Birkenstock missed quarterly profit expectations, with its shares dropping 12% in premarket trading.
The German sandal maker’s global expansion and increased production capacity led to a decrease in its gross profit margin, which fell by 220 basis points to 59.5% in the third quarter.
Despite strong demand and a 15% revenue increase in the Americas and a 19% rise in Europe, overall revenue growth slowed compared to the previous quarter.
The company’s adjusted profit was 0.49 euros per share, below the expected 0.52 euros. Birkenstock’s revenue rose 19.3% to 564.8 million euros, just short of the forecasted 565.2 million euros.
The company is investing in new manufacturing facilities and expanding its presence in markets like India and Japan, which has contributed to its margin compression.
Despite the profit miss, analysts view the situation as a result of Birkenstock’s growth investments rather than brand health.
The company’s stock has increased by 24% this year, and it has continued to gain market share at major retailers. Birkenstock has maintained its annual sales and core profit forecasts.