Birkenstock shares did not maintain its debut price as it plunged on its first trading day despite growing popularity.
German shoe manufacturer Birkenstock Holding plc (NYSE: BIRK) saw its shares lose more than 12% on its first day of trading on the New York Stock Exchange (NYSE). Birkenstock shares closed on Wednesday at $40.20 per share, lower than its opening price of $41. The opening price also put the company’s valuation at $7.55 billion, lower than the $8.6 billion set at an IPO price of $46.
Birkenstock IPO and BIRK Shares
Birkenstock raised nearly $495 million after selling about 10.75 million ordinary shares. The company’s initial plan was to sell about 32.26 million shares at a price range of $44 to $49 per share.
Founded nearly 250 years ago in 1774 by Johann Adam Birkenstock, the company remained in the family’s control until private equity powerhouse L Catterton purchased a majority stake. In a 2021 deal, L Catterton purchased an undisclosed stake in a deal that valued the company at 4 billion euros (about $4.85 billion at the time). Since the acquisition, sales have spiked, rising to 1.24 billion euros from 728 million euros between fiscal 2020 and 2022. In fiscal 2022, Birkenstock’s net income was nearly 187 million euros.
In an interview, Birkenstock CEO Oliver Reichert said family problems contributed to the company’s decision to list publicly. Reichert said:
“The best thing for the brand would be staying family owned, but within the family there were so many problems. So we go for the second best option and that’s to be public and give the brand back to the people.”
Factors Driving Birkenstock’s Popularity
Birkenstock’s growth was largely driven by different factors. Firstly, the company boasts impressive adaptability that has helped it remain relevant for centuries. Birkenstock has also taken on a direct-to-consumer approach instead of focusing on wholesale partnerships. In addition, the company directed its attention to selling items at higher prices.
Known for its comfortable products, Birkenstock strives to produce unique footwear emphasizing several specifics, including footbeds, soles, straps, and buckles. The company also recently saw new popularity for its feature in the “Barbie” movie, where Margot Robbie wore pink Birkenstock sandals.
The fashion industry, especially clothing and footwear, has declined because people are no longer spending as much on goods. Nevertheless, Birkenstock’s focus on comfort has kept the company in people’s good books.
According to research company Third Bridge’s Global Sector Lead, Alex Smith:
“Birkenstock is a long-standing brand but it fits into the trend of embracing casual comfort in the workplace after COVID. It continues to grow even in the face of a declining global footwear market, as consumers allocate their disposable income to other interests, such as travel.”
Last week, the CEO of independent equity research firm New Constructs warned that Birkenstock’s valuation might be too high. David Trainer pointed out that the $8.6 billion market cap is a bigger one than other shoe companies, including Crocs, Skechers, and Steve Madden. Noting that the only companies with larger market caps are Deckers Outdoor and Nike, Trainer warned that Birkenstock would have to make an annual revenue of over $3.8 billion to justify the valuation.
As of this writing, Birkenstock shares are changing hands at $39,72, a 1.19% fall from its $40.20 close.