Analysis

Why Birkenstock Stock Hit an All-Time High Above $57 Per Share Today

Growth in 2024 is now expected to be even better than management previously expected.

Shares of shoe company Birkenstock (BIRK 11.66%) hit all-time highs on Thursday after the company reported financial results for its fiscal second quarter of 2024. The stock rose as much as 15% before settling for a 12% gain by the time the market closed for the day.

This old company is still going strong

Birkenstock clearly doesn’t have a demand problem, which is encouraging for a shoe company that’s been in business for 250 years. In Q2, the company had record revenue of 481 million euros (about $521 million), which was up 22% year over year.

Birkenstock’s Q2 gross margin took an unexpected step back. It had a 56% margin in Q2 compared to a nearly 60% margin in the prior-year period. But management pointed to temporary issues and still expects to hit a 60% gross margin in the medium term, which might explain why investors were willing to look past the issue.

Investors are likely most excited about Birkenstock’s full-year outlook. Management had previously expected 17% to 18% full-year revenue growth, but now it thinks it will grow the top line by 19%. And this increased outlook is what pushed the stock to new highs today.

Can Birkenstock keep growing?

Birkenstock went public in late 2023 and has put up dazzling results since then. The stock has surged to a price-to-sales valuation of about 6, which looks pricey for a shoe stock, generally speaking. However, its profit margins are good and its growth is ongoing, which usually earn a stock a higher valuation.

The real question for long-term investors is how much room for expansion Birkenstock has. Its growth is fastest in Asia, the Middle East, and Africa — up 42% in Q2. And that’s encouraging because these regions currently only account for about 11.5% of the business. This points to continued growth potential and could be a good reason to keep holding for now.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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