Birkenstock misses profit estimates as expansion plan pressures margins

(Reuters) -Birkenstock missed expectations for third-quarter profit on Thursday in a sign that margins were under pressure from high costs associated with the German sandal maker’s plans to expand globally and invest more in production.

The company’s shares were down 4.4% in premarket trading.

Birkenstock (NYSE:), which is enjoying robust demand globally, has laid out plans for a worldwide expansion that include opening more stores in an attempt to boost sales from its own channels, where products are sold at full price.

The company has also invested in additional manufacturing capacity to meet the growing demand and ensure supply of its products across countries.

The temporary impact of capacity expansion resulted in gross profit margin dropping 220 basis points to 59.5% in the third quarter.

On an adjusted basis, Birkenstock earned 0.49 euro ($0.5437) per share, missing LSEG estimates of 0.52 euro.

In Europe and the Americas, Birkenstock has increased its market share at retailers such as Nordstrom (NYSE:) and Foot Locker (NYSE:), with the retailers looking to stock their shelves with top-performing and sought-after brands such as Roger Federer-backed On and Deckers’ Hoka.

Birkenstock’s third-quarter revenue rose 15% in the Americas, while it increased 19% in Europe. However, revenue growth slowed in both the regions when compared with the second quarter, signaling some level of caution from consumers.

The company’s revenue in the third quarter rose 19.3% to 564.8 million euros, slightly missing analysts’ estimates of 565.2 million euros.

Birkenstock maintained its annual sales and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) forecasts.

($1 = 0.9012 euros)