Birkenstock Q2 2026 Earnings Report

Birkenstock EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.70
• Beat/Miss: Missed by -$0.12
• One Year Ago EPS: $0.63

Birkenstock Revenue Results

• Actual Revenue: $714.40 million
• Expected Revenue: $716.62 million
• Beat/Miss: Missed by -$2.22 million
• YoY Revenue Growth: +7.70%

Birkenstock Announcement Details

• Quarter: Q2 2026
• Date: 5/13/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 13, 2026
• Conference Call Time: 8:00AM ET

Birkenstock (NYSE:BIRK) is a global footwear company best known for its anatomically shaped cork-latex footbed and distinctive sandals. The company offers a range of footwear, including sandals, shoes, clogs, boots and sneakers, as well as accessories and foot-care products.

Birkenstock traces its roots to 1774, when Johann Adam Birkenstock was listed as a shoemaker in Germany. The company’s products are sold through its own retail stores and e-commerce platforms, as well as through independent retailers and distributors. Birkenstock serves customers across Europe, North America, Asia-Pacific and other international markets.

The company is headquartered in Linz am Rhein, Germany. Oliver Reichert serves as Birkenstock’s chief executive officer, and the company has operated as a publicly traded business on the New York Stock Exchange since 2023.

Birkenstock Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Birkenstock said second-quarter revenue grew 14% in constant currency, with adjusted EBITDA margin remaining strong at 32.1% despite FX and tariff pressure. Management reiterated full-year fiscal 2026 guidance, calling the business resilient even in a tougher macro backdrop.
• Positive Sentiment: The company highlighted broad-based demand strength, including APAC up 30%, Americas up 14%, and EMEA up 11% in constant currency. Birkenstock said its own retail and D2C business continued to accelerate, with own retail growth above 60% and double-digit same-store sales growth.
• Negative Sentiment: Management said the Middle East conflict and weaker European consumer sentiment reduced EMEA revenue by about EUR 6 million in the quarter and could create roughly EUR 10 million to EUR 12 million of revenue risk for the region. Inflation, energy costs, freight, and supply-chain disruptions were also cited as ongoing headwinds.
• Negative Sentiment: Tariffs and FX continue to weigh on results, with the company estimating about a 640 basis point hit to reported revenue growth from currency and expecting additional margin pressure in coming quarters. Birkenstock said adjusted gross margin was 54.6% and adjusted EBITDA would still be at least EUR 700 million for the year, but both include meaningful FX and tariff drag.
• Neutral Sentiment: Birkenstock is expanding capacity and inventory to support growth, including pre-production of semi-finished goods and new production investments. The company also said it expects to reach about 140 owned retail doors by fiscal year-end and is considering share repurchases as it enters its seasonally stronger cash-generation period.

Presentation

[Operator]

Good morning. Thank you for standing by. Welcome to Birkenstock's Second Quarter 2026 Earnings conference call. At this time, all participants are in a listen-only mode. After today's prepared remarks, we will host a question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. The company has allocated 45 minutes to this conference call and will take as many questions as time allows. I would like to remind everyone that this conference call is being recorded. I would now like to turn the call over to Megan Kulick, Director of Investor Relations.

[Megan Kulick, Director of Investor Relations at Birkenstock]

Hello, and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of the Birkenstock Group, and Ivica Krolo, Chief Financial Officer of the Birkenstock Group. Nico Bouyakhf, President of EMEA, and Alexander Hoff, VP of Global Finance, will join us for Q&A. Today we are reporting the financial results for our fiscal second quarter ended March 31st, 2026. You may find the press release and the supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com. Results have been filed on Form 6-K with the SEC. We would like to remind you that some of the information provided during this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws.

[Megan Kulick, Director of Investor Relations at Birkenstock]

These statements are subject to various risks, uncertainties and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as in our filings with the SEC, which can be found on our website at birkenstock-holding.com. We undertake no obligations to revise or update any forward-looking statements or information except as required by law. We will reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with IFRS. Reconciliations of non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings.

[Megan Kulick, Director of Investor Relations at Birkenstock]

Now I will turn the call over to Oliver.

[Oliver Reichert, CEO at Birkenstock]

Good morning, everybody. Since our Q1 results, a lot has happened. We face multiple conflicts in the Middle East, disrupting global supply chains and driving higher energy costs. These cost pressures are fueling inflation, clearly causing pressure on consumer wallets. The annual inflation rate in the U.S. jumped to 3.3% in March 2026, marking the highest level since May 2024 and a sharp increase from 2.4% in both February and January. Eurozone inflation reached 3% in April, the highest level since September 2023, driven by 11% increase in energy costs. Eurozone inflation is broadly expected to remain elevated throughout the remainder of 2026. The U.S. Supreme Court ruling striking down IEEPA tariffs has actually increased our tariff exposure, at least temporarily. We estimate our refund claims will be about EUR 30 million, but timing is still uncertain.

