Birkenstock announced an accelerated share repurchase program.
Last week, the stock had sunk to all-time lows since its 2023 IPO.
Birkenstock looks cheap if the company maintains its current growth trajectory.
Shares of Birkenstock Holdings (NYSE: BIRK) rallied 32.3% this week through Friday, at 1:30 p.m. EDT, according to data from S&P Global Market Intelligence.
Birkenstock bounced hard off its all-time lows this week. While “all-time low” sounds bad, the company held its IPO in October 2023, so it hasn’t been public for very long.
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This week, management made it clear it believes the low stock price is unwarranted. On Thursday, Birkenstock announced an accelerated $250 million stock buyback. That message clearly resonated with investors who quickly snatched up shares on the news.
On Thursday, Birkenstock announced an accelerated share repurchase of $250 million. Birkenstock will immediately repurchase six million shares at an average price of $33.21, which accounts for 80% of the total, while the remaining 20%, or $50 million, will be used to repurchase shares through June 30.
That’s already looking like a good deal, since Birkenstock’s stock has already leaped to over $41 as of this writing. CEO Oliver Reichert said in the press release accompanying the announcement:
The $250 million accelerated share repurchase is a strong statement that we believe in near-term and long-term value of BIRKENSTOCK. Our business continues to deliver outstanding performance and we see a huge runway for growth ahead for our beloved brand. We remain confident in our ability to achieve revenue growth of 13-15% annually in constant currency, while maintaining strong margins and strong free cash flow generation.
At first glance, Reichert looks correct in his assessment, given that even after yesterday’s and today’s jump, Birkenstock only trades at 18.7 times trailing earnings. That’s a cheap valuation for a stock that plans to grow in the mid-teens for the foreseeable future.
The reason Birkenstock had gotten so cheap was last week’s earnings report, which showed just 8% revenue growth and an adjusted net profit decline of 10%. A profit decline isn’t a great sign, but the reason for Birkenstock’s declining margins was one: a huge currency headwind, and two: the impact of tariffs that were implemented a year ago.
On a constant currency basis, revenue grew a much better-looking 14%, in line with Birkenstock’s targets, while the tariff impact is likely to be one-time.
While apparel stocks haven’t looked very enticing in the age of AI, with many name brands down big from their highs, Birkenstock looks like a potential value pick for investors to buy on the cheap.
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Billy Duberstein and/or hsi clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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