German footwear manufacturer Birkenstock Holding Plc. (NYSE: BIRK) posted strong 3Q 2025 performance last week, with adjusted earnings of €0.62 per share (up 27% y-o-y) topping the market estimate of €0.60 per share. The company delivered a solid top-line of €635 million (+12% y-o-y) underpinned by robust product demand globally, strong pricing power, and favorable product and channel mix. On the back of these results, management reaffirmed its full-year guidance for revenue growth and adjusted EBITDA margins, signaling confidence in its business momentum despite macroeconomic challenges.
However, the investors appeared cynical about the company’s long-term growth strategy and the potential impact of the new U.S. tariff regime on its margins, causing the stock to slip by almost 5% immediately after the earnings release. Though the stock has bounced back, the initial pullback highlights a disconnect between the company’s strong fundamentals and market skepticism. Let’s analyze Birkenstock’s third quarter performance to assess whether the market reaction was justified or an overreaction.
Double-Digit Growth Across Geographies
Birkenstock is known for its iconic footbed design which promotes foot health and comfort. The company offers a range of products, which include sandals, shoes, closed-toe silhouettes, skincare products, and accessories. The London-based company reported 3Q revenue of €635 million, a solid growth of 12% y-o-y (16% on a constant currency basis), driven by healthy growth in volume and higher average selling price (ASP).
Birkenstock is a well-diversified company with significant operations in the U.S., Europe, and the Asia-Pacific region. The company witnessed strong demand for its products across all segments, channels and categories, delivering double-digit revenue growth across geographies. The Americas segment revenue jumped 10% to €312 million, driven by strong demand from the U.S. retailers. The company expanded its retail footprint with new stores in Houston, Deer Park, and Naperville, bringing the total number of own stores to 13 in the region.
EMEA region, which includes Europe, Middle East, and Africa, recorded revenue of €259 million, up 13% y-o-y owing to double-digit growth in both B2B and DTC channels. Store openings in the Hague and San Sebastian increased the EMEA store base to 39. The Asia Pacific region grew the fastest with its revenue increasing 21% y-o-y to €63 million driven by eight new store openings that lifted the regional total to 38 stores. The company also expanded its mono-brand partner stores by over 20% in the region.
On profitability, Birkenstock’s gross margin expanded by 100 basis points to 60.5% y-o-y due to price adjustments and better absorption of manufacturing capacity, partly offset by unfavorable currency translation and channel mix. Adjusted EBITDA rose 17% y-o-y to €218 million, with margin improving to 34.4% versus 33% a year ago. Net profit surged to €129 million, up 73% y-o-y while the adjusted net profit increased 26% y-o-y to €116 million, underscoring strong operating leverage.
Creating Shareholder Value
At the end of 3Q 2025, Birkenstock held cash and cash equivalents of €262 million against a total debt load (including lease liabilities) of €1.37 billion. Cash flows from operations dropped slightly to €261 million due to the timing of tax payments and working capital movements. The company invested €22 million in capital expenditure in 3Q to expand its production capacity and enhance operational efficiency.
Further, BIRK repurchased 3.9 million shares for €176 million, reducing the outstanding share count to 183.9 million at the end of 3Q. This indicates the company’s commitment to consistently deliver higher value to its shareholders. Further, the company strengthened its balance sheet, bringing down its net leverage to 1.7x from 1.8x at the end of FY 2024. It aims to further delever its balance sheet and achieve its targeted net leverage of 1.5x by the end of FY 2025.
APAC To Drive Long-Term Growth
With a robust 3Q performance, Birkenstock’s management reiterated its full-year 2025 guidance, projecting revenue growth at the upper end of 15-17% range in constant currency. Further, the company is on track to achieve its adjusted EBITDA margin target of 31.3% – 31.8%, despite FX headwinds due to weakness in the US Dollar.
A key driver of this confidence is the closed-toe footwear segment, which has consistently outpaced sandals, gaining 400 bps in revenue mix during the third quarter. Sustained demand from affluent consumers, coupled with rising purchasing power and heightened focus on comfort, positions Birkenstock to further capitalize on this high-margin category. Further, APAC as a region is viewed as a growth engine, particularly for consumer brands, and Birkenstock’s solid performance in the region highlights its ability to gain much more traction in this market compared to its other mature markets.
CEO Oliver Reichert also addressed investor concerns over the new 15% U.S./EU tariff agreement. With 95% of production based in Germany, Birkenstock is better positioned than peers to absorb the impact of higher tariffs through selective price increases, disciplined cost controls, and inventory optimization. Notably, the company reported no customer pushback or cancellations following its July 1, 2025, price adjustments.
Additionally, a recently approved (July 2025) German tax reform could prove to be a crucial tailwind for Birkenstock. The new law reduces the corporate income tax rate from 15% to 10% until 2032, which could offer a meaningful upside to the company’s profitability, and shareholder return in the coming quarters.
Conclusion
Birkenstock delivered another strong quarter in 3Q 2025, highlighting the resilience of its brand, pricing power, and diversified growth model. Revenue growth was driven by robust demand across geographies and channels, while margin expansion came from the ongoing mix shift toward higher-margin closed-toe footwear. Consequently, the management reaffirmed its full-year guidance, despite macroeconomic risks such as currency fluctuations and higher tariffs. With solid fundamentals, proactive strategies to support profitability and long-term value creation, the recent market sell-off appears more of an impulsive reaction than a reflection of the company’s underlying performance.