- 250-year-old company will go public in New York next week
- The sandal manufacturer has expanded its range to include clogs and boots
- The company is backed by a private equity firm affiliated with LVMH
Oct 5 (Portal) – Sandals company Birkenstock needs to sell more clogs and boots and increase sales through its own website and boutiques to attract new shoppers amid the cost of living crisis, investors and analysts say, before its next New York meeting Will be listed on the stock exchange this week.
Birkenstock is the latest high-profile listing to draw investor focus on the initial public offering (IPO) market, which is gradually reopening in September after two relatively quiet years and a burst of activity.
But several companies that recently went public, including Arm, Instacart (CART.O) and Kellogg spinoff Kellanova (KN), have seen their stock prices plunge.
And a cost-of-living crisis — which has caused consumers to limit their spending on discretionary items like shoes and clothing in favor of essentials — could be a challenge for the premium footwear company.
Global footwear sales are expected to increase by just 2.9% in 2022 due to recent price increases, according to market research firm Euromonitor International.
“The question is, how do you get 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, meaning the company’s sales fluctuate throughout the year, Valechha added.
Still, there’s a lot more to Birkenstock – including the ability to remain popular for decades since it first rose to prominence as a slightly frumpy but comfortable sandal to complete a laid-back hippie look.
The “Birkenstocks” from the Neustadt-based company founded in 1774 by Johann Adam Birkenstock were exported worldwide and initially sold exclusively in health food stores in the USA.
The trend toward more casual clothing, fueled by the COVID-19 pandemic, has seen them grow in popularity in recent years.
Like its shoe counterpart Crocs, Birkenstock has also managed to keep up with fashion trends and rebrand itself as a fashion item for models and celebrities. Barbie, played by Margot Robbie, wore a pink pair of Birkenstocks in the final scene of the film of the same name, which hit theaters this summer.
“The parallel with Crocs is that they’re not necessarily known for their beauty, are they?” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
Still, people continued to buy Birkenstocks and the brand modernized and gained momentum, she said.
“She [Birkenstocks] “We are making good use of many powerful structural shifts in purchasing habits: health, convenience and sustainability,” said Siobhan Gehin, senior partner at Roland Berger in London.
Birkenstock has announced plans to sell at least 32 million shares at a price between $44 and $49 apiece, which it estimates would raise about $1.58 billion.
Its IPO filings 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 for further expansion and that its strong position in the U.S. would allow it to pass on cost increases to buyers.
At a time when footfall at major retail stores has declined, Birkenstock has seen steady store traffic, but analysts say the company needs to further expand its direct-to-consumer sales to attract more customers.
Retailers like Foot Locker (FL.N) and Dick’s Sporting Goods (DKS.N) have started reducing their shoe orders, even though neither of them carries Birkenstocks.
While Birkenstock had over 6,000 wholesale partners in the 2022 financial year, the company only operated a small network of around 45 of its own boutiques as of June 30.
New products on Birkenstock’s U.S. site include mules for $34.95, leather “Cannes” sandals for $250 and leather boots for $240. According to data from Similarweb, unique visits to its website have increased about 26.4% this year through August 2023 compared to the same period last year. The data shows that monthly increases in traffic to the site ranged from 11.5% to 72.1%.
In contrast, some of its competitors, including designer sneaker brand Golden Goose, saw Dr. Martens and Allbirds, have seen a year-on-year decline in visits to their own websites in recent months, Similarweb data shows. U.S. shoe sales for the back-to-school season were largely dismal.
Portal graphics
SUPPORT FROM KEY INVESTORS
Birkenstock is the latest in a string of shoemakers to go public in recent years – most of which have had lackluster records so far. AllBirds (BIRD.O), Dr. Martens (DOCS.L) and On Running (ONON.N) have seen their market value decline since their IPOs in 2021.
Still, Birkenstock is backed by some luxury sector heavyweights: Alexandre Arnault, the son of billionaire LVMH (LVMH.PA) CEO Bernard Arnault, will sit on the board, and LVMH-backed private equity firm L Catterton – which owns 100% of the company company now owns shares – will still own about 83% of Birkenstock after the offering.
Funds managed by Durable Capital Partners LP and Norges Bank Investment Management have also separately expressed interest in buying shares totaling $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 plans to buy Birkenstock shares.
However, this support is not a guarantee of success on the stock market. Take, for example, consumer tech company Oddity, owner of beauty brands Il Makiage and SpoiledChild.
With the backing of L Catterton, the company went public in July at $35 per share, well above the initial range of $27 to $30, before trading at $49.10 on the first day of trading -Dollar opened. However, shares are now down almost 45% from their opening price.
“If you look at the trend of other shoe companies that have gone public, the prospects for Birkenstock are not particularly good,” Valechha said.
(This story has been re-archived to clarify meaning in the headline)
Reporting by Ananya Mariam Rajesh and Helen Reid, additional reporting by Emma-Victoria Farr, Echo Wang and Abigail Summerville, editing by Deepa Babington
Our standards: The Trust Principles.
Acquire license rights, opens new tab