[Oliver Reichert, CEO at Birkenstock]

In this challenging environment, we performed strongly. We once again demonstrated the resilience of our business model. In the second quarter, we grew revenues over 14% within our target range of 13%-15% growth in constant currency. Our adjusted EBITDA margin remained strong at over 32% despite the impact of FX and tariffs. Even in this uncertain environment, demand for Birkenstock remains strong. We delivered as promised in our white space growth opportunities. Closed toe penetration was up 300 basis points, driven by strong growth in clogs. APAC grew at over 2x the pace of the other regions. Share of business was up over 100 basis points year-over-year. We opened 5 new owned retail doors, bringing the total globally to 111.

[Oliver Reichert, CEO at Birkenstock]

We are well on track to meet our target of 140 doors by the end of fiscal 2026. Importantly, within our D2C business, our own retail grew over 60% in constant currency. Same store sales were up double digits, accelerating from the first quarter. We also continued to invest in our online business to drive better conversion and higher growth. Our Americas business remains strong, up 14% in constant currency. It was driven by very strong B2B growth and sell-through at partner doors, which was up over 30% at key partners. Youth retailers and sporting specialty continued to lead the B2B growth. The in-person shopping trend continues. Within the Americas D2C business, we saw strong same-store growth, and we added two new stores in the Americas, bringing the total to 17. Growth in EMEA was 11% in constant currency.

[Oliver Reichert, CEO at Birkenstock]

A strong result when considering the negative impacts of the wars in the Middle East. We estimate the direct and indirect impacts of the war reduce EMEA revenue by about EUR 6 million and growth by about 300 basis points. About half of this was a direct impact due to our inability to complete shipments into the Middle East. The other half was due to muted consumer sentiment in Europe, largely attributed double-digit increase of energy costs and higher inflation. While it is difficult to foresee how long the impacts will last, we have taken measures to mitigate some of the direct impact. We have secured alternative delivery routes, and we can also steer products originally intended for the Middle East to other regions, especially APAC, where demand remains very strong. This is the beauty of our engineered distribution model and proves our resilience.

[Oliver Reichert, CEO at Birkenstock]

APAC was up 30% in constant currency. As planned, growing more than twice as fast as our other segments. Within our top markets in the region, our strongest growth was in India, China, and Japan. APAC showed the highest closed-toe penetration and highest ASP in the quarter compared to the other segments. Our production is ramping up as planned to reach our target of 10% annual growth in pairs sold. Despite the impact of different conflicts, inflation, and tariff uncertainty, we are confident in our growth potential. We are reiterating our targets 13%-15% for fiscal 2026 and the longer-term targets we shared with you in January. Why are we so confident? We are a purpose-driven brand and see strong global demand for the footbed that shows resilience in uncertain times.

[Oliver Reichert, CEO at Birkenstock]

As an affordable luxury brand with a huge pricing bandwidth, we attract a diverse range of consumers across geography, gender, age, and income. We manage our distribution with discipline to maintain scarcity, properly segment the market, and manage channel growth. The ultimate truth for brand health and momentum is sell-through at full price, which remains very strong at over 90%. I will pass the call over to Ivica to go through the quarter results in more detail.

[Ivica Krolo, CFO at Birkenstock]

Thanks, Oliver. I am happy to share with you the details of Birkenstock’s performance for the second quarter of fiscal 2026, which met our expectations despite the headwinds Oliver already mentioned. We generated second-quarter revenues of EUR 680 million, growth of 8% on a reported basis. Growth in constant currency was 14%. The strong depreciation of the U.S. dollar, Canadian dollar, and Asian currencies compared to the second quarter of 2025 cost a 640 basis point headwind to revenue growth in the quarter. For reference, in the second quarter of 2026, the average euro to U.S. dollar rate was 1.17, up from 1.05 in Q2 of fiscal 2025. We saw strong growth across all segments in the quarter. The Americas segment was up 14% in constant currencies, reflecting continuing strength in our most developed market.

