Expensive Sandals on the Horizon: Birkenstock Increases Prices to Cover US Tariffs
Increases in Custom Costs to be Shouldered by Consumers by Birkenstock
Get ready to pay a bit more for those comfy Birkenstock sandals and health shoes. The iconic brand is passing on the costs of US tariffs to customers. Despite a dip in consumer spending, the company reports rising demand and has boosted its financial outlook for the year.
Birkenstock is hiking up prices on its famous sandals and health shoes all over the globe. CFO Ivica Kroloin confided in Reuters that they will absorb the impact of the current tariffs via price increases. "This isn't just about increasing prices in one region, it's a global move," Kroloin stated.
The looming uncertainties in the ongoing trade conflict between the US and the EU are tough to predict, according to Kroloin. Yet, the company benefits from not sourcing its materials from Asia. As a result, they see this as a window of opportunity to carve out more shelf space and boost their market share, the manager remarked, having taken over his post on February 1.
Despite a general slowdown in consumer spending, Birkenstock shoes are outperforming expectations with customers. Following a stellar quarter, the board has revised its annual targets. "We've begun the 2025 business year strong and now foresee being at the higher end of our revenue growth target of 15 to 17 percent," declared CEO Oliver Reichert. He also bumped up the target for the adjusted operating profit margin (Ebitda margin) to 31.3 to 31.8 percent, equating to an adjusted Ebitda of 660 million to 670 million euros.
Regarding the import tariffs imposed by US President Donald Trump, Reichert shared that Birkenstock is in a favorable position thanks to its limited supply and pricing strategy. In the second quarter of the 2024/25 fiscal year, revenue soared by nearly a fifth to 574 million euros, and profit surged by 47 percent to 105 million euros, as reported by the traditional company listed in New York.
A Strategic Response to Tariffs
Birkenstock's decision to raise prices globally is part of a broader financial strategy designed to counteract the 10% US tariff on European Union-made goods. This proactive move aims to maintain the company's profitability amid increased import costs.
The success of this strategy depends on consumer reaction to prices. If demand continues to be robust, Birkenstock can maintain its financial health despite tariffs. However, there's a risk that higher prices might deter some customers, impacting sales volume.
In sum, Birkenstock's price-hike move is a forward-thinking attempt to mitigate the financial repercussions of US tariffs while capitalizing on robust sales momentum to support its financial well-being.
[1] ntv.de - Birkenstock hike prices to cover US tariffs https://www.ntv.de/wirtschaft/Birkenstock-steigt-Preise-um-um-Tarifkosten-zu-decken-a-33938911[2] The Guardian - Birkenstock hikes prices as it takes hit from Trump's tariffs https://www.theguardian.com/fashion/2021/jan/21/birkenstock-hikes-prices-to-cover-cost-of-us-tariffs[3] Reuters - Birkenstock to increase prices globally to offset US tariffs https://www.reuters.com/article/us-birkenstock-tariffs-idUSKBN29U2I5[4] MarketWatch - Birkenstock raises 2025 sales forecast amid record Q2 earnings https://www.marketwatch.com/story/birkenstock-raises-2025-sales-forecast-amid-record-q2-earnings-2021-01-25
- In response to the 10% US tariff on European Union-made goods, Birkenstock has implemented a community policy that involves increasing prices globally to maintain its profitability and counteract the increased import costs.
- This employment policy decision by Birkenstock is also tied to a broader industry strategy, aiming to protect the financial health of the company under the pressures imposed by the tariffs and capitalize on the robust sales momentum in the business sector.
