?

Yes, you are right. We didn't call that out in the first quarter any impact from capacity expansion. It's quite the same than last year. So it has not an incremental margin impact in the first quarter of this financial year.

And as we said before, we are expecting that the second half of the year, we expect a positive impact From the utilization of our factories So you can at a full year basis expect a modest improvement in gross margin.

Great. Thanks again. Thank you. The next question is coming from Matthew Boss from JPMorgan.

Matthew, your line is live.

Thanks. Congrats on another nice quarter.

So Oliver, maybe could you elaborate on key drivers of the revenue upside in the first quarter, maybe particularly the direct to consumer acceleration that you cited to exit the quarter. And then just relative to the larger picture comments on macro uncertainty, I guess, have you seen any softening at all in demand momentum post holiday in the second quarter? And just anything you're seeing in terms of visibility for the back half aside from just the larger picture? [indiscernible] Uncertainty.

Hi, Matt. Thank you for the the question. I'll take the first part. We don't see any at all. I mean, we believe that the brand demand is super strong globally, by the way. I think the ultimate truth is in wholesale, if you perform as we do perform in wholesale, with this full price realization very high sell through ratio, it's It's an unbelievable strong demand out there. The people and the customers, they should decide where they want to shop our product. And they do it, especially younger target groups, But Nicole and David can give you some more detailed color than this we see a very strong order book. We see very strong demand globally. So we're fine on the Hey, Matt. This is Nicolas. Thank you for your question. I'll touch a bit on the growth drivers in Q1. So as we heard in the earlier part of this call, it is really a broad based demand across all regions. So that's something that we have to consider that we're very pleased with. Particularly, we had a very strong holiday and gifting season. So as consumers even in the areas of our globe where it's was getting colder, as they switched into the winter wardrobe, they really remained loyal to us.

We are becoming much more of a full year brand. Furthermore, I'd really like to share that we see a very strong growth contribution from the white space opportunities we shared during our IPO. Crystal, as we shared earlier, is going at twice the speed compared to our overall growth. The share of business is up 600 basis points and now making up more than 5050% of revenues.

The Americas region, it's two third of the business, driven by closed tow. In EMEA, our online business is the same, two third of the business is closed toe. Retail is our fastest growing channel. And be reminded that we just opened four new stores, totaling now at 71 stores globally. And the bigger part of expansion is still to come. So we're bringing this 71 stores closer to 100 in this fiscal year. So you see us opening many more stores again across all all the regions. And finally, I want to touch on the APAC. Region. Again, a very, very strong growth strong results with accelerated partner store openings We opened 19 partner stores and that's also paying into the B2B revenue recognition. And we generally see an increasing brand awareness in that region that results in strong demand, especially in higher price points.

That's also something really worth mentioning compared to other brands.

Thank you. And the next question is coming from Randy Konik from Jefferies. Randy, your line is live.

Hey, good morning. Maybe give us some perspective on the amount of allocation improvement or space shelf space gained that you got in 2024, maybe dimensionalize that for us and maybe give us some perspective on what you see in 2025. And maybe kind of characterize how you also see pricing versus units looking into the year to come up with your guidance on overall top line And then relatedly, maybe just give us some perspective on APAC. It's obviously growing extremely well. And it's early days. Just maybe give us some, again, perspective on where you are with allocation there. Wholesale partners, etcetera, just the building blocks of that that business or that geography would be super helpful.

Hey, Randy. This is David. Thanks for the question. As you know, the word allocation ties to the term engineered distribution we use. We are a true sell through company, not a sell in company. So as we take share, we manage the allocation to make sure the stock to sales ratios are always healthy. As Oliver said when he answered the opening question, when you're delivering selling results in an aggregate of retail partners, that's 30% to 40% and above 40% increases on an average stock level that's only up 10% your stock to sales ratios are incredibly healthy. Are we and where we're taking share goes beyond our traditional sandal category. I think that's the beauty of this. The growth rate in closed toe shoes is twice the rate of the rest of the of the collection In The Americas, closed toe shoes was two thirds of the revenue in the quarter. So you're seeing a much broader based acceptance of the brand clogs are leading the way, but it's clogs, it shoes, it's shearling, and sandals. So very broad based success in the quarter and we continue to allocate against [indiscernible] And as Oliver said in the opening question, we will never compromise the allocation the scarcity, So, suffice to say, as much as the demand increases, and as much as there's an appetite in the wholesale market to increase our shelf space we manage that very strictly.