[Ivica Krolo, CFO at Birkenstock]

EMEA was up 11% and APAC up 30% in constant currency. As Oliver mentioned, we estimate the impact of the war in the Middle East was about 300 basis points to EMEA growth or about 100 basis points to consolidated growth. By channel for the year, B2B was up 15% in constant currency on the back of continued strong demand at our key partners, and D2C is sustaining double-digit growth, up 12% in constant currency. We are still seeing stronger growth in our B2B channel compared to D2C as consumers, especially our newest younger consumers, prefer to shop in store. At the same time, our digital business remains a positive contributor to growth, and we are taking measures to drive stronger digital growth in the future. Our own retail business was very strong, up over 60% year-over-year in constant currency.

[Ivica Krolo, CFO at Birkenstock]

We added five new doors. Same-store sales growth accelerated from Q1 and was up double digits. Gross profit margin for the second quarter was 53.9%, down 380 basis points year-over-year. Adjusted gross profit margin, including the reversal of distributor markup associated with the acquisition of our Australian distribution partner, was 54.6%, down 310 basis points. Adjusted gross profit margin, excluding 230 basis points of pressure from FX and 90 basis points of pressure from incremental U.S. tariffs, was up 10 basis points year-over-year. Selling and distribution expenses were EUR 138 million in the second quarter, representing 22.4% of revenue. This was up 40 basis points from the prior year.

[Ivica Krolo, CFO at Birkenstock]

General and administration expenses were EUR 33 million or 5.3% of revenue, down 30 basis points year-over-year. Adjusted EBITDA in the second quarter of EUR 198 million was down 1% year-over-year, primarily due to tariffs and currency translation impacts. The flow-through of FX effects reduced adjusted EBITDA by EUR 27 million. Excluding this FX impact, EBITDA was up 13%. Adjusted EBITDA margin of 32.1% was down 270 basis points year-over-year. Excluding the FX and tariff impacts, adjusted EBITDA margin would have been up 60 basis points to 35.4%. Adjusted net profit of EUR 93 million in the second quarter was down 10% year-over-year. Adjusted EPS for Q2 was EUR 0.50, down 9% from EUR 0.55 a year ago.

[Ivica Krolo, CFO at Birkenstock]

Adjusted net profit and adjusted EPS were negatively impacted by FX translation of EUR 17 million or EUR 0.09 respectively, and by a EUR 15 million one-time non-cash expense or EUR 0.08 per share from the change in valuation of the embedded derivative in our senior notes. We generated EUR 29 million in operating cash compared to the use of EUR 18 million in Q2 2025. We ended the quarter with cash and cash equivalents of EUR 201 million. Our inventory to sales ratio was 39% in the quarter, up from 36% a year ago. The primary reason is due to FX. While our inventory is largely euro-based, LTM sales are negatively impacted by the depreciation of the US dollar and other currencies. On a currency neutral basis, our inventory to sales ratio was 37%.

[Ivica Krolo, CFO at Birkenstock]

The increase from 36% last year is largely driven by increased work in progress as we increase pre-production of semi-finished goods, especially in clogs to reduce the bottleneck we have faced in final assembly. Inventory level was also impacted by the increase of capitalized tariffs. Our DSO for the quarter were a healthy 49 days, up from 46 days a year ago, primarily due to the higher B2B mix and timing of large shipments that occurred later in the quarter. During the quarter, we spent EUR 21 million in CapEx, adding to our production capacity in Arouca, Görlitz, Ströth, and Pasewalk, beginning the build-out of Wittichenau. Finally, continuing our investments in retail and IT. Our net leverage was 1.7x as of March 31, 2026, up from 1.5x at September 30, 2025 due to normal cash seasonality.

[Ivica Krolo, CFO at Birkenstock]

Turning to our outlook for the remainder of fiscal 2026. In both the third and the fourth quarters, we expect revenue growth in constant currency within our annual guidance of 13%-15%. We expect to experience less headwind from FX in Q3 and expect FX to be relatively neutral in Q4. At the EUR 1.17 to U.S. dollar rate, which our annual guidance is based on, we expect approximately 200 basis points of headwind to reported revenue growth in Q3 and almost no difference between reported and constant currency growth in Q4. On margin for Q3 and Q4, we expect tariffs to have a similar impact on gross margin and EBITDA margin in Q3 of about 100 basis points. In Q4, the impact will be around 50 basis points. FX pressure should be around 60 basis points in Q3 and neutral in Q4.

