Birkenstock warns of higher costs from tariffs, Middle East conflict
Birkenstock Faces Financial Pressures Amid Global Challenges
By Savyata Mishra
May 13 (Reuters) - Birkenstock shares slumped 13% on Wednesday after the sandal maker warned of rising second-half cost pressures from U.S. tariffs and the Middle East conflict, with CEO Oliver Reichert saying war-driven inflation was crimping consumer spending.
The comments echo broader challenges across the apparel and sportswear sector, with companies such as Nike and Under Armour also grappling with rising costs and a more cautious consumer backdrop.
Impact of Middle East Conflict on Birkenstock
"We face multiple conflicts in the Middle East, disrupting global supply chains and driving higher energy costs," Reichert said on an earnings call.
The company, which also missed estimates for second-quarter results, recorded a 6 million euros ($7.02 million) hit to its Europe, Middle East and Africa (EMEA) segment, due to shipment disruptions to the region and weaker demand owing to the conflict.
To mitigate the disruption, the company is rerouting shipments to faster-growing markets such as the Asia-Pacific, and reallocating inventory.
Geopolitical Disruption and Its Effects
"The company's ...commentary shows geopolitical disruption is now flowing through both logistics and demand, so further regionalised pressure cannot be ruled out if the conflict persists," said Sam North, market analyst at eToro.
Shares of the company were trading at $33, after dropping as much as 14% to a record low.
Tariffs Overhang and Margin Pressure
TARIFFS OVERHANG
Birkenstock is also contending with higher tariffs following changes in U.S. trade policy, with its average tariff burden rising from just over 10% earlier to above 20%, its executives said.
Financial Impact of Tariffs
“If the current tariff structure were to hold… we could see some additional increase in margin pressure in Q4,” Chief Financial Officer Ivica Krolo said. Tariffs are expected to weigh on margins by about 100 basis points in the third quarter and 50 basis points in the fourth.
Birkenstock, which produces 95% of its footwear in Germany and sells heavily into the U.S., has been attempting to offset some of the cost pressure through price hikes and inventory management.
Company Performance and Outlook
Sales and Revenue Growth
The German shoemaker, whose price points range from $50 to up to $2,000, kept its annual forecasts intact, citing resilient demand in its key markets.
It expects 13% to 15% constant-currency sales growth in fiscal 2026, and profit between 1.90 euros and 2.05 euros per share.
Regional Sales Performance
The company's revenue growth was led by the Asia-Pacific, where sales jumped 22% on a reported basis during the quarter, while the Americas grew 4% and EMEA rose 10%.
It posted quarterly revenue of 618.3 million euros, missing analysts' average estimate of 620.07 million euros, according to data compiled by LSEG.
Profitability and Margins
Gross margin fell to 53.9% from 57.7% a year earlier, hit by foreign exchange pressures and U.S. tariffs, partly offset by higher prices.
It earned 0.50 euros per share on an adjusted basis, down 9% from a year earlier and below estimates of 0.59 euros per share.
($1 = 0.8546 euros)
(Reporting by Savyata Mishra in Bengaluru; Editing by Leroy Leo and Devika Syamnath)
