Have you heard of the Birkenstock IPO? Birkenstock is a sixth-generation German family-owned business that began in 1774. After the family sold the business in 2010, the sandal and shoe retailer gained popularity. The sandal was recently featured in the Barbie movie with Margot Robbie wearing a pink pair.
It wasn’t the main reason people gossiped about the film, but many noticed the Birkenstock sandal. In September 2023, the company filed for an IPO. It began trading less than a month later, on Wednesday, October 11th, at $46 per share, valuing the company at $9.3B.
This is the fourth major IPO in the last month after ARM Holdings, Instacart, and Klaviyo went public. Only one on the list is currently trading above its IPO price.
Will Birkenstock be successful on the stock market and join the ranks of other shoe-making peers? It’s backed by big names in the industry and other impressive investors. Let’s find out more about Birkenstock.
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Birkenstock Background
When it comes to the Birkenstock IPO, let’s get some more information. Let’s fast-forward to 2021 when private equity firm L Catterton bought a majority stake in Birkenstock for \$4.3B. In two years, the company’s valuation more than doubled. The world’s second-richest individual backs L Catterton after Elon Musk and owner of Louis Vuitton Moet Hennessy (OTCMKTS: LVMUY), Bernard Arnault.
Bernard Arnault and Louis Vuitton Moet Hennessey (LVMH)
The French businessman owns over 75 luxury, fashion, and cosmetics brands such as Tiffany & Co, Christian Dior, Givenchy, Marc Jacobs, Kenzo, Celine, Sephora and many more. It’s safe to say that he knows what’s hot in the fashion world.
Now that the German family is out of the picture, Bernard Arnault and his other investors have huge plans to make Birkenstock grow further.
The Norwegian sovereign wealth fund (worth $1.47T), Financière Agache, and Durable Capital Partners all agreed to invest around $300M each. Will the Birkenstock IPO be as popular with investors on the stock market?
Fun fact: In the US, a Birkenstock customer owns, on average, 3.6 pairs.
Is Birkenstock a Good Investment?
Since 2020, Birkenstock’s revenue has grown from $770M to $1.3B in 2022. Net profits have also increased, but some administrative expenses lowered expectations. Most importantly, the company is profitable, which isn’t always true with IPOs.
Birkenstock has a strong board of directors with Bernard Arnault and his business partners, his son, and other German executives. What will that mean for the Birkenstock IPO?
Birkenstock IPO First Day of Trading
How did Birkenstock’s stock market debut go? It couldn’t have gone worse. The stock lost 12%, and its valuation decreased to $7.5B. Investors lacked confidence in Birkenstock’s growth capabilities and believed consumer demand had peaked.
The DJIA and S&P gained, so the overall market can’t be blamed for Birkenstock’s decline. However, all three recent IPOs were in the red (ARM Holdings, Instacart and Klaviyo). Does the company have any upside, or is it destined to fail? Let’s take a quick look at this Birkenstock IPO.
Case Against the Birkenstock IPO
Birkenstock has its critics, and they have a valid point. First, the company’s valuation is a red flag. It is worth more than Skechers (NYSE: SKX), Crocs (NASDAQ: CROX), and Steve Madden (NASDAQ: SHOO). Each has a higher revenue than Birkenstock while having a lower market cap.
For Birkenstock to maintain a market cap of over $9B, its revenue in 2023 must triple from 2022. If we look at Skechers alone, its revenue for 2022 was $7.4B, and its current market cap is $7.53B.
Next, the IPO market hasn’t been very hot in the last 24 months. In the last month, ARM Holdings, Instacart, and Klaviyo all went public. Klaviyo is the only one trading above its IPO price. Investors aren’t too optimistic about IPOs, and there’s a chance the Birkenstock IPO might suffer the consequences.
Mr Arnault hasn’t been spared in regards to IPOs. He is behind Oddity Tech’s (NASDAQ: ODD) stock market debut in July 2023, which is currently down almost 40% since. The company uses AI to identify consumers” beauty and wellness needs.
Case for the Birkenstock IPO
There is also some positivity about Birkenstock and its growth opportunities. Not only has the brand become somewhat of a fashion statement, it is very popular among celebrities and influencers.
DTC and e-commerce sales have increased in the last few years, and there is still much room for growth. That is very important for many people, and they will follow this trend. The famous two-strap Arizona sandal is successful, but the company wants to penetrate new markets.
The Birkenstock IPO filing focused on closed-toe shoes, professional footwear, orthopedics, outdoor and kids models. Thanks to new materials and innovation progress, Birkenstock can address and develop these new markets. The company is also looking to adapt its materials to mattresses and sleeping options.
Its valuation might consider these new growth opportunities, which Crocs, Skechers, and Steve Madden don’t possess. It will be interesting to see how consumers will react to these new products and if they will be successful.
Birkenstock Competitors
Let’s go back to Crocs and Skechers here. They may not be your first fashion choice, but they are very popular among consumers. Locals and tourists also widely use these brands outside of developed countries.
The Birkenstock IPO is facing a lot of competition in existing markets. If the company decides to expand, it must spend a lot of money and resources to convince customers that its products are superior.
Crocs (NASDAQ: CROX)
How does Crocs compete with the Birkenstock IPO? When I first saw Crocs in the early 2000s, I thought it was a joke and wouldn’t last. Oh, how I was wrong. Crocs are still popular and used more than ever in the US and abroad.
They have new designs, are more comfortable, and can even be considered a fashion statement. Between 2014 and 2018, Crocs lost popularity and threatened bankruptcy and store closures.
When its new CEO took over, he changed the branding and target audience. Crocs focused on awareness and fashion instead of only comfort. Celebrities endorsed the products, and the brand became popular once again.
Since 2018, revenues have tripled from $1B to $3.5B in 2022. After seeing a negative net income from 2014 to 2018, numbers have risen. Last year, the company recorded a net income of $540M, lower than in 2021 ($726M).
Crocs and Birkenstock look very different but compete in similar markets. Both rely on fashion and popularity to remain relevant.
Skechers (NYSE: SKX)
Could Sketchers affect the Birkenstock IPO? Skechers have never been so popular. Its stock is near an all-time high, revenue is growing, and the company is profitable. In the US alone, it is the third-largest footwear brand.
You can’t compare it to the popularity of Nike, Adidas, or Birkenstock, but the shoe is comfortable and a cheaper alternative. Not everyone can afford to spend a few hundred dollars on footwear, and that’s where Skechers is capitalizing.
This year, Skechers is expected to record $8B in revenue, a new record for the company. I wouldn’t be surprised if the company exceeds expectations, carrying the stock even higher.
Birkenstock IPO Final Take
The Birkenstock IPO had a disastrous first day on the stock market. Even though LVMH founder Bernard Arnault values the company twice as much as he bought it two years ago, the stock market doesn’t agree with him for now.
It could go either way as the company is exploring new markets, but nothing has been proven. Fashion comes and goes, and it’s hard to predict when a trend ends. For the moment, I would stay away from this stock until the company puts it in motion and delivers on its filing promises.
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