Randy, this is Alexander. Second part of the question brief and quite straightforward. So we expect and reiterate two thirds unit growth and one third in ASP. And ASP will continuously driven on the one hand by product mix with consumers continuously buying into more higher price points and secondly, like for like licensing. And with a balanced growth between channels for 25%, you should not expect an impact from channel mix. Just on Asia? Hi. Can you just repeat the question on Asia?

Just give us some just further give us some perspective on where we are with that. Obviously, we're Where are we with distribution? Where can we expect to go with distribution over the next couple of years? That'd be super helpful. Hello, Andy. This is Claus.

So as we always said, we are expanding in a mixed model.

So we are having partners in Asia running mono brand stores. As you have seen, we are very strong in opening our own fleet in B2C. And also this season, we had the first holiday season with this setup. We said that they're coming in very strong. So we will keep the pace of opening but very in a very good premium way. And important is to really do the brand building the brand awareness and being strong on spreading the word of the brand into territory [indiscernible] the right message here.

Thank you. The next question will be from Louise Singlehurst from Goldman Sachs. Louise, your line is live.

Hi, good morning, everyone. Thanks for taking my question. Just wanted to have a commentary with regard lots of new product coming through on the new launches and the opportunities for price mix that that might provide for you as you work your way through 2025, but also looking further down the line. The new products, are they just give us a bit of color in terms of the appetite from the consumer? Is that more of a loyal customer coming in and broadening out the Berkenstock range at home? Or is that a good new customer acquisition tool as well? That'd be very helpful. Thank you.

Hey, Louise. This is Nico again. I can give you some color on the latest launches in Q1 in EMEA.

So we are very pleased to see that in EMEA shoes, one of our expansionary categories had a record quarter. So as Oliver was referring to, majority of the top 20 and the top 10 selling styles was closed shoes, but also boots at a price point of €200 So how we usually spare has that success is we venture into our GTC business where we have the most loyal customers and what we see is we can easily migrate them into new styles, into higher price points and that's also what we saw with the shoes category. Now you might recall that we also doubled the order intake because what we do is for B2B, we take the success from B2C bring it into B2B We doubled the order intake for Auto Mini 24 on shoes. And we're just seeing now very promising sell through results. This is how we expand with our expansionary categories. Starting with PTC with our most loyal customers, then going into B2B to reach a more critical mass and drive penetration in the market and there's more to on this one.

Thank you. Thank you. The next question will be from Paul Lejuez from Citi.

Paul, your line is live.

Hi. This is Kelly on for Paul. Thanks for taking your question.

Just wanted to clarify a comment from earlier on the gross margin. Did you say the capacity ramps of your pass the walk facility was still a drag in 1Q? Any way to quantify that? I believe it was only a 50 basis point drag in 1Q last And just given it was a pretty significant headwind to gross margin, In 2Q last year, should we expect that to flip to a tailwind beginning in 2Q? This year? And then just any other if you could just give us any more detail on the puts and takes, the gross margin 1Q, how much did pricing benefit gross margin and what we should expect for pricing going forward?

Thanks. Hey, Kelly. This is Alexander speaking. Yes, on the gross margin in the first quarter, You're right, it was still an impact, but the same impact than the previous year's first quarter. So not an incremental pressure on margin. And we expect in the back half of the year So starting second, third fourth quarter to be a little bit positive against that 150 basis points on full year or the year 'twenty four.

And we confirm also that we want to completely off that this 150 basis points margin pressure in the third quarter of twenty twenty six. So you will see a constant improvement quarter by quarter on the gross margin piece from the underutilization from the Parzival factory.