[Ivica Krolo, CFO at Birkenstock]

Our business is remarkably resilient. We are confident we will be able to meet our fiscal 2026 guidance despite the additional headwinds from the Middle East war, inflation, increased tariffs, and persistent FX pressures. We are reiterating our guidance for 2026 for constant currency revenue growth of 13%-15%. The FX headwind to revenue growth should be about 350 basis points for the full year, resulting in reported revenue growth of 10%-12% to EUR 2.3 billion-EUR 2.35 billion. This assumes an average euro to U.S. dollar exchange rate of 1.70. We expect adjusted gross margin of 57%-57.5% in fiscal 2026, inclusive of the 200 basis points of pressure from FX and U.S. tariffs combined.

[Ivica Krolo, CFO at Birkenstock]

We expect adjusted EBITDA of at least EUR 700 million for the year, implying an adjusted EBITDA margin of 30%-30.5% inclusive of the 200 basis points pressure from FX and tariffs. Our expected tax rate is 26%-28%. Adjusted EPS is expected to be EUR 1.90-EUR 2.05, including approximately EUR 0.15-EUR 0.20 of pressure from FX. This does not include the impact of any additional share repurchase. We remind you that we intend to repurchase share for a total consideration of $200 million during fiscal 2026, subject to market condition.

[Ivica Krolo, CFO at Birkenstock]

Capital expenditures should be in the range of EUR 110 million-EUR 130 million. We have a net leverage target for the end of fiscal 2026 of 1.3x-1.4x, excluding the impact of any additional share repurchases. With that, I'll turn it back to Oliver to close.

[Oliver Reichert, CEO at Birkenstock]

Thanks, Ivica. We are confident in our business model and its resilience, even in the face of pressures from war, inflation, tariffs and FX. Demand for our beloved brand remains strong. We are a democratic and accessible brand. Our addressable market is every human being that walks on two feet. We are unique in that we have products to address consumers with price points from $50 to our 1774 collection at up to $2,000. At Birkenstock, we turn challenges into opportunities. As a brand with a heritage of over 250 years, we stick to our plans, continue to take share, steer product between geographies and channels to optimize margins, and use our strong balance sheet and capital allocation decisions to increase shareholder returns. In an overall challenging context, we continue to see plenty of opportunities.

[Oliver Reichert, CEO at Birkenstock]

We see it in the fast-growing APAC market, in our expanding own retail fleet, and in our developing closed-toe business. We have proven our ability to mitigate external challenges and difficult market conditions to drive strong, profitable growth. Now we will take your questions. Thank you.

[Operator]

We will now begin the question-and-answer session. A reminder to please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you were muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Boss with JPMorgan. Matthew, your line is now open.

[Matthew Boss, Analyst at JPMorgan]

Great, thanks. Oliver, first half revenue growth averaged 15%. Full year reiterated forecast calls for 13% constant currency growth in the back half. Could you just break apart the factors that you're embedding in the second half forecast, if we could think about capacity constraints, Middle East exposure, and channel mix? Could you elaborate on the impact that you're seeing today, where you cited the more muted consumer sentiment in Europe tied to higher energy costs and inflation?

[Oliver Reichert, CEO at Birkenstock]

Thanks for your question, Matt. The clear answer to the first part of your question is that we're not seeing any slowdown in second half of fiscal 2026. From everything we see that we can control, of course, demand remains strong and resilient despite the headwinds from the different conflicts, inflation, FX and tariffs. Actually, as you know, we've to pay 10 percentage points higher tariffs compared to pre-Liberation Day. As you know, we are a super resilient, purpose-driven brand. We can reach consumers with price points from $50 to up to $2,000, and we have a global addressable market of every human being. The stage is set, and we reach consumers with a broad range of products for almost all use occasions and across thousands of doors globally.

[Oliver Reichert, CEO at Birkenstock]

Keep in mind, we own most parts of our supply chain, which shields us and protects us other than most of our industry peers and the industry peers from the disruption in the global supply chain and the risk related to shipment delays. I think this is very important, especially in these days. All this together supports our business and brand through tough times of disruption. To sum it up, we've always shown the ability to overcome challenges. Our track record supports this through all kinds of external headwinds: COVID, war, energy crisis. We are seeing no difference this time around. Still, as you know, we cannot be blind what's going on in the world around us. Yes, we are conservative in how we guide for the rest of the year.

[Oliver Reichert, CEO at Birkenstock]

Keep in mind, the third and the fourth quarters are our two largest quarters and are very D2C heavy, especially in EMEA, which is most directly exposed to these external changes and challenges. It's important that we recognize this uncertainty in our outlook. That's how we think about the guidance for the second half of the year. That said, we are confident in our guidance of 13%-15%, a range we can deliver even if unexpected challenges arise. I hope this answers your questions. Thank you, Matthew.

