Birkenstock's Preliminary Q1 Revenue Shows Strong Growth but Leaves Key Risks Unaddressed

What happened

Birkenstock announced preliminary fiscal first-quarter 2026 revenue of €402 million, with 17.8% year-over-year growth in constant currency, though reported growth was 11.1% due to U.S. dollar depreciation. This performance aligns with the double-digit growth highlighted in the DeepValue report as necessary to justify the stock's premium valuation. However, the report notes that Birkenstock trades at approximately 24x trailing EPS and 17x EV/EBITDA, reflecting aggressive expectations for sustained high growth and margin resilience. Critical risks such as material weaknesses in internal controls, exposure to new U.S. tariffs on EU-made products, and design-copy threats remain unresolved, as this release only covers top-line figures. Consequently, while the revenue growth is positive, it does not yet shift the cautious 'WAIT' stance without evidence on margins or risk mitigation.

Implication

For investors, the 17.8% constant currency growth reinforces Birkenstock's ability to deliver on its double-digit guidance, potentially reducing growth-related uncertainty in valuation models. However, the absence of margin data leaves questions about profitability amid tariff pressures and cost inflation, which could compress EBITDA margins from their current high levels. Persistent material weaknesses in internal controls and a leveraged balance sheet with Tax Receivable Agreement obligations continue to pose governance and financial risks that could undermine long-term stability. Valuation remains elevated at roughly 80% above conservative DCF estimates, requiring flawless execution on growth and margins to justify current prices. Therefore, this news should be viewed as a preliminary positive signal, but investors must await full quarterly results and progress on risk factors before considering a more bullish stance.

Thesis delta

The preliminary revenue growth meets the 'Execution vs. guidance' watch item from the DeepValue report, suggesting a step toward potential de-risking if sustained. However, without confirmation of margin resilience or improvements in governance and control weaknesses, the core 'WAIT' thesis remains unchanged, as overvaluation and structural risks persist. Investors should monitor upcoming full financial results for signs of comprehensive execution before reassessing the investment stance.