The news: Birkenstock said its three plant projects in Germany and Portugal are running to plan. The company also said it remains on track for the 10% annual unit growth it set out in January. Work at Wittichenau, Arouca and Görlitz “is progressing according to plan,” CFO Ivica Krolo told analysts on the fiscal third-quarter call earlier this month.
The company spent about €26 million on capital projects in the quarter, most of it on production capacity, according to its release. Revenue rose 13% to €720 million, or 15% in constant currency.
The target dates to early 2024, when CEO Oliver Reichert said Birkenstock would double production capacity within three years. “It’s not just a slight increase,” he said. “It’s a doubling of the whole thing.”
Birkenstock makes almost everything itself. Every footbed is made in Germany and 95% of pairs are assembled in its own German plants, per the Capital Markets Day deck it filed in January. Its filings show what adding owned factory capacity costs a brand in margin, and for how long.
What changed: Between fiscal 2023 and fiscal 2025, Birkenstock grew volume 25% and production hours 50%, per the deck. It added about 1,400 employees, raised capacity for its foam and polyurethane products by more than half and doubled its clog output.
Most of that came from Pasewalk, a plant built from scratch in northeastern Germany that made about 10 million pairs in fiscal 2025. In Arouca, Portugal, a component plant Birkenstock bought and scaled went from 100 workers to 800.
Three more projects follow:
Görlitz, Germany: an extension that moves footbed-making and final assembly into existing halls, adding 30% footbed capacity. Go-live is fiscal 2026, which ends in September.
Wittichenau, Germany: a former furniture factory Birkenstock bought in October 2025 for €18 million, with about 78,000 square meters of production and logistics space. The first phase makes footbeds, sandals and clogs. Go-live is fiscal 2027.
Arouca: an extension for leather components, due in fiscal 2027.
Through fiscal 2028 the company targets 10% unit growth a year and 15% growth in production hours, because closed-toe clogs and shoes take more minutes per pair than sandals. Birkenstock sold 38 million pairs in fiscal 2025, up from 30 million in fiscal 2023.
How it works: A new plant pays its fixed costs from the first day, while output takes quarters to build, so each pair made early carries more overhead. Birkenstock’s filings call that under-absorption.
Gross margin fell to 58.8% in fiscal 2024 from 62.1% a year earlier. The company attributed the 330-basis-point drop mainly to “the planned, temporary under-absorption from ongoing capacity expansion.”
In fiscal 2025, the margin rose 30 basis points to 59.1%, helped by price increases and “better absorption of manufacturing capacity,” per the annual report. In the quarter just reported, absorption added 50 basis points to adjusted gross margin, Krolo said, while product mix cost 40.
Gross margin still fell 140 basis points in the quarter, to 59.1%. The drag now is tariffs, at 70 basis points, currency, at 60, and a 20-basis-point mark-up to cost of sales from buying its Australian distributor, per the release.
Krolo expects a blended US tariff rate of “just over 15%” in the fourth quarter, under the EU agreement and the new Section 301 duties. That is below the rate under the expired Section 122 surcharge, so tariffs should be roughly neutral year over year.
Birkenstock is also buying plants rather than building them where it can. The deck says brownfield sites, meaning vacant industrial buildings, cut both capital cost and time.
Wittichenau is planned at about a year from purchase to production, while the Arouca extension, built on bare land, takes two. Capex is guided at €110 million to €130 million this year, about 5% of revenue by our arithmetic, against about 4% in each of the past two years.
More than 70% of units are contracted by wholesale partners five to nine months ahead, and 85% are carryover styles, per the deck. That, the company says, lets it preproduce and balance production.
The pattern: Birkenstock is one of four premium brands to add owned factory capacity in a high-cost home country in the past 14 months.
Hermès broke ground in June 2025 on its 26th French leather workshop, in Charleville-Mézières, which will employ 250 artisans when it opens in 2027, with three more French sites under development.
Brunello Cucinelli is adding two outerwear plants in Italy, at Penne and Gubbio, with room for up to 650 tailors. It puts 2025 capital spending at about 10.5% of revenue, per Il Sole 24 Ore. It said it has no intention of moving production outside Italy.
New Balance opened a $65 million, 120,000-square-foot expansion of its Skowhegan, Maine, plant in September 2025 that doubles the factory's capacity.
All four sell at premium prices. Adidas and Nike, the two largest athletic brands, make nearly all of their shoes through contract factories in Asia.
The counter: Adidas ran the same bet and reversed it. It opened automated Speedfactories in Ansbach in Germany, and Atlanta. But it closed both by April 2020 and moved the technology to its Asian suppliers, saying it expected better use of existing capacity and more flexibility in product design.
Adidas made 92% of its 2025 volume in Asia, with Vietnam at 27%, Indonesia 18% and China 16%, per its annual report. Nike said last year it would cut China’s share of its US-bound footwear to a high single-digit percentage from about 16%.
Birkenstock’s own targets need 15% more production hours for every 10% more pairs. Capital spending is rising again after two years near 4% of revenue.
Morgan Stanley’s Edouard Aubin asked on the call how many pairs the existing plants could make in a year, and when new factories would be needed. But Krolo restated the 10% unit target and gave no ceiling.
What’s next: Görlitz is due to go live before the fiscal year ends in September. And full-year results come in December, with the first full quarter at the tariff rate Krolo guided to.
Wittichenau and the Arouca extension follow in fiscal 2027, when the three-year doubling pledge comes due. Beyond that, the deck lists a Pasewalk extension and “brownfield opportunities” the company is exploring.