[Operator]

Your next question comes from the line of Laurent Vasilescu with BNP Paribas. Laurent, your line is now open.

[Laurent Vasilescu, Analyst at BNP Paribas]

Good morning. Thank you very much for taking my question. Oliver, Ivica, I wanted to follow up on EMEA. Your growth was up 11% for the quarter. The prior quarter was up 17%. You mentioned the war has reduced EMEA growth by about 300 basis points. Can you quantify the ongoing risk of exposure in the Middle East region for the rest of the fiscal year? Should we be lowering our EMEA growth rate for 3Q and 4Q? What are you seeing in terms of overall consumer sentiment in EMEA? Thank you very much.

[Nico Bouyakhf, President of EMEA at Birkenstock]

Hey, Laurent, this is Nico. Thank you for your question. I'm gonna answer this, being responsible for the EMEA region. Let me start by saying that we continue to deliver double-digit growth in EMEA in a market that is overall flat to slightly negative. In this context, we believe 11% on a constant currency reflects the underlying brand strength and is a pretty robust result. As in previous quarters, we continue to be one of the very few chosen brands, as Oliver just mentioned, and we will continue and do continue to take share with a very strong full price realization. Now, with regards to the impact of the current situation in Middle East, Q2 was indeed a very busy quarter for us, specifically the end of the quarter. We saw some external disruptions related to the Middle East situation.

[Nico Bouyakhf, President of EMEA at Birkenstock]

Most importantly, all our team members and partners in the region are safe, our partner stores are open, and our online business is operating. The team has shown really strong resilience to continue our business under extreme conditions, yet we saw a revenue impact of EUR 6 million, equaling 300 basis points headwind to our growth. Two impacts. One direct impact, which is half of it, primarily in B2B, related to the Strait of Hormuz being blocked. We could effectively not ship product into the region. The other one is an indirect impact, mostly in Europe, in both our DTC channels due to reduced tourism in some of our key cities and a more cautious sentiment among local consumers. Excluding those effects, growth would have been in line with our planned fiscal year guidance of 13%-15%.

[Nico Bouyakhf, President of EMEA at Birkenstock]

With regards to the outlook in EMEA for H2, we believe there will be an ongoing direct impact in our Middle East business. Our Middle East team is exploring all measures to offset this risk. We now put a bigger focus on Saudi Arabia that has proven more resilient due to more local consumers, and we also have started to ship product on different routes into alternative ports to get product into the region. However, the majority of our Middle East business sits within the war-impacted region. That was the direct impact that we anticipated. The indirect risk is really difficult to predict at this point. If inflation continues to rise, we can anticipate further pressure on the consumer wallet, consumer sentiment.

[Nico Bouyakhf, President of EMEA at Birkenstock]

As per today, we identified approximately EUR 10 million- EUR 12 million of revenue risk in EMEA, which at this point, we believe we can offset with other regional segments. There's no change in our overall revenue guidance.

[Operator]

Your next question comes from the line of Ed Aubin with Morgan Stanley. Ed, your line is now open.

[Ed Aubin, Analyst at Morgan Stanley]

Good afternoon, guys. Thank you for taking my question. Oliver, you've addressed the impacts of the Middle East on revenues. What about the COGS side? What's the impact of energy and other inflation on your business?

[Ivica Krolo, CFO at Birkenstock]

Hi, Edouard. This is Ivica. Thanks for your question. Where we currently see higher inflation related to Middle East is energy, is freight rates, and is raw materials, especially in everything that is petroleum-based materials such as EVA granulate and sole sheets, for example. In general, the exposure is mitigated by our strong inventory position. The impact naturally is and will be gradual. As you know, as a manufacturing company, we always address input cost inflation as we make our pricing decisions. No change to this, no change to this approach, and we see no impact on margin guidance for the overall fiscal 2026.

[Operator]

Your next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine, your line is now open.

[Lorraine Hutchinson, Analyst at Bank of America]

Thank you. Good morning. You mentioned tariffs are now 10 percentage points higher versus pre-Liberation Day. If this structure holds, what's the impact on gross margin guidance, and how quickly can you raise prices to offset the margin dollars associated with the new tariffs?

[Ivica Krolo, CFO at Birkenstock]

Hey, Lorraine, Ivica speaking. Thanks for your question. As a background and as you, as you rightly said, if you recall, prior to April 2025, we were paying average tariffs of just over 10% depending on the product mix. In April 2025, our average tariff initially went up to 25%. With the European Union agreement in July of 2025, this settled to just over 15%. After the U.S. Supreme Court ruling, we are at just over 20%, so this including the Section 122 temporary tariffs. If the current tariff structure were to hold, which is still very unclear at this point, we could see some additional increase in margin pressure in Q4.

