Birkenstock warns of higher costs from tariffs, Middle East conflict

By Savyata Mishra

May 13 (Reuters) - Birkenstock BIRK.N warned of rising cost pressures in the second half from U.S. tariffs and the Middle East conflict, even as strong full-price demand helped the German sandal maker maintain its annual forecast.

The comments echo broader challenges across the apparel and sportswear sector, with companies such as Nike NKE.N and Under Armour UAA.N also grappling with rising costs and a more cautious consumer backdrop.

Shares of Birkenstock were down more than 8% in early trading after the company also missed second-quarter results estimates.

It recorded a 6 million euros ($7.02 million) hit to its Europe, Middle East and Africa (EMEA) segment during the quarter, as the company was unable to ship some deliveries into the region and due to muted consumer sentiment linked to the war.

To mitigate the disruption, the company is rerouting shipments to regions with stronger growth, such as the Asia-Pacific, and reallocating inventory.

TARIFFS OVERHANG

Birkenstock is also contending with higher tariffs, mainly due to changes in U.S. trade policy over the past year. The company's average tariff burden has risen from roughly just over 10% earlier to above 20% currently, executives noted on an earnings call.

“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.

"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.

Revenue growth at the company 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%.

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 posted quarterly revenue of 618.3 million euros, missing analysts' average estimate of 620.07 million euros, according to data compiled by LSEG.

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.

Birkenstock stuck by its fiscal year 2026 forecast of 13% to 15% constant-currency sales growth. Analysts on average were anticipating growth of 11.32%. Its annual profit forecast of 1.90 euros to 2.05 euros per share was also reiterated.

($1 = 0.8546 euros)