How to Join Michael Burry’s Birkenstock Bet
I have highlighted the K-shaped economy consistently over the past year or so on these pages.
Over the past several quarters, consumer sentiment has hovered near its lowest level since the University of Michigan started tracking this reading monthly in 1952. Most consumers were challenged by five years of elevated inflation before the conflict with Iran commenced nearly seven months ago. Those hostilities have triggered a spike in energy and commodity prices that have made the situation worse. Higher interest rates are pushing housing affordability near record-low levels again.
My regular readers know I have been quite underweight consumer facing industries for a long time now. Today, I am going to make an exception around a trade idea on one of the newest editions to my personal account.
There are few financial commentators that are more bearish around the overall market than I currently am. One notable exception is Michael Burry, of “The Big Short” fame. He was out again this week highlighting his concerns around an AI bubble.
However, Burry does have some long positions in the market despite his bearish stance.
One of these is Birkenstock Holding plc ($BIRK), a well-known retail name that values functional comfort over fashion. Birkenstock is headquartered in London, even as it is a legendary German brand. The company executed a U.S. listing in the fourth quarter of 2023. The stock ground nicely higher through yearend 2024.
2025 ushered in a new administration, which radically changed longstanding tariff policies which disrupted global trade. Most of Birkenstock’s materials are sourced from Europe, even as it gets roughly half of its overall sales from the United States, 40% is from Europe and rest from the APAC region. It also should be noted that private equity firm L Catterton sold a big chunk of its shares in Birkenstock in mid-August, but remains a large and controlling shareholder.
The stock is off just over 40% from its post U.S. listing highs, being one of myriad retailers that have been more than challenged by the recent economic backdrop. That said, the company has delivered solid revenue growth despite the challenging environment. In its last reported quarter, revenues grew sales in the mid-teens in the U.S. and EMEA. The company is expanding its footprint in Asia, with a focus on India and China. This region saw sales growth of 23% last quarter. Birkenstock plans to open 170 new stores in the region, both company owned and with partners, by 2028.
Birkenstock is best known for its flagship open-toed sandal, something every hippie in good standing in the 1970s had at least one pair off. However, its recent growth is being driven closed-toe footwear products. This segment made up nearly 40% of overall sales in FY2025 and experienced 40% sales growth last year.
The current analyst firm consensus has profits growing just 3% this year to $2.23 a share on 9% sales growth. They see growth accelerating significantly in FY2027 as the company’s initiatives pay off. EPS is projected to come in just under $2.80 a share on sales growth in the low 20s. The stock is trading at around 12-times FY2027E EPS. The company’s balance sheet is in good shape with leverage under two times.
I would not mind owning shares straight out like Burry, but the covered-call trade below will either give the shares with a lower entry or generate a decent return even if the stock trades down 10% over the option duration.
Option Strategy
Here is how one can initiate a position in BIRK utilizing a covered-call strategy. Selecting the April $30 call strikes, fashion a covered call order with a net debit in the $26.75 to $27.25 a share range (net stock price – option premium). This strategy provides downside protection of 19% over the trade’s duration. This strategy also provides 11% return potential.
At the time of publication, Jensen was long BIRK.
