top of page
Lanon Wee

Birkenstock Seeks a Large Role in IPO Following 'Barbie' Boost

The Birkenstock IPO is being met with wide interest due to the firm's flourishing under the oversight of L Catterton, an LVMH-backed private equity investor. The brand furthermore received a boost from its involvement in the extremely popular movie "Barbie", which has positioned it favourably in the public offering marketplace for footwear; however, the track record of such outfits in the stock market has been erratic, with success stories such as Crocs, Skechers and Deckers Outdoor, as well as stumbling blocks for Allbirds and On Holding. The iconic footwear company Birkenstock, established in the 18th century, has made it official on Tuesday - it is preparing for an initial public offering, confirming what has been speculated in the press for months. The company lodged its IPO registration statement on Tuesday afternoon. The move follows two years after the Birkenstock family sold majority stake in their company to LVMH-affiliated private equity firm L Catterton, and comes as the brand is enjoying a surge in popularity due to its appearance in the hit movie "Barbie". It is forecasted to IPO at an estimated $8 billion valuation. At the time of the buyout in 2021, the deal valued the business at $4.85 billion. Revenue has rapidly grown from around $781 million in 2020 to over $1.3 billion in 2022, at a 31% annual rate. The IPO filing didn't include an official valuation, however it revealed that net revenue for the six months ending 31 March had risen 19% to $692.9 million, although profits had diminished compared to the same six-month period the year prior by 45.3%. Birkenstock aims to list on the New York Stock Exchange under the "BIRK" ticker. Press reports have suggested the company could be worth close to $8 billion. The success of L Catterton's Oddity in its debut on the Nasdaq exchange in the summer, where it rose 40%, is likely to be encouraging to Birkenstock, and possibly to other fashion brands toying with the idea of an IPO. While some footwear stocks, such as Crocs, Skechers and Deckers Outdoor, have done well in the long-term, others like Allbirds and On Holding have seen more difficult times. "Consumers buy our products for a thousand wrong reasons," declared Birkenstock CEO Oliver Reichert in the IPO document. "But they all come back... Through the strong reputation and universal appeal of our brand - allowing for extensive word-of-mouth exposure and exceptional earned media value - we have been able to efficiently construct a steadily increasing global fanbase, comprising millions of consumers that transcends national borders, gender, age and income," Reichert shared. Birkenstock and L Catterton declined to comment. Birkenstock's roots can be traced back to Johann Adam Birkenstock, a shoemaker in Germany, in 1774, while modern-day Birkenstock was founded by his grandson Konrad in 1902. Karl, Konrad's grandson, created the first Birkenstock sandal in 1963. The shoes were introduced to the USA in 1966 by Margo Fraser, a German dressmaker residing in California, and it is likely where associations of it being a 'hippie' shoe originated, as health food stores primarily sold them. Birkenstock entered the high fashion world with a Kim Knott shoot for British Elle in 1985, but it was Kate Moss wearing them for her shoot for The Face (shot by Corinne Day) that truly embedded the shoes in American fashion consciousness. It has since collaborated with Rick Owens, Dior, and Manolo Blahnik, among many other renowned fashion brands. The company's latest venture may be its most significant yet: the brand's Arizona sandal has a prime role in this summer's blockbuster-hit feature film "Barbie". In the movie, Barbie (portrayed by Margot Robbie) is faced with the dilemma between seeking knowledge in the "real world" – the Birkenstock – or returning to a state of naivety – an unbranded stiletto. After unsuccessfully trying to take the stiletto, Barbie chooses the Birkenstock, and moves on to discover the facts of the human world. To conclude the movie, Barbie is seen in the real world wearing a pair of pink Birkenstocks. Given the huge level of recognition that Birkenstock has obtained over its almost 250 year history, this bodes extraordinarily well for its upcoming IPO, according to Bochanis. "Right now, potential IPO investors are in search of something they know and that offers a bit more reliability in these uncertain times," he remarked. "We have not seen numerous startups that are not profitable but quite eye-catching come to the IPO market lately. Instead, the tendency is for names that are familiar to people, with business models that can endure these complex conditions, and Birkenstock meets this criteria. After all, it's been nearly 250 years since it was founded." Despite the fact that Kenvue offered the largest IPO of the year, it has slightly held on to its IPO price, as reported by data from CNBC and Renaissance Capital. In addition, the IPO market in general has not done especially well since listing. 64 percent of the 70 IPOs this year, or 45, are trading below their IPO price. Mark Cohen, director of retail studies at Columbia Business School, believes that Birkenstock is unique. "It has been around for a very long time, it's a well-known brand, and its users appreciate its brand equity, shape, finish, design, and comfort," he pointed out. However, Cohen cautions investors from relying too much on its success as a public stock. The pandemic has caused major, sudden upheavals in the retail industry; on the other hand, as the pandemic eases, some of these upheavals have been modified. At the same time, inflation will continue to influence consumer spending in the near term. Moreover, Birkenstock should be aware of the rising imitations of its products on Facebook, as per its IPO filing. Even though inflation has abated from its peak, there are still signs that it will continue. Furthermore, consumers are likely to cut back on nonessential spending in such an environment. Credit problems have now reached levels not seen since 2009. Even if Wall Street thinks that a recession may not arise, it is still a threat that could affect shoppers, even though it might not show in time to affect the current IPO interest. Regarding the two potential paths of a footwear IPO, Crocs and Allbirds can be used as a model. Despite its stock price this year, Crocs, which went public in 2006, has obtained substantial gains since its opening at $21. As Birkenstock, the brand has collaborated with designers, such as Balenciaga, and has earned a loyal customer base that cherishes the comfort of the item. Meanwhile, the S&P SPDR Retail ETF has grown 3 percent so far this year but is below the S&P 500’s progress; moreover, it has dropped 6 percent in the last month. The graph is indicating a rise in levels. A chart is exhibiting an increase in amounts. Cohen commented that Allbirds, which went public in 2021, experienced a lackluster performance on the stock market after debuting at a high of around $21, having since dropped down to near the $1 range. He remarked that this serves as an example of how, unfortunately, not all stories have a happy ending. This chart is in the process of being loaded. Cohen argued that Allbirds sought too much growth in multiple directions, leading to a retrenchment. They expanded their product range too far with no assurance of successful consumer uptake, and are now attempting to rectify the issue. On the other hand, Birkenstock has extended their stock beyond shoes into skincare, accessories, and sleep systems, but it is facing the same uncertainties and risks that other consumer brands face; an unpredictable customer base, a rapidly shifting style trend, and strong competition. Nevertheless, they have seen their direct sales initiatives grow from 30% to 38%, with the average US consumer owning 3.6 pairs. The company has identified a "whitespace" in the highly competitive footwear market, with them currently having less than 1% of the market; thus, they believe there is still potential for growth. Cohen cautioned, however, that in the unpredictable retail market, a brand must establish and keep their success daily.

Comments


bottom of page