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This story has been updated on Wednesday, 11 October.
Today, Birkenstock debuted on the New York Stock Exchange under the symbol “BIRK”, raising about $1.48 billion in its IPO and valuing the brand at more than $9 billion. Shares were priced at $46 on Tuesday, in the middle range of the $44 to $49 the company set last week, and 32 million shares were sold. But by market close on Wednesday, shares had dropped 11 per cent to around $40.
It’s a tough market for fashion IPOs, experts say. Investors are more cautious and there is less capital available, says Neil Saunders, retail analyst and managing director at analytics firm Globaldata. “The market is also very changeable so some parties are more reluctant to get into IPOs, especially if they are looking for short-term gains.” Earlier, prior to the brand's debut, Saunders flagged that the “mid-range price reflects some caution in terms of how volatile the market is”, but that demand was high.
Birkenstock, the longstanding German comfort shoe brand, has been on the up in the fashion world. In 2021, LVMH-backed private equity firm L Catterton acquired the brand in a deal valuing it at $4.35 billion. Since then, revenues have boomed. Last month, the company reported a 21 per cent revenue jump to €1.12 billion in the nine months ended 30 June, upon releasing updated financials ahead of today’s IPO. In 2022, the brand generated €1.24 billion in revenue.
Birkenstock has released collaborations with Dior, Staud and Proenza Schouler, and shot to the forefront of public discourse this summer when featured in the Barbie movie. “Birkenstock’s growing reputation is absolutely linked to their well-thought out and brilliantly executed collabs,” says luxury marketing and branding expert Thomaï Sedari, who is the director of NYU Stern’s fashion and luxury MBA programme. “Let’s also remember that Birkenstock has a product core that has staying power because it has been both a legacy and innovative proposition that has delivered value since 1774. Now, someone needs to ensure that Birkenstock continues on its creative innovation path for the next 249 years. That is what will totally justify its valuation.”
An ongoing downturn in discretionary consumer spending warrants caution, Jessica Ramírez, senior analyst at research firm Jane Hali & Associates. “The market has been very volatile because the consumer has been very volatile,” she says. However, she and Saunders agreed that Birkenstock came in strong. “It’s a comfort-driven product and it’s footwear — that’s where we’ve seen strength in consumer discretion categories,” Ramírez says.
Footwear brands Allbirds, Dr Martens and On Running have seen their valuations fall since their 2021 IPOs. Birkenstock could be the exception, analysts agree. Birkenstock is a much more established brand than Allbirds was at the time of its IPO, and Dr Martens opted for too high a price, Saunders says. He noted early Wednesday that Birenstock was more cautious in its pricing approach, “and has much more solid fundamentals than newer players, as such it has a better chance of maintaining its value.” That it popped after debuting speaks to the difficult IPO environment.
Birkenstock still has heritage to lean on. This is its point of difference, Ramírez says. “Any time you have a heritage brand, it’s strong and can create loyalty because of the quality behind it. When you’re able to do that, and rebrand it and bring in younger generations via collaboration, there’s momentum and strength.”
Sedari avoids clustering companies in groups, like direct-to-consumer for instance, when it comes to IPOs. “I don't want to examine this valuation through the lens of DTC brands,” she says. “We cannot assume that all DTC brands have such potential — which, unfortunately, is how the market looks at these situations sometimes. It is not the DTC that makes Birkenstock win, although it has greatly contributed to its gross margins which give it tremendous power.” (Gross margins, she notes, are an indicator of financial health and potential in the premium and luxury markets as they determine how much money the brand has to reinvest in marketing efforts and increase desirability for consumers).
Instead, she says, it’s Birkenstock’s attention to quality, innovation and creativity through their control of production that brought them to where they are today. “If they can continue manoeuvring between the levers of controlling production along with desirability, while also deflecting some of the pressures of the analysts, then they will be on their way for another 250 years of success. It won’t be easy.”
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