Just on pricing, Yes. On pricing, I mean, we are regularly reviewing our pricing structure. I mentioned before that ASP will be not only driven by product mix, but also by like for like pricing. We are doing it very surgically. Those kind of adjustments it will be in the single digit low single digit amount each year. We are doing style by style.

Not on average for all of those products depending on how we want to price each of the products.

And yes, on inflation, so clearly the goal is to offset Inflation by pricing, but we are also working internally on cost structures and supply chain to further gain shares here.

Got it. And just one follow-up on just the flow of the year from the top line perspective. Is it fair to assume that even given we're coming biggest quarters here in and the share of closed toe it seems given as we move to spring becomes a lower penetration of the assortment. Will we assume 2Q, 3Q sort of towards the low end of the guidance range Just any color you could provide there would be helpful. Thank you.

Yes. We are not guiding specifically for quarters, Kelly. I think we've given a little bit of guidance around how we see margins in the next quarters we are not specifically guiding quarters.

Got it. Thanks. Best of luck.

Thank you. The next question will be from Simeon Siegel from BMO. Simeon, your line is live.

Thanks, everyone. Nice broad based growth. Eric, it's been great getting to know you best of luck in the next chapter. And welcome aboard. Looking forward to meeting you in the future. So, we can hear your comfort in the health of the B2B business. In the qualitative comments, but you also offered some quantitative color. I mean, you brought up the improving DSOs in your remarks. Any further color you could share on competition of receivable health about how much of the B2B growth has come from deeper going deeper within existing doors versus new. David, I assume from your comments, safe to say your retail partners would still love to take more willing to give them more. So anything further on that would be helpful.

Yes. Hey, Simeon. Just a quick comment on that. As we've said, 90 plus percent of our whole doors So that indicates that on this growth level, it's clearly taking share and it's clearly expansion from our our basis business. So the stronger the business is, the more we continue to expand slowly and very deliberately. We had a very, very strong holiday sell through and the business was strong going into the holiday season. So obviously, results correspond to future order book. And demand. And clearly, you're absolutely right. There's probably not a retailer out there that would not want more product. And then it's contingent upon us to determine how much they get. And in what quantities and how the brand shows up at retail. [indiscernible] could be very intentional right now about where we're taking our business and continue what we've been doing based on the results.

That's great. And then would you guys be able to quantify the gross margin drivers this quarter all anymore? Just thinking through product, geo, channel mix shifts, higher ASP, etcetera? Anything in terms of how Q1 played out. Hi, Simeon.

This is Alex Sittner again. Yes, I think I touched a little bit already on the first quarter gross margin. So it's quite straightforward in this quarter. So the really the biggest part of the 70 bps decline is relating to the change of the channel mix with 400 basis points less B2C penetration that gives you approximately the gap you're looking for.

And yes, all other drivers have been not material. So we managed to offset inflation. So this was not a big driver targeted price actions product mix was not a big driver. So essentially, it's It's [indiscernible] then the channel mix.

Great. Thanks a lot. Thanks a lot guys. Best of luck for the rest of the year.

Thank you. And we would like to remind participants in the interest The next question is coming from Dana Telsey from Telsey.

Dana, your line is Thank you. Good morning, everyone. Nice to see the progress. As you've touched on faster DTC growth in B2B as we go through the year. Any more perspective on e commerce versus owned stores? How you're seeing current store opening performance versus the base and how you're thinking about store openings by region this year?

Thank you.

Hey, Dana. This is Nikko speaking. It's a great question. I'm happy to take the question. So as I touched on, retail is the fastest growing channel and will remain the fastest growing channel when we look into the future. We operate 71 stores. We just opened four stores in this quarter.

We're going to bring the total number closer to 100 this year.

