Birkenstock Shares Fall 12.6% in Wall Street Debut
Updated at 4:14 p.m. on Oct. 11
Birkenstock took a big step down when it hit Wall Street.
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Shares of the German sandal-maker fell 12.6 percent to $40.20 on Wednesday, the company’s first day on the New York Stock Exchange.
While that left Birkenstock with a still-hefty market capitalization of $7.6 billