Investing.com -- Telsey Advisory Group (TAG) has increased its price target for Birkenstock Holding plc (NYSE:BIRK) to $70.00 from $63.00.
The brokerage believes that Birkenstock's strong brand, effective distribution, and sustained consumer interest, particularly during the back-to-school season, will continue to drive demand for its products.
Despite a challenging macroeconomic environment characterized by inflationary pressures and cautious consumer spending, Birkenstock has managed to maintain strong demand across its product lines.
The company's success in overcoming obstacles and maintaining consumer interest has contributed significantly to its robust financial performance.
TAG flags that Birkenstock's consistent results are supported by strategic pricing, a focus on high-quality products, and an expansion into direct-to-consumer channels.
Birkenstock's growth has been widespread across various regions, with notable performance in the Asia-Pacific, Europe, and Americas markets. According to TAG, the Asia-Pacific region is expected to see a 32% year-over-year (YoY) growth in the third fiscal quarter, driven by a nearly doubling of digital sales.
Europe and the Americas are projected to grow by 19% and 18% YoY, respectively. This geographical expansion underscores Birkenstock's ability to adapt and thrive in diverse markets.
In terms of sales channels, Birkenstock has seen particularly strong growth in its Retail (up 37% YoY) and Online (up 27% YoY) segments, outpacing the Wholesale channel, which is still expected to grow by 14% YoY.
TAG mentiond that the DTC segment is particularly crucial for Birkenstock, as it not only supports higher average selling prices (ASPs) but also allows for greater control over brand presentation and customer engagement.
Birkenstock has seen significant growth due to its emphasis on high-quality products and strategic distribution. The company's expansion into premium lines, including closed-toe styles and the Big Buckle (NYSE:BKE) sandal, has been particularly successful.
Closed-toe footwear now constitutes a substantial portion of Birkenstock's revenue, reflecting a positive consumer response. This shift has been accompanied by an increase in average selling prices, which has positively impacted both revenue and profitability.
Birkenstock's disciplined approach to distribution, balancing B2B (wholesale) and DTC channels, has also been instrumental in its success.
By maintaining product scarcity and optimizing channel allocation, Birkenstock has managed to sustain high demand while strategically expanding its market presence.
TAG has revised its financial estimates for Birkenstock upwards, reflecting the company's continued strong performance. For the third quarter, TAG now expects total revenue growth of 19.4% to €565 million, up from a previous estimate of €552 million.
Adjusted EBITDA is projected to reach €182.7 million, reflecting a margin of 32.3%, up from 31.7% previously. These estimates are in line with the broader market consensus, which sees Birkenstock's profitability continuing to improve despite margin pressures.
TAG forecasts Birkenstock's total revenue for fiscal year 2024 will range between €1.77 billion and €1.78 billion, representing a 20% YoY growth. EBITDA is expected to be between €535 million and €545 million, up from €520 million to €530 million in previous guidance.