*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, May 28 due to the market holiday next Monday, May 26 in observance of Memorial Day.
Sparked by positive trade developments, the stock market raced higher last week as the S&P 500 rallied 5%, the Dow gained 3.4%, and the Nasdaq added 6%.
The Stock – Birkenstock (BIRK)
Birkenstock shoes have gained popularity in recent years, driven partly by their comfort (owing to their contoured footbeds and arch support) and durability, but also thanks to collaborative endorsements from celebrities and social media personalities.
Although the German company is seeing growth across all its segments and product categories, the growth has been most pronounced for its closed-toe silhouettes, which are unisex clogs similar to competitor Crocs’ offerings (but definitely higher-end), preferred by many wearers due to their superior arch support. These products were a key growth driver for Birkenstock in fiscal Q2 (ended March), which saw company-wide revenue of $621 million increase 20% year-on-year, with earnings of 59 cents a share that were up 34%. By channel, direct-to-customer (DTC) and wholesale-to-retail (B2B) sales both grew 19%, led by a strong performance in sandals and closed-toe shoes, with sales of its five most iconic silhouettes also growing by double digits. In the earnings call, Birkenstock said its fiscal 2025 was off to a “very strong start” and credited its distribution strategy as putting the firm in an “enviable position” to take additional shelf space and gain market share.
The outfit said it’s on track with its retail expansion, with 77 owned stores (six opened in Q2), with a goal of 100 stores to be open by the end of the fiscal year. And with its revenue from closed-toe silhouettes growing at twice the rate of the overall group (nearly half its top 20 silhouettes in Q2 were closed-toe), it was able to increase market share by 4% as its spring/summer ’25 demand was up “strong” double digits, while guiding for continued strength in this category as it begins to build up its order book for spring/summer ’26.
On the international front, management said its three top markets included Australia, Japan and China, with the latter more than doubling in revenue year over year, and with the firm seeing an opportunity for continued strong growth in this market. Despite all the tariff uncertainty out there, Wall Street sees Birkenstock’s bottom line surging this year and next, while sales move ahead at high-teens rates.
Technical Analysis
After coming public in October 2023 at 41, BIRK has had a couple of false starts—shares did break out from a nice post-IPO base last May, but the move didn’t get very far, and shares ended up giving it all back in the summer. Then came the rally and rest period into this year, but again, it fell flat, with tariff fears pulling shares down to new lows. But now BIRK is trying again, running back into resistance areas on good volume. Stop - 51
The Covered Call Trade
Buy Birkenstock (BIRK) Stock at 57, Sell to Open July 55 Strike Calls (exp. 7/18) for $4, or a Net Price of 53 or less
Static Return: $200 per covered call (3.77%)
Breakeven: 53
Covered Call Return (if assigned): $200 per covered call (3.77%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 53 or less. (In this case, 57 minus 4 = 53. Or another example is you could pay 56.7 for the stock and sell the call for 3.70, which also equals 53.)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| ATI (ATI) | 67.8 | 76 | 54.5 | June 67.5 -- $4 | $9.00 |
| Coupang (CPNG) | 26.4 | 27 | 22.5 | June 26 - $1.25 | $1.70 |
The next Cabot Profit Booster issue will be published on May 28, 2025.
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