Birkenstock raised its annual revenue and core profit forecasts on Thursday as the German sandal maker bets on full-price selling and strong demand for its cork-based sandals and newer closed-toe styles, sending its shares up 10 percent premarket.

Most wholesale retailers are still stocking up on in-demand Birkenstock products despite a wider effort to cut back on inventory as demand for discretionary items such as footwear remains under pressure.

Birkenstock has also been expanding its own store base to boost full-price selling in its direct-to-consumer channel, where its products are sold largely above the average selling price at wholesale shops.

This helped second-quarter DTC revenue grow more than 30 percent, while wholesale revenue rose 19.2 percent.

Birkenstock’s closed-toe footwear has been growing in popularity, with the category bringing in more than a quarter of the company’s total second-quarter revenue, compared with a high-teens percentage a year earlier.

The company now expects fiscal 2024 revenue between 1.77 billion euros and 1.78 billion euros, up from a prior forecast of 1.74 billion euros to 1.76 billion euros.

It forecast annual adjusted earnings before interest, taxes, depreciation, and amortisation between 535 million euros and 545 million euros, up from 520 million euros to 530 million euros expected earlier.

However, Birkenstock’s quarterly adjusted EBITDA margin was down 470 basis points to 33.7 percent due to pressures from its plans to expand globally and invest more in production.

“Investors are focused on the impact of this DTC expansion ... if that is done successfully it will reduce the volatility in the business which traditionally comes with wholesale exposure and they will have a stronger control over the brand,” said Javier Gonzalez Lastra, luxury-focused portfolio manager at Tema ETFs.

Birkenstock’s second-quarter revenue rose 21.6 percent to 481.2 million euros ($520.23 million), compared with LSEG estimates of 466.1 million euros. Adjusted profit per share came in at 0.41 euros, beating estimates of 0.36 euros.

By Ananya Mariam Rajesh; Editing by Devika Syamnath

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Birkenstock Posts Strong Earnings With Sandal Demand Growing

Birkenstock Holding Plc’s earnings beat analysts’ estimates as consumers snapped up its high-end sandals and clogs while other casual footwear makers struggled.

Fara Homidi, the cult “cool girl” cosmetics label endorsed by models Paloma Elsesser, Adwoa Aboah and Hailey Bieber, is going wide thanks to a tie-up with Sephora.

Starting June 1, consumers will be able to shop the brand’s lip and complexion compacts on the retailer’s e-commerce channel with a brick-and-mortar entrance slated for next year, the company announced Wednesday.

Sephora will be the brand’s largest retailer in terms of distribution after having also inked partnerships with Goop, Violet Grey, Dover Street Parfums Market and Moda Operandi since the business’ launch in March 2023.

The label’s founder, makeup artist Fara Homidi, describes the brand as “slow beauty” — her team plans to establish a cadence of one or two launches a year. She added that the label is uniquely positioned to enter Sephora at this time, following her participation in the retailer’s Accelerate programme in 2022.

”We wanted to start small with retailers that live in a fashion adjacent world,” said Homidi. “Launching in Sephora means we’re more established, we’ve proven ourselves, the brand has legs and we can bring it out into the world in a bigger way.”

Homidi said the brand’s light blue and red refillable packaging and a focus on “simple and utilitarian beauty routines” that are centred on complexion products will help it stand out among Sephora’s crowded marketplace. The label’s products are priced between $36 and $298. The company is projected to grow its sales at a rate of 400 percent in this year and expects to reach $15 million in sales in 2025.

Despite launching in the prestige retailer, Homidi still wants to make the brand’s consumers feel part of the inner circle. Last year, the label launched a loyalty programme, FH Friends, in which returning shoppers are automatically enrolled and are eligible for discounts, offered sneak previews and can attend the brand’s launch parties alongside its muses, including Elsesser.

The self-funded beauty brand has plans to expand internationally to markets in the Middle East as well as the UK and Australia in the next few years and is open to raising capital or a possible acquisition in the near future.

”As a brand, we’re focused on making beauty feel more personalised,” said Homidi. “I’m not putting out products that are frivolous or trendy but products that are meant to last the test of time.”

Glossier wants to reach more people.

On July 16, the Millennial beauty brand will launch in 70 Mecca locations across Australia and New Zealand, as well as on Mecca’s e-commerce site.

Despite being a decade old, Glossier only started to make inroads into the market in October 2023 when it launched its e-commerce operations there. Still, a greater desire for its Cloud Paint blush, Balm Dot Com lip salves and Boy Brow pomade by local shoppers remains long-awaited.