So we will be opening many, many stores What we see is the newly opened stores, they deliver higher ASP, a better conversion rate and a better square meter productivity. So it's a proven store model that we are not looking for locations at a triple location. We are going to this site suite next to the AAA location. We operate stores at 120, 150 square meters The CapEx payback is and will be at a bit twelve and eighteen months. So it's a really highly proven store model and we definitely see success On some locations that we have secured, so there will be locations across all three regions where we open the stores there will be any store in London, another store in Paris, We will also look into the Spanish region, but you'll see opening every quarter dynamically growing into every region. So on the online business, we do believe we have a very strong online business. As you know, it's 90% of our DTC. And we still do see significant growth opportunities from a regional Just be reminded, in our Asia region and the APAC region, we just opened four new countries as new.com destinations. Our business in dot com in Middle East Africa is just two years old, so really in its infancy and you see further growth coming from those from those regions.

Just to close off with new customer audiences, As we expand with expansionary categories in our online business, and we just shared the great results there, we also acquire new customers and that's going to continue also into the next quarters and the next two years. So we are very, very positive about the DTC and the outlook that we have with this channel.

Question will be from Lorraine Hutchinson from Bank of America. Lorraine, your line is live.

Thank you. Good morning. As you run scenarios around potential tariffs into The U. S, What levers are you considering? Do you plan to offset any potential tariffs with pricing?

Thank you, Lorraine, for your question. It's Iluto speaking. As you know, our final assembly is entirely in Germany. So we would only be impacted by tariffs on imports from Germany. And the good news is here that we have historically had the ability pricing action. [indiscernible] That offset these inflationary pressures including tariffs, without any impact on our business. This is something that we will obviously monitor closely [indiscernible] and pricing adjustments. So it's not about just pricing adjustments. But it's overall for us to gain efficiency through cost initiatives. One point I want to mention in addition is that besides we may see a couple of indirect impacts as tariffs may drive inflation generally and may impact also consumer sentiment which certainly adds to the uncertainty over the mentioned in his initial [indiscernible] Overall, we're watching that Thank you.

Thank you. The next question is coming from Michael Panetti from Evercore ISI.

Hey, guys. Thanks for taking our question and all the detail on the call here. Congrats on a great quarter. Just to double quick on the earlier question on gross margin. I think in second quarter last year, there was a pretty big step up in the gross margin pressure from the factory deleverage relative to 1Q. I know you did speak to it I can hear your confidence in the gross margin in the second half. Is there any puts or takes that are unusual that we should think about in the gross margin in the second quarter that hold you back from saying there's a step up in the gross margin there? Or is it just conservatism given it's a bigger wholesale quarter? I guess and then maybe bigger picture one for David as you look across some of the parts of the wholesale channel in The U. S. That's stocked out, which we saw in a lot of our work stocked out key gifting items this Christmas. How do you think about adjusting the strategy relative to that level of unmet demand for next holiday? I know you're always balancing this David with managing the corporate first principles at Bergenstock for managing scarcity.

Just any thoughts you have as you look across the results in this holiday? [indiscernible] Yes. The puts and takes, again, we are not guiding specifically quarters. But what I can say is that we are not seeing substantial impact from channel mix in the second quarter. And on the Baselbach impact, as I said before, we are not So but quarter by quarter, you will see now that 150 bps from last year turning into a positive impact quarter by quarter. Michael, I'll take the second part of that This is David. As you know from following our brand in the market, allocation and distribution is half art and half science.

I mean, we do it with a lot of data. We have planners. We have analysts on a door by door, on a style by style basis, We're always going to make sure that the stock to sales ratios are always So while we don't want stock outs all over the market Clearly, some of that unrequited love and the demand that it that it creates for the brand is part of this flywheel impact that we get and that's why demand keeps increasing. And what we keep finding continually is the more we put additional product into the wholesale market, the more the demand continues to increase. And again, just remember, our D2C base is already at 40% penetration with 90 plus percent of it being digital. So as we open more of our own doors, the white space category that we've been talking about that's just more points of distribution where we can fulfill that demand. So it's all really part of one ecosystem.

