A Birkenstock banner hangs outside the New York Stock Exchange (NYSE) in New York on October 11, 2023, as Birkenstock launches an initial public offering (IPO).
Angela Weiss | Afp | Getty Images
Shares of Birkenstock fell about 10% in their debut on the New York Stock Exchange on Wednesday after the longtime German footwear brand traded at $41 a share.
Birkenstock’s opening price was about 11% below the original price of $46 set on Tuesday, which was just below the midpoint of the expected range of $44 to $49 per share. Birkenstock sold 10.75 million common shares in the offering, raising about $495 million and valuing the company at about $8.64 billion.
Birkenstock had originally sought a valuation of up to $9.2 billion.
The company’s market debut comes almost 250 years after it was founded by German shoemaker Johann Adam Birkenstock. It remained under family control until 2021, when private equity firm L Catterton acquired majority ownership in a deal that valued the company at $4.85 billion.
In an interview on CNBC’s Squawk on the Street, Birkenstock CEO Oliver Reichert explained why the company decided to go public.
“The best thing for the brand would be to remain family owned, but there were so many problems within the family, so we are choosing the second best option, which is to be public and give the brand back to the people,” Reichert said.
Since L Catterton acquired his stake, sales have increased and Birkenstock’s valuation has almost doubled. Between fiscal years 2020 and 2022, revenue increased from 728 million euros ($771 million) to 1.24 billion euros ($1.32 billion). Over this time, the company increased direct sales to consumers, strategically exited certain wholesale partnerships, and focused on increasing sales of items with higher price points.
The company reported net profit of around 187 million euros ($198 million) in fiscal 2022 and achieved a margin of around 60%. Birkenstock has room to increase those margins as it expands its direct-to-consumer sales, which rose from 18% of sales in fiscal 2018 to 38% in fiscal 2022, it said in a securities filing.
The offering comes as the IPO market is beginning to thaw after more than a year of stagnation. But it remained unsettled and uncertain. Several stock market filers did well in the first few days of trading, but those stocks have since fallen.
Instacart priced its long-awaited initial public offering at $30 per share last month. But after an initial 40% rise, it closed at $33.70 on its first day on the Nasdaq and is now trading below its opening price. Oddity Tech, another L Catterton-backed consumer company, debuted on the public markets in July with a 35% gain, closing at $47.53 after the first day of trading. Soon after, it reached a high of $56 per share, but Oddity’s stock has since fallen and is now trading below its original offering price of $35.
A similar trend followed the Johnson & Johnson spinoff Kenvue.
The footwear and apparel industries have been under pressure this year as consumers shifted spending from goods to services. But Birkenstock’s growth, sustained profitability and cultural relevance following its recent cameo in the “Barbie” movie have piqued investor interest.
“Birkenstock is a long-standing brand, but it fits into the trend of favoring casual comfort in the workplace after the Corona crisis. “The company continues to grow even in the face of a declining global footwear market as consumers use their disposable income for other interests, such as travel,” said Alex Smith, head of global sector at research firm Third Bridge, in an emailed statement.
“Current growth is being driven by a younger, new consumer base and increasing popularity among celebrities – even Barbie has been spotted wearing Arizona sandals.”
Smith pointed out that despite its long history, Birkenstock still has room for growth. Because of its size options and manufacturing capabilities, its customer base remains primarily female, and the company could expand sales outside the U.S. and Europe.
This is breaking news. Please check back for updates.