“Even if there are other exciting brands that have launched in the last 10 years, there’s still a lot of nostalgia [for Glossier],” said Sarah Tarca, co-founder of Australian beauty newsletter Gloss Etc. “We’re finally getting something that we’ve wanted for a long time.”

For years, the only way to shop Glossier was online with the brand directly, or in one of its 12 experiential stores – earlier this month, it launched its latest outpost in Las Vegas – which feature signature touches like staff in pink jumpsuits, location-specific merchandise and Instagrammable interiors. A longtime wholesale holdout, Glossier partnered with wholesalers just last year, when it launched into Sephora US in February 2023; a rollout into its UK stores followed in October.

Mecca will be creating in-store experiences to herald its Glossier debut, with activations like pop-ups and store takeovers planned. “Australia will be turning pink,” said Marita Burke, who leads Mecca’s new business division, Mecca-Maginations, referring to the brand’s signature pastel shade.

“We’re going to harness the enthusiasm of our store teams. They’ll be the ones that bring the products to life,” she said, adding that Mecca has been courting Glossier since 2016.

Kyle Leahy, Glossier’s chief executive, said that half its three million Instagram followers are based outside of the US. Australia was on the “top of the list” when it came to key untapped markets, alongside others such as Germany.

While Glossier’s core value propositions, which include its community ethos and cool-girl aesthetic, have been replicated by many newer brands, Burke is betting on its disruptive appeal: “I feel confident we’ll still continue to play that card.”

Mecca Muscle

While owned brick-and-mortar stores were once Glossier’s calling card, it’s taking a different approach for its wider Antipodean rollout by banking on the clout of Mecca, an enduringly popular retailer in the market.

“Mecca has the dominance and the loyalty in the market,” said Tarca, adding that the store is popular with younger cohorts like Gen Alpha and Gen-Z as well as Baby Boomers. “They’ve done a phenomenal job at building that brand and tapping into what the Australian consumer wants.”

Mecca also has a first-mover advantage. Founded in the 1990s by Jo Horgan, the store launched mega brands such as Nars and Drunk Elephant in the market, helping to circumvent logistical challenges for international companies by acting as an importer, distributor and brand manager for many of its labels, as well as a retailer.

LVMH-owned Sephora, while a global behemoth, didn’t launch in Australia until 2014, by which point, Mecca already had a wide network of stores and strong, exclusive relationships with a number of international lines – it operates 110 stores throughout region, four times larger than Sephora’s footprint, and more than the two biggest domestic department stores, David Jones and Myer, combined.

Leahy said while Sephora is a key partner in the US and UK, Mecca made sense for Australia and New Zealand.

“We meet the customers where they are,” she said. “[Mecca] is right for the Australian customer and right for the Australian market. [It] brings brands to life … it was the best [option] that allows us to tell the Glossier story in the most impactful way.”

Local Competition

Despite not being present until recently, Glossier still enjoys brand recognition in the market, said Jessica Beresford, a New Zealand-based contributing editor at the Financial Times’ lifestyle supplement, HTSI. “People were really excited about it even when we couldn’t get it,” she said, adding that many shoppers would use roundabout shipping methods or employ friends and family overseas to bring it back. Part of its appeal is its American-ness, she said. “The US influences Australia and New Zealand more than other countries.”

However, other international brands have been quicker off the mark. Kosas, Westman Atelier and Ilia are all already available in Mecca, while Sephora’s Australian outposts offer Rare Beauty and Fenty Beauty. Domestic brands like Go-To Skincare, Alpha H and Kora Organics are also popular.

Tarca mentioned one of Mecca’s in-house brands, Mecca Max, offers a popular brow gel at $18 AUD, a cut under Glossier’s at $37 AUD.

“It will be more of a challenge [now],” said Beresford, but added that she thinks Mecca’s popularity as a homegrown company could help boost Glossier’s presence. Burke added that Glossier still has a unique advantage. “It [offers] a suite of the essentials … it’s a very contemporary approach,” she said.

Glossier Grown Up

In Glossier’s early days, it was characterised almost more by its strategic choices – no wholesale, community-led approach, simple products – than by its assortment, but none more so than by being DTC only.

Selling exclusively through its owned channels allowed the brand to create a coherent and cohesive universe of colours, language and brand magic that set it apart. But as the label closes out its first decade, it’s outgrown those roots.