[Ivica Krolo, CFO at Birkenstock]

However, given our strong inventory position in the U.S., which is now tariffed at a range of rates, we don't believe it would push us out of our targeted margin range for the year. With regards to your second part of the question on pricing, we will follow the same approach we have always followed. Our pricing is very targeted, very granular on a season-by-season, style-by-style level, and it's designed in a way to protect our margin in the first instance, and to pass through higher input cost and inflation. We have lots of moving parts here, including the Section 122 tariffs, which are temporarily limited to the 24th of July, and currently, we see trade negotiations between U.S. and EU.

[Ivica Krolo, CFO at Birkenstock]

We will not jump any conclusions here and stick to the approach that we have followed in the past already.

[Operator]

Your next question comes from the line of Michael Binetti with Evercore. Michael, your line is now open.

[Michael Binetti, Analyst at Evercore ISI]

Hey, guys. Thanks for taking all our questions. Two for me. The adjusted EPS at EUR 0.50. I see from the release today that, you know, came in a little below expectations, but there was a partly driven by a EUR 15 million non-cash negative revaluation of an embedded derivative in your senior notes. A quick explanation of that derivative, why the revaluation occurred, and whether the volatility continues in the future. I think I know you walked through some of the gross margin bridge for the quarter. Would you mind going through the details on that and how the gross margin components beyond tariffs and that backs roll through 3Q and 4Q for us?

[Ivica Krolo, CFO at Birkenstock]

Hi, Michael. It's Ivica speaking. Thanks for your question. First on the EPS with regards to the senior notes. We have the option for early repayment of the senior note. This is basically a redemption feature, and this is what created the embedded derivative. The valuation of the embedded derivative is largely impacted by the current price of the notes. In Q1, the notes price was unusually high above the call price. From a valuation and model perspective, this made early repayment more likely, resulting in a non-cash gain of EUR 10 million in the 1st quarter of fiscal 2026. In Q2, we see an opposite picture as we approach the call date. The notes price dropped to slightly below the call price.

[Ivica Krolo, CFO at Birkenstock]

Now it's no longer, again, technically obvious whether we will call the note or not, and that uncertainty makes the option more sensitive to volatility and resulted in a devaluation of the derivative, and this made the non-cash impact of EUR 0.08 expense in Q2. Excluding these non-cash impacts, recurring finance cost should be in the range of EUR 18 million-EUR 20 million in each Q3 and Q4 2026. On the second part of your question, on the adjusted gross margin, it was 54.6%, down 310 basis points. To bridge the change here, negative impacts were FX with 230 basis points, tariffs 90 basis points, channel 30 basis points. On the positive side, we saw absorption of 30 basis points, sales price over inflation of 10 basis points.

[Ivica Krolo, CFO at Birkenstock]

Excluding tariff and FX, this margin expansion of 10 basis points even with a channel shift. Looking ahead for Q3, FX should be in the range of 60 basis points and tariffs a 100 basis points drag. For Q4, FX should be largely neutral and tariffs a drag of 50 basis points. Pretty much the same picture on EBITDA margin for this quarter, like for like, so excluding tariffs and FX, it was an improvement of 60 basis points year-over-year.

[Operator]

Our next question comes from the line of Simeon Siegel with Guggenheim Securities. Simeon, your line is now open.

[Simeon Siegel, Analyst at Guggenheim Securities]

Thanks. Hey, everyone. Ivica, inventory grew faster than revs. Can you speak to that trend, how you're thinking about the opportunity to improve working capital going forward? Then sticking with the balance sheet, just DSOs also, I guess, grew year-over-year, even if I adjust for the higher B2B revenues. Could you elaborate a little bit more on what's driving that increase? I think you mentioned something about timing in the prepared remarks. Is this a new baseline, or do you expect this to move back down to historically lower levels? Thanks, guys.

[Ivica Krolo, CFO at Birkenstock]

Hey, Simeon. Thanks for your question. As we mentioned on the call, the increase in the inventory to sales ratio was largely due to FX impacts, so inventory in euros and sales, a mix of USD, euros, and other currency. On a constant currency basis, it was up only slightly from 36% to 37%. The main driver of this was raw materials and semi-finished goods, which grew 19% year-over-year, which is EUR 26 million. This was intentional. We have told you that we have greatly expanded our pre-production of uppers in our plant in Arouca, in Portugal, to be more flexible, to be faster in final assembly, and this addresses one of our production bottlenecks. This is the main driver of the increase. Also, keep in mind, our tariffs increased and which means we are capitalizing more tariff expense into inventory.

