Can Investors Handle the Sandal? Birkenstock Unboxes IPO

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Step by step, Birkenstock is sauntering on down to Wall Street. 

The German sandal maker unboxed its filing for an initial public offering (IPO) on September 12. The company plans to list on the NYSE under the ticker “BIRK.” No date has been announced as yet, but the filing says the deal will land as “soon as practicable.”

No price details were listed, though the deal is expected to value Birkenstock around $8 billion, Barron's has reported.

News that a Birkenstock deal was afoot first surfaced in July. Sources at the time told Bloomberg a deal may come soon, and it filed confidentially with the Securities and Exchange Commission SEC) that month. The filing came on the heels of the brand’s successful cameo appearance in the recent Barbie movie triggered a sales rush.  

Birkenstock’s confirmation of the impending deal is the latest sign of life for public listings that may be emerging from their historic downturn.

The news comes just as investors are firing up for chip designer Arm’s launch, set for this week and likely to be the biggest deal of 2023. Wall Street is waiting to see if Arm’s IPO has enough reach beyond the red-hot AI and chips sector to shake the broader IPO market from its slumber. 

The coming arrival of the grocery app Instacart is also adding to market enthusiasm. Birkenstock, yet another buzzy IPO, is sure to be watched closely. 

Last year, it sold roughly 30 million pairs of sandals. The firm clocked an impressive $644 million in total revenue in the six months prior to March 31 – an almost 20% year-on-year gain in sales numbers. However, higher wages and a weaker US dollar bit into its margins during that time, causing its net profit to slump 45% to $40 million.

The deal has along lineup of lead underwriters, including Goldman Sachs, J.P. Morgan, Morgan Stanley, BofA Securities, Citigroup, Bernstein, HSBC and more. 

Creature Comforts

Although the brand has become a fashion must-have in recent years, the Birkenstock brand has been associated with comfort and health for much longer. 

The sandal maker’s historic routes date back to its inception in Germany as a family artisanal boutique in 1774. The sandals boast an orthopedic design and often feel rigid at first before softening as they mold to the wearer’s foot shape. They are said to help especially with foot pain thanks to their supportive longitudinal arch. Birkenstock claims its footbed “represents the best alternative to walking barefoot.”

Despite the ballooning size of its operations, today, Birkenstock remains close to its Germanic roots. It claims that 95% of its products are made in the country, while the remainder are produced elsewhere in Europe. 

Yet it has swapped hands on the way from a family-owned boutique to a soon-to-be public company. In 2021, L Catterton took out a majority stake in Birkenstock, which saw the firm’s valuation reach about $4.3 billion.

Going forward, Birkenstock hopes to sell more shoes to customers directly and cut back its reliance on retailers, which cut into its profit margins. This could also be to control the product line and prevent counterfeits from flooding the market. Birkenstock lists “knock-offs” as a risk factor in its prospectus. It says some competition comes from “private label offerings” at third-party retailers but that “knock-off products” on Facebook and other platforms are cashing in on its intellectual property (IP).

Investors will need to stay on their toes and wait for the size of this deal to see ‘if the shoe’ fits their portfolios. 

Author: Liam Gibson

Bio:

Liam is an experienced journalist in Taiwan who has been covering politics, economics and finance professionally for almost five years. His writing has appeared in many leading publications in both the U.S., Asia, the Middle East, and elsewhere. He currently works as a finance writer for Wealth of Geeks. He formerly ran the Substack newsletter and podcast, Policy People