Suffice to say, the stock to sales ratios that are maintained very healthy in the whole [indiscernible] Are basically the foundation for the entire business model. Okay. And maybe just one quick follow-up on the model. Is there related to your very last comment there, is there anything in the guidance for the year assuming a price increase in directly earmarked for tariffs or would that be incremental if tariffs happen and it's not Hey, this is Oliver. I think there's no big sense in discussing the possible tariffs up and [indiscernible] I think the tariffs will have more an impact overall inflation and the overall macroeconomic because as I mentioned in my first question, and the answer, It was inflation in U. S. Is above 3% And that's before all the tariffs kicks in.

This is why we are concerned about the tariffs As you know, we constantly adjust our pricing every season very very precisely style by style It's the opposite what you can see from the [indiscernible] by 10%, 20%, 15%, 30%.

Step by step very precise, [indiscernible] textile, different one. And that's what we're doing. So I would call it price adjustments And yes, if something happens, prices increases on raw material side, on tariffs, whatever.

Then of course, we try to balance it out within our collection, but don't [indiscernible] [indiscernible] [indiscernible] The next question will be from Anna Andreeva from Piper Sandler.

Anna, your line is live.

Great. Thank you so much for all the color and taking our questions. Could you provide a little bit more color on your loyalty program? I think you said 8,800,000 people this quarter. So nice growth versus I think 8,000,000 you called out last quarter. Just curious how is that performing versus expectations?

And what are some of the recent KPIs of how you measure how success is going to look like in 2025. And then we had a quick follow-up.

Yes, thanks. Great question. Our member are very important to us. As you know, people who wear Burke in stock aren't just consumers. They become our fans. They become our brand missionaries.

And more we wrap our arms around them, the better the return on investment is for us.

Our membership, at over $8,000,000 right now is 30% higher year on year.

I can certainly see it moving to $10,000,000 quite quickly when you do the math on it.

Marketing to our members has been very successful [indiscernible] of our D2C business came from members in the past quarter.

And just remember, our members tend to spend 30% higher per transaction So the return on investment as we market to them and as we share new products If you've won Birkenstock in any product, if you came to us by way of the sandal or the clog, you've experienced the footbed odds are much higher you're going to adapt for another use occasion a closed toe shoe or an outdoor shoe or recovery.

Or if you work in healthcare or hospitality or professional shoes.

So as our membership grows, we see that as a key driver for our D2C business And just remember also the more touch points we have, as we open retail stores around the world, those retail stores also become vehicles for membership.

That's awesome. That was very exciting. Thank you, David. And just as a follow-up so APAC was up very nice 47% in 1Q and you mentioned accelerated pace of door openings and also deliveries during the quarter. Should we think there's a timing shift which could negatively impact the second quarter growth rate? In the region or that should affect the current quarter. Hello, Anna. This is Claus.

We always said we are very fine with the growth rates in APAC have been double of our mature markets. This is also what we keep So I think that answers the question, right?

Got it. Well, thank you so much. The next question is coming from Sam Poser from William Street.

Sam, your line is live.

Thanks open. Thank you. Thank you for taking my question. Just you mentioned that Q2 is a is another big sell in quarter. And I'm just trying to balance out how the DTC for the year is going to grow faster Is do you anticipate DTC to grow faster than wholesale in Q2 or Or is that DTC growth to be driven a lot by these new stores that are going to open and impact the second half of Hi, Pam. This is Alexander speaking. We cannot be that specific. What we said is that we want to grow in the remaining quarters more in D2C to come than on a full year basis to a balanced number. Will it be quarter two, three, four, That would be really too specific and it's also depending on how we ship into the wholesale accounts.

In general, as you know, Sam, because you know the business best probably the first half is wholesale heavy and the second half of the year is more DTC heavy. So that probably gives you the the best direction how to think about this.

And so that also would be a balance off the gross margin. Another reason For the gross margin in the second quarter, while it may increase year over year, to being the biggest wholesale quarter to keep It's well underneath Q1 and underneath the full year average. Would say Is that a a good way to think about it?

Absolutely, that's correct.

Thanks very much.

Thank you. The next question will be from Erwin Ramberg from HSBC Erwin, your line is live.

Best of luck to the outgoing and incoming CFOs, if I can put it that way. Two little follow ups. First of all, on closed toe shoes being [indiscernible] in Q1. Where do you see this going in Q2 and maybe for the full year?

