Birkenstock IPO is the latest shoe company to drop in a tough market. Sandal company Birkenstock needs to sell more clogs and boots and boost sales from its own website and boutiques to attract new shoppers amid a cost of living crisis, investors and analysts said before it lists on the New York Stock Exchange next week.
Birkenstock IPO is the latest high-profile listing to put investor focus on the market, which is gradually reopening after two relatively quiet years and a burst of activity in September.
Increasing IPOs in market
But several companies including Arm, Instacart (CART.O), and Kellogg spinoff Kellanova (K.N) that have gone public recently have seen their share prices slump.
And a cost of living crisis, which has seen consumers rein in spending on discretionary items like shoes and clothing in favor of essentials could be a challenge for the premium footwear company.
Birkenstock IPO will it work
Due to recent price hikes, worldwide footwear sales are expected to rise just 2.9% over 2022, according to market research firm Euromonitor International.
“The question is, how do you create desirability for people to buy another pair of Birkenstocks?” said Mamta Valechha, consumer discretionary analyst at asset manager Quilter Cheviot in London. Sandals are a seasonal product, which makes the company’s sales volatile over the year, Valechha added.
Still, Birkenstock has much else going for it including the ability to stay popular decades since first becoming well-known as somewhat frumpy but comfortable sandals that complete a laidback, hippie look.
All about Birkenstock
Founded in 1774 by Johann Adam Birkenstock, the Neustadt, Germany-based company’s “Birkenstocks” were exported worldwide and first sold exclusively in health stores in the U.S.
A trend towards more casual dressing, turbo-charged by the COVID-19 pandemic, has kept them popular in recent years.
Like its footwear counterpart Crocs, Birkenstock has been able to keep up with style trends and rebrand itself as a fashionable item worn by models and celebrities. Barbie, played by Margot Robbie, wore a pink pair of Birkenstocks in the final scene of the eponymous movie released this summer.
“The parallel with Crocs is that both aren’t necessarily known for being beautiful, right?” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
Yet people have continued to buy Birkenstocks and the brand has modernized and built momentum, she said.
Birkenstock valuation
Birkenstock has disclosed plans to sell at least 32 million shares priced between $44 and $49 apiece. Putting Birkenstock’s valuation, to about $1.58 billion at the top end of estimates.
In Birkenstock IPO filings, it said it would use the proceeds to pay down debt.
But Thomas Hayes, chairman of hedge fund Great Hill Capital, said Birkenstock would likely use some of the capital raised through the IPO to further expand, and that its strong position in the U.S. allows it to pass on cost increases to shoppers.
Retailers like Foot Locker (FL.N) and Dick’s Sporting Goods (DKS.N) have started to cut back on their shoe orders, though neither carries Birkenstock.
While Birkenstock had 6,000 wholesale partners in fiscal 2022 it operated only a small network of about 45 of its own boutiques as of June 30.
Birkenstock IPO listing is the latest in a series of footwear makers to do so in recent years – most with a lacklustre showing so far. AllBirds (BIRD.O), Dr Martens (DOCS.L), and On Running (ONON.N) have all seen their market value fall since their IPOs in 2021.
Birkenstock backing
Still, Birkenstock has the backing of some luxury sector heavyweights: Alexandre Arnault, the son of billionaire LVMH (LVMH.PA) Chairman Bernard Arnault, will sit on its board and LVMH-backed private equity firm L Catterton – which owns 100% of the company now – will still own about 83% of Birkenstock after the IPO offering.
Funds managed by Durable Capital Partners LP and Norges Bank Investment Management have also separately indicated an interest in buying Birkenstock shares of a combined value of $300 million.
“The expression of interest from prominent cornerstone investors is remarkable,” said Matt Oguz, CEO of Iris Family Office in Silicon Valley, who said he planned to buy Birkenstock shares.
But that support is not a guarantee of success on the stock market.
“When you look at the trend of other shoe companies that have IPO-ed, it doesn’t give a great outlook for Birkenstock,” Valechha said.