[Ivica Krolo, CFO at Birkenstock]

When you adjust for all of these factors, our inventory level actually improved modestly year-over-year. Be reminded, the largest part of finished goods are carryover products and/or allocated already to existing customer orders. 85% of all our units carry over, and this allows us for pre-production and production balancing. To that regard, our B2B business allows us to manage that and organize that very efficiently. Coming back to the second part of your questions on DSO, we saw slightly higher B2B share, which had some impact, as well as timing of deliveries in the quarters. That said, our receivables are very healthy. We have very long-standing relationship with our partners. Our credit losses are very minimal. In fact, we released more credit loss reserved than we added this quarter.

[Ivica Krolo, CFO at Birkenstock]

We remain very diligent and rigorous when it comes to credit management, so no changes here.

[Operator]

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Dana, your line is now open.

[Dana Telsey, Analyst at Telsey Advisory Group]

Thank you. Good morning, everyone. With the additional stores and the investments in digital that you're talking, should we expect to see an acceleration in DTC in the second half of the year? What measures are you taking to accelerate digital growth? You mentioned an acceleration of new store openings this year. What is that number tallying, and how does it differ by region? Thank you.

[Nico Bouyakhf, President of EMEA at Birkenstock]

Hey, Dana. This is Nico again. Allow me to start with our own physical retail. This channel will continue to be our fastest-growing channel and will enable us to capture in-person demand more strongly in the future. At the end of Q2, we mentioned this in the prepared remarks, we operate 111 stores and expect to reach around 140 stores by end of the year. The new stores that we opened continue to outperform our longer-standing fleet, through higher ASP and more units per transaction, we deliver higher transaction value. At the same time, these new stores continue to deliver against our overall return on CapEx target, which is 12 months-18 months. Having said this, we delivered double-digit growth in same-store sales, the one doesn't go at the expense of the other.

[Nico Bouyakhf, President of EMEA at Birkenstock]

With regards to online, we are now increasing investments in mid and upper funnel, specifically in social media, and particularly in the Americas region, in the U.S., we see a very strong ROAS with strong ability to capture demand there. While at the same time, we continue to drive retention with our membership base of almost 13 million members globally. In parallel, you might remember that the two more mature regions, Americas and EMEA, are currently executing against the online transformation agenda we outlined at our capital markets day. four key areas, I repeat them from capital markets day, it's distinctive offering, elevated storytelling, personalization, and new business models. APAC, as a younger online business, will continue to benefit from very strong organic growth in this channel.

[Operator]

Your next question comes from the line of Mark Altschwager with Baird. Mark, your line is now open.

[Mark Altschwager, Analyst at Baird]

Taking the question. Ivica, just following up on tariffs, where do you stand with the IEEPA claim process? How are you thinking about the timing of the refund and the confidence you'll receive it? How do you plan to deploy those funds? Separately, I wanted to ask on the buybacks, EUR 200 million authorization. You haven't done any year to date. I don't think the guidance incorporates any. Just given the stock price, maybe speak to your appetite for buybacks from here. Thank you.

[Ivica Krolo, CFO at Birkenstock]

Thank you for your question, Mark. It's Ivica again. You're right. Under the current U.S. customs process, IEEPA refunds are handled through a system which is called CAPE, which is run by the U.S. Customs and Border Protection. The system went live on April 20th. However, we are not yet able to file for refunds because our custom entries are submitted as reconciliation cases, which will be handled at a later stage of the process. As such, we're waiting for the next administrative steps and are or will take action accordingly as it evolves over the next couple of weeks and month. To the second part of your question with regards to the buyback, yes, we do have $200 million available for buybacks.

[Ivica Krolo, CFO at Birkenstock]

It was originally the intention to use the buyback in conjunction with a sale by our majority shareholder, as we did last year. Clearly, we have not had that opportunity this year. As we get now into our seasonally strong cash generation period, we consider definitely all options available to us, including open market repurchases.

[Operator]

Your next question comes from the line of Janine Stichter with BTIG. Janine, your line is now open.

[Ethan Saghi, Analyst at BTIG]

Hey, morning. You've got Ethan on for Janine. Thanks for taking our questions. We've noticed a higher SKU count offered at a discount on your website. Could you just give us some insight into what's driving this? Just how much of closed-toe penetration is the Boston right now, and what is growth in the Boston versus non-Boston silhouettes? Thank you.

