r/stocks
Why is nobody talking about Birkenstock (NYSE: BIRK)?
BIRK looks undervalued with strong margins (57%), global expansion, and buybacks, despite debt concerns. P/E compressed to 20x.
- Strong pricing power allows for high gross margins (~57%) despite being a footwear company.
- Valuation has become more attractive as P/E ratio compressed from >40x at IPO to ~20x.
- Management is actively reducing leverage and initiated a $250M share buyback program.
- High debt levels remain a primary concern for the balance sheet health.
- Potential headwinds from tariffs and a slowing consumer environment could impact growth.
- ROIC is currently modest at 9-10%, requiring execution to improve returns.
I've been looking at Birkenstock for a while, and I'm struggling to understand why it gets so little attention compared to other consumer brands.
During a recent trip through Croatia, Birkenstocks seemed to be everywhere. That alone isn't an investment thesis, but it made me take a closer look at the company.
A few things stand out to me:
The brand appears stronger than ever.
Customers routinely pay $120–200 for what are essentially premium sandals.
The company continues to expand globally while maintaining exceptionally high gross margins of around 57%.That’s pretty impressive for a shoe company
The stock is no longer trading at IPO valuation multiples, with the P/E ratio having fallen from above 40x to around 20x.
What I find interesting is the disconnect between the apparent strength of the brand and the lack of investor enthusiasm.
Of course, there are risks. Debt has been one of my biggest concerns, although management appears to be making steady progress in reducing leverage. On top of that, the company recently announced a $250 million share buyback program, which could be interpreted as a sign that management believes the stock is undervalued at current levels.
What strengthens my conviction is that Birkenstock is still guiding for 13 to 15% revenue growth despite concerns about tariffs and a slowing consumer environment.
The company currently generates an ROIC of roughly 9 to 10%. If Birkenstock can maintain gross margins around 57% while continuing to reduce debt, I would expect returns on invested capital to improve over time. Combined with double digit revenue growth and strong pricing power, that could make the current valuation look quite attractive.
Am I missing something here?
For those who are bearish, what is the biggest risk to the investment case?
The Company was bought by LVMH and since then the quality has obviously gone down the drain.
Quality was THE reason to buy those sandals. Cheap low quality sandals can be bought from every other company.
It’s not like Birkenstock owns anything that makes them standout compared to the 15€ sandals.
People that wear Birkenstock don’t think or care about aesthetics.
I know the factory that makes there soles. Nothing has changed for them, in terms of quality or process, just volume through the roof since LVMH took over
You must be blind then. The quality is considerably worse, especially the longevity of the newer Birkenstock.
You could use your brain and think how their profit after tax somehow rose by 80% even though the sales didn’t even remotely rose in the same manner. 8% rise in sales number and 80% in profit
Where do you think that the profit comes from???
That’s a ridiculous reaction. You okay?
I know the factory that make the soles, I understand compounds and seen the in house performance tests.
That has remained the same for 20 years.
Maybe the leather, or manufacturing has changed. But I didn’t state that.
People that wear Birkenstock don't think or care about aesthetics.
Excuse me, 'German Orthopedic Chic' is a highly sophisticated aesthetic
"I've been looking at Birkenstock for a while, and I'm struggling to understand why it gets so little attention"
This sub primarily focuses on a dozen or two popular stocks at any given time and - especially in recent years - stocks that have some sort of narrative/theme. BIRK might be a fine company, but has no narrative/theme. I'll also note this: "Customers routinely pay $120–200 for what are essentially premium sandals" will mean some considerable drawdowns over time.
Not a bad valuation or stock. It's probably got room to grow 30%, maybe more. No one is talking about it cause all of the noise is about trying to find tech stocks that will go up 400%
I’m personally being more conservative these days. As of now I’m hunting for stocks that can double this month. I’m tired of chasing 100x plays.
LOL
Okay, that makes sense.
Funny those commenting have no idea. The brand has the exact same quality being bought or not. Once you own a pair, if its your fit, you can't wear anything else, I currently own 7 pairs and do not considering buying anything else. They not only sell sandals, that's the basic stuff, its their shoes, boots etc that are incredible quality. So on average, fans of the brand own between 5 to 10 pairs, that's roughtly 1000-2000, plus we are all returning costumers. I do think this stock is really good but the brand is niche, all things considered.
As a parent of two high schoolers and one college student, I can attest to the resurgence in popularity.
its a SHOE company. Their point of difference is how comfortable and good for your feet they are.
they never stop selling those, they are online as we speak
No talk, all walk.