Adding wider global wholesale distribution helps to edge Glossier closer to ubiquitous territory. It’s launching in a second UK retailer, Space NK, in June, and in addition to Australia and New Zealand, its international shipping expansion in October means the company now also ships to over 180 countries, including Germany, Spain, Italy, Netherlands, Mexico, and India. “We’ve been playing in really less than a quarter of the beauty industry,” said Leahy.

As its retail expansion ramps up, more unexpected steps like increased wholesalers could follow, especially as Glossier looks for a prospective buyer; the brand reportedly has hired Morgan Stanley to explore its exit options.

“We feel we can really bring the brand to life through strategic partners in the right markets,” Leahy said. “We have to let the customer shop where they want to shop.”

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Last week, while people online buzzed about the mishaps in Google’s new AI-generated search results, like its suggestion to add glue to tomato sauce on pizza to keep the cheese from sliding off, the tech giant revealed some other notable AI news.

Those AI-generated results will soon include ads, the company said. It also unveiled a number of other AI features.

A new ability in its Product Studio, which can generate a realistic background behind a standard product shot, now allows brands to tailor the result to their brand aesthetic by letting them upload a reference image representing their style. One of three new ad formats integrates Google’s AI-powered virtual try-on into ads for apparel, giving shoppers a glimpse of what a product would look like on different body types without the brand needing to photograph its item on different models. (For now it’s only available in ads for men’s and women’s tops.) Another uses AI to create spinning 360-degree views of a product from a set of still images.

Since generative AI’s abilities captured widespread attention, Google and numerous other tech companies from Meta to Salesforce have raced to bundle AI of all kinds into more of their products. The audience for these features isn’t just the general internet-using public. It’s also marketers willing to spend on tools that make it easier to create ads that grab shoppers.

Tech companies have good reason to appeal to them. Their money fuels much of the industry. In Google’s most recent quarter, about 77 percent of its revenue came from companies paying to advertise on its properties, including YouTube.

The big money in AI might even be in convincing brands and retailers to use AI tools that can help them better sell their products.

Last week, Salesforce similarly expanded the capabilities of its conversational AI assistant, Einstein, to let marketers generate briefs, content and campaign emails. TikTok, meanwhile, announced an automation feature where advertisers input their content, budget and goals and the platform will automatically choose the best asset and serve it to the target audience at the best moment.

Earlier in the month, Meta announced its own enhancements to its generative-AI tools for advertisers, first introduced last October. The company described in a release how a coffee-bean business with an ad depicting a steaming cup of coffee can now use its generative AI to produce variations on the ad, “including scenery that embodies a lush and idyllic farm, and also provide adjustments to the coffee cup to offer you more creative options.” In Meta’s most recent quarter, roughly 98 percent of its revenue came from advertising.

While generative AI has its shortcomings — like its inability to sort fact from fiction when answering a question, leading to fears it’s been overhyped into a bubble waiting to burst — the technology is already adept at simple creative tasks, such as producing backgrounds for campaign imagery. For that reason alone it seems set to have an impact on the advertising business and is raising concerns about how it could affect creatives in the industry. In one 2023 survey by Gartner, 63 percent of marketing leaders intend to invest in generative AI over the next two years.

Those already announcing plans include some of the biggest names in the business. Publicis, one of the world’s largest advertising and communications agencies, has pledged to invest €300 million euros ($327 million) in AI over the next three years. Another advertising giant, WPP, announced a partnership with Google Cloud in April that it said would allow its clients “to create brand- and product-specific content using gen AI, to gain deeper insights into their target audiences, to accurately predict and explain content effectiveness, and to optimise campaigns with ongoing adaptive processes.”

Of course, brands and retailers need to want to use these tools for them to have an impact. The early indications, according to a new Bain & Company report, are that they’re at least beginning to.

“Retailers are likely to have experimented already with using generative AI to enhance and streamline their marketing efforts—with promising results,” it stated.

The firm estimated that uses of generative AI for marketing tasks from translating or repurposing content to creating dynamic, personalised landing pages could boost marketing productivity by as much as 40 percent.

It’s little wonder retailers would be eager to at least give the technology a try. They’re battling high costs to acquire shoppers online and the demands of producing content for several different channels as they try to break through the noise and catch shoppers’ attention for even a moment. (The pressures are contributing to the growing importance of loyalty programmes that can retain existing customers and drive repeat purchases.)

Whether generative AI can deliver on all its promises remains to be seen. In the meantime, it looks set to be a target for spending by marketers seeking any advantage they can.