[Nico Bouyakhf, President of EMEA at Birkenstock]

Hey, this Nico. Thank you for your two questions. I'm gonna answer both of them. With regards to your first one, at an overall industry level, we do see higher markdown activities as retailers are currently competing for more constrained consumer wallet. In this context, we continue to deliver a superior full price realization at over 90%. This underlines the strength of our brand, but also this underlines our markdown discipline. Any active markdown we do is to effectively manage our real seasonal excess stock as the business continues to grow. As a reminder, and Ivica alluded to that, 80% of our business is core essentials and carry-over product, so season-less product. Our markdown assortment is centered around past seasons. Yes, there will be moments you may see some increase in discount items.

[Nico Bouyakhf, President of EMEA at Birkenstock]

This is by design and doesn't really break our full price realization, which will continue to be very strong. The second question was around closed-toe and Boston. We haven't given the closed-toe share of Boston. We'll also not give it in the future. What we can say is that the Boston silhouette and its variations remain a major part of our closed-toe business. At the same time, non-Boston silhouettes grew at a much higher pace than Boston. Again, it's not one at the expense of the other. We are really diversifying our portfolio. Currently, 11 out of 20 top styles are closed-toe, seven are clogs, like the Boston, the Naples, Tokio, Buckley. Four are traditional shoes, like the London, the Highwood, the Ooty, and the Bend.

[Nico Bouyakhf, President of EMEA at Birkenstock]

It's worth mentioning that also recent archive bringbacks, like our Santa Clarita, our ballerina style, are quickly gaining shares. You see that we are much more diversifying our closed-toe business and have become a very strong full-year brand.

[Operator]

Our next question comes from the line of Adrien Duverger with Goldman Sachs.

[Adrien Duverger, Analyst at Goldman Sachs]

Hey, thank you very much for taking my question. I think we've spoken at length about the EMEA. We've spoken a bit about the DTC channel. I was wondering if you could help me understand better the consumer environment across other regions. More specifically, could you comment on the U.S. and on APAC, maybe help us understand the path to doubling revenue in that APAC region. Thank you very much.

[Oliver Reichert, CEO at Birkenstock]

Thank you for your question, Adrien. It's Oliver again. The APAC grew at twice the pace of the other segments. That's in line with our expectations, and with D2C, especially retail leading the growth, which is super important in this region. It's a very high qualitatively growth. This has continued despite all the conflicts in the Middle East. The demand remains very strong, the ASP was up double digits as consumers, they continue to gravitate to higher price points. That's pretty unique in the APAC region, it's including a lot of our 1774 collection. If you go to a store in China, or even India, you see a lot of very high-priced products, making the somehow the baseline there. In the Americas, our business remains super strong. We see no slowdown in our growth.

[Oliver Reichert, CEO at Birkenstock]

We see continued strong full-price sell-through at key partners, with many up around 30%. In and DTC, our stores continue to perform very well, especially our newer stores like Sawgrass. Keep in mind, the beauty of Birkenstock is that even if we start to see consumers tightening up their spendings, we are an affordable luxury brand. We serve a broad range of price points, starting as low as $50, if needed. The beauty of our business model is that we can lean into stronger markets, stronger channels, and stronger product categories when we see softness elsewhere. Between us, Adrien, this is engineered distribution in real time.

[Operator]

We are at time. There are no further questions at this time. I will now turn the call back to Birkenstock's executive team for closing remarks.

[Megan Kulick, Director of Investor Relations at Birkenstock]

Thanks for joining us, guys. If we didn't get to your questions, I apologize. We will follow up with you in our follow-up calls. Take care, everyone.

[Oliver Reichert, CEO at Birkenstock]

Thank you.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Ivica Krolo, CFO
• Megan Kulick, Director of Investor Relations
• Nico Bouyakhf, President of EMEA
• Oliver Reichert, CEO

Analysts

• Adrien Duverger, Analyst at Goldman Sachs
• Dana Telsey, Analyst at Telsey Advisory Group
• Ed Aubin, Analyst at Morgan Stanley
• Ethan Saghi, Analyst at BTIG
• Laurent Vasilescu, Analyst at BNP Paribas
• Lorraine Hutchinson, Analyst at Bank of America
• Mark Altschwager, Analyst at Baird
• Matthew Boss, Analyst at JPMorgan
• Michael Binetti, Analyst at Evercore ISI
• Simeon Siegel, Analyst at Guggenheim Securities