Shares of German footwear company Birkenstock Holding (BIRK 0.09%) dropped on Thursday after the company reported financial results for the first time since going public in October. The company is warning about its profits but investors need to take this with a grain of salt. As of 10:10 a.m. ET, Birkenstock stock was down 8%.
The market is concerned about profits
Birkenstock completed its fiscal 2023 in September. The company reported results for fiscal 2023 this morning, showing year-over-year revenue growth of 20%. This capped off a 20% compound annual growth rate of 20% over the last decade, which is an impressive feat for a 250-year-old shoe company.
Looking at adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), Birkenstock had a margin of 32.4%, a meaningful pullback from its adjusted EBITDA margin of 35% in fiscal 2022.
To be clear, a 32.4% adjusted EBITDA margin is still quite good compared to Birkenstock's peers. But the market is reacting negatively nevertheless.
More of a pullback ahead?
Looking ahead to fiscal 2024, Birkenstock's management expects 17% to 18% top-line growth as it continues expanding into new markets. However, management said that it expects a "modest headwind" when it comes to profits. It's projecting further contraction of its adjusted EBITDA margin, expecting it to be 30% for the year.
Birkenstock is expanding, paying down debt, and is still highly profitable. The profit margin is contracting, yes. But a 30% margin is still quite good.
Whether Birkenstock stock is a good value today is another matter entirely -- trading at more than 5 times its trailing sales, it's pricey. That said, I wouldn't be too concerned about its profit margins since they are still among the best in the business.
