Birkenstock plans to sell 32.3 million shares in a deal that values the European sandal-maker at $8.6 billion at the midpoint of the pricing range of $44 to $49 a share. Include debt and the enterprise value (market value plus net debt) could top $10 billion. The company plans to list under the ticker symbol BIRK.<\/p>\n
\n
It could be a hot deal, after pricing Tuesday night at $46 a share. Lead underwriters are
\n Goldman Sachs Group
\n (ticker: GS),
\n Morgan Stanley
\n (MS), and
\n JPMorgan Chase
\n (JPM).<\/p>\n
How rich is it? The company would be valued at about 37 times earnings, Barron\u2019s<\/em> estimates.<\/p>\nBy contrast,
\n Deckers Outdoor
\n (DECK), the maker of Uggs and Hoka shoes, trades at around $511 a share, or 22 times projected earnings in its fiscal year ending in March.
\n Crocs
\n stock (CROX), at around $87, trades for just seven times estimated 2023 earnings.
\n Dr. Martens,<\/span>
\n the U.K. bookmaker with lightly traded U.S. shares (DOCMF), is valued at about 13 times estimated current-year earnings.\u00a0<\/p>\nIt\u2019s hard to find any luxury-goods company with a similar valuation. One of the few is
\n Herm\u00e8s International
\n stock (HESAY), which trades for about 45 times current-year earnings. Shares of the top luxury-good maker,
\n LVMH Mo\u00ebt Hennessy Louis Vuitton
\n (LVMUY), are valued at 22 times 2023 estimated earnings.\u00a0<\/p>\n
To arrive at our Birkenstock valuation, Barron\u2019s<\/em> took the company\u2019s adjusted after-tax profits for the nine months ended June 30 of $193 million (Birkenstock reports its results in euros, and we made the currency adjustment), subtracted stock-based compensation, and then annualized that amount and divided by the 187.8 million shares that will be outstanding after the IPO.<\/p>\n\u00a0We put the annualized adjusted earnings at about $232 million, or roughly $1.25 per share for the fiscal year that just ended in September. <\/p>\n
Birkenstock adds back stock compensation to calculate its adjusted earnings, but there is no good reason for that considering that stock compensation is properly treated as an expense under generally accepted accounting principles and the IFRS accounting rules used by Birkenstock.\u00a0<\/p>\n
Notable investors like
\n Berkshire Hathaway
\n (
\n BRKb
\n ) CEO
\n Warren Buffett
\n have said it\u2019s ridiculous to exclude stock compensation from earnings. The argument in favor of excluding it is that stock compensation isn\u2019t a cash expense and that other companies do the same thing.<\/p>\n
Nonetheless, Birkenstock looks richly priced based on other valuation measures, as well. The company is valued at about 20 times earnings before interest, taxes, depreciation, and amortization (Ebitda) in the current fiscal year, against 15 for Deckers. Birkenstock is valued at about six times sales based on its enterprise value (market value plus debt) against Deckers at about three times.<\/p>\n
Growth-stock investors don\u2019t care much about book value, but it\u2019s worth noting that Birkenstock has negative tangible book value.<\/p>\n
Birkenstock, a popular brand that dates back to the 18th century, generated roughly 20% sales growth to $1.2 billion in the first nine months of its current fiscal year. Its revenue growth is about double that of Deckers, which has been powered by its Hoka shoes.\u00a0<\/p>\n
Birkenstock sees growth potential in Asia, where it has a small presence, as well as in what it calls underpenetrated European markets like the U.K. and France. Most buyers of Birkenstock sandals, which sell for about $100 a pair, are women.<\/p>\n
\u00a0But footwear\u2014and clothing\u2014is faddish. Look at parka-maker
\n Canada Goose Holdings
\n (GOOS), whose stock trades at $14.75, down from a 2019 high of 75.
\n Allbirds
\n (BIRD) makes woolly sneakers popular in Silicon Valley; its stock has collapsed to around $1, down from a post-IPO peak of $30 in 2021.<\/p>\n
In the IPO prospectus, Birkenstock calls itself \u201ca revered global brand rooted in function, quality and tradition dating back to 1774.\u201d<\/p>\n
Barron\u2019s<\/em> reporter Andy Serwer wrote more than a month ago that the IPO of the maker of \u201cTeutonic-hippie-cum-hipster sandals is emblematic of what concerns not only culture vultures but also hardcore investors right now.\u201d The sandals had a cameo in the Barbie movie.<\/p>\nSerwer noted that the IPO will be a big payday for the billionaire Birkenstock brothers Christian and Alex, as well as for the controlling shareholder, L Chatterton, a private-equity firm that bought the company at a $4.9 billion valuation in 2021. Existing shareholders paid an average price of about $17.50. New investors will pay more than double that.<\/p>\n
Birkenstock has a buzzy and durable brand, but it\u2019s going to have to sell a lot of sandals to justify the expected valuation.<\/p>\n
Write to Andrew Bary at andrew.bary@barrons.com<\/p>\n<\/p><\/div>\n
Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Birkenstock plans to sell 32.3 million shares in a deal that values the European sandal-maker at $8.6 billion at the midpoint of the pricing range of $44 to $49 a share. Include debt and the enterprise value (market value plus net debt) could top $10 billion. The company plans to list under the ticker symbol […]<\/p>\n","protected":false},"author":1,"featured_media":71422,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-71421","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\n
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