I think you mentioned 600 basis points of incremental contribution in Q1. How should we think about the full year I think you were a bit above 30% contribution for the full year last year and Ken, I don't know if you've said, what difference the ASP is relative to average. Then secondly, a follow-up. On wholesale. For David or possibly Nico and Klaus as well. It's quite stunning that you're growing 30% given that 90% of the growth is with existing doors. So sorry for the naive question, but how much more space can you actually can they actually accommodate And at some stage, even though I understand you're more pull than push, will you not need to sign up with new partners at some stage to increase the visibility of the brand.

Hey, everyone. This is Nico. Thank you for your question. I'll take the first part and then I guess I'm going to share a bit the second part of your question. So yes, you're right. So close to increased by 600 basis points. It's two times faster than the rest of the business. While our open toe business is also growing double digits. And I think that's really worth mentioning. We have been reminded that quarter is probably one of the quarters with the highest closed door penetration due to seasonality. So don't expect us to deliver the same share of business in the coming quarters.

We have given not ourselves a specific target for quarter, but we see great opportunity coming out of this quarter in the closed tow business. Also specifically in closed shoes. As I just shared early on with the great results we achieved in close shoes, And maybe just on the ASP point, how much more expensive in terms of ASP if close to versus the average of the business?

So just as you can imagine, closed shoes is a much higher ASP than sandals. So I referred to the boots example that we had great success in Q1 with boots. And they are sold at €200 price point. That's adopted by the So you can imagine, what's the sort of potential difference in ASP between those categories between sandals and closed shoes. [indiscernible] Thank you. The next question will be from Jim Duffy from Stifel. Jim, your line is live.

Thank you.

Very clear momentum in the B2B Following up on that last question, very interested in the evolving product mix at wholesale. Speak to what you're seeing in the order book by product type and ASP mix within the orders, specifically interested in whether the wholesale channel partners are embracing more premium offerings and how that's balancing with interest in EVA offerings like the Berkey.

Thanks.

Thank you, Jim, for your question. Great question. What we do definitely see is, I'll start with the consumer, consumer continue to seek our premium product. The leather shares increasing Clogs category is doing extremely well, not just the Boston, but also of Clogs [indiscernible] So that's another And what we also just shared is the great adoption of boots in Q1. So, yes, the consumer is seeking for our most premium product. And that's also reflected in the B2B buys, in the B2B order book. As retailers are expanding their assortment and writing their assortment With us [indiscernible] Thank you.

Thank you. And the next question will be from Janine Stitcher from BT Hi, Hey, thanks so much for all the color and for taking our questions. One more on B2B. Outdoor, professional and run specialties. So how penetrated are you in these categories? And just maybe what you see in terms of shelf space potential? Thank you. Hey, Jeanine, it's David.

In the new distribution, which again is a little bit limited to our traditional base. We're seeing immediate adoption of the brand. Whether we show up as a recovery, sandal, recovery product in run specialty. It's the exact same place that we were in when we went into some of these other accounts, 10 to twelve years ago, The expansionary categories in our heritage business have been adopted very quickly. I mean, again, when we talk about over half of our business being non sandals, that's pretty substantial compared to a couple of years ago. And when you see the brand out at retail, you're certainly no longer seeing a sandal based [indiscernible] So as we go into some of these other categories, where it's a different use occasion, but it's the same footbed, whether you're outdoors, whether you're wearing house slippers, whether you're professional, and wearing it in a work environment, it's the footbed.

The more we bring the footbed to different use occasions, the more it's being adopted. So I think it's more a matter of how many use occasions do we continue expand into and what's the share of closet?

I mean, as you remember, the average 3.4, 3.6 pairs of our product.

Anecdotally, we think that's even higher. So I don't think there's a limit to how many Birkenstock products are fans can own in their closet.

The more they see it out in those environments where it validated the quicker it's being adopted.

Great. Thanks so much for the color.

Thank you. There are no other questions. And this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. [indiscernible]