Birkenstock's US Expansion Has Significant Upside With Fewer Than 10 Stores Today, Analyst Says

J.P. Morgan analyst Matthew R. Boss reiterated an Overweight rating on the shares of Birkenstock Holding PLC BIRK and shared key insights from a meeting with management.

BIRK ended first quarter FY25 with 71 owned stores globally, including just 9 in the U.S. Management plans to open locations in Nashville and Houston this month, aiming for 14 stores by year-end.

Key focus areas for new stores include regions with hybrid work growth, large college areas, and destination locations.

Management intends to accelerate U.S. store openings, aiming for 25-30 by 2027, surpassing IPO expectations. Store openings typically boost nearby e-commerce sales.

BIRK aims to expand its direct-to-consumer retail stores from 71 globally (including 9 in the U.S.) to approximately 150 by FY27.

Plans include doubling the European fleet, focusing on key destinations like Milan and Madrid, adding 20-25 stores in the U.S. with small square footage, and targeting key cities in APMA.

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Management expects U.S. brick-and-mortar retail to contribute ~€120 million ($130 million) in incremental revenue from 25 new stores over the next three years.

Additionally, the company anticipates double-digit growth in digital sales in the U.S., driven by a 30% increase in DTC membership and higher member spending.

By FY27, total Americas DTC revenue is projected to reach €630 million, with a +16% CAGR. Globally, DTC revenues are expected to grow 19% by FY27, capturing a larger share of total revenues.

For the second quarter, management anticipates balanced growth between DTC and wholesale channels, with DTC outpacing wholesale in third-quarter and fourth-quarter.

Birkenstock’s Miami Design District store, opened in December 2023, is the fifth U.S. location, featuring 2,795 sq. ft. of space.

It leads the U.S. fleet in sales per sq. ft., with higher UPT and AOVs compared to other stores. To engage the local community, the store launched digital and local marketing campaigns, including a collaboration with Concepts.

Price Action: BIRK shares traded higher by 1.42% at $44.26 at last check Monday.

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