Shares of
Birkenstock Holdings,
the maker of cork-soled clogs, got off to a rocky stock market debut Wednesday.
Shares of the company (ticker: BIRK) opened at $41 on the New York Stock Exchange on Wednesday afternoon, down 11% from its IPO price of $46 a share. The German shoe maker expected to price its IPO between $44 and $49 a share, according to documents filed last week.
Birkenstock raised $1.58 billion and at the opening price has a market value of $7.7 billion, not counting shares for employees and executives.
Still, Birkenstock has a bigger market capitalization than peers
Allbirds
(BIRD),
Skechers
(SKX),
Crocs
(CROX), and
Steve Madden
(SHOO) and its valuation is about double the roughly $4.3 billion private-equity firm L Catterton paid to acquire the company in early 2021.
The lofty valuation reflects the company’s success over the past few years, says Neil Saunders, managing director and retail analyst at research firm GlobalData. Birkenstock’s revenue grew from €727.9 million ($770.9 million) in fiscal 2020 to €1.24 billion ($1.3 billion) in fiscal 2022. Net profit rose by about €86 million ($91 million) within that time frame.
“There has been some good levels of growth there, and I think there’s a degree of confidence around the brand as well,” Saunders says. “It looks to be quite a strong IPO.”
Some, however, aren’t convinced. To justify a valuation of $8 billion, Birkenstock would need to generate more than $3.8 billion in annual revenue—or about three times its fiscal 2022 revenue, David Trainer, CEO at investment research firm New Constructs, says.
“We don’t see this happening anytime soon, if ever,” he wrote in a research note last week. “BIRK looks more than fully valued and does not provide investors much upside potential.”
Looming over Birkenstock’s public debut is the specter of other recent IPOs whose stocks have dropped after a first-day pop. Shares of chip designer
Arm Holdings
(ARM) have fallen below their opening trade after an impressive debut. Shares of delivery platform
Maplebear
(CART), Instacart’s holding company, have retreated below their IPO price. And stock in fast-casual Mediterranean chain
Cava Group
(CAVA), which went public over the summer, is trading well below its opening price. Perhaps most comparable, shares of fellow footwear company Allbirds now trade for under a dollar despite opening at $21.21 in November 2021. Allbirds is now valued at roughly $144 million.
The likelihood of Birkenstock following a similar path to Allbirds is “very low,” Alex Smith, global sector lead at research firm Third Bridge, says. Unlike Allbirds, which is a relatively new company, Birkenstock has a loyal customer base and a “rich history” that spans 250 years.
GlobalData’s Saunders echoes that sentiment. The IPOs that are now struggling—such as Instacart—carry a higher degree of risk given that their business models are still relatively new, he says. Birkenstock, in turn, is “very vanilla” in the way it operates, he adds, employing a classic retail model the market is already familiar with.
“In these times, investors want to go into safe haven, and Birkenstock is one of those safe havens,” Saunders says.
Birkenstock also has several backers. L Catterton—which merged with the private equity arm of
LVMH Moët Hennessy Louis Vuitton
(LVMHF) in 2016—will remain the company’s majority owner after the offering. The company has also secured financing offers from several investors, including Financière Agache, Durable Capital Partners, and Norges Bank Investment Management, according to a filing.
Write to Sabrina Escobar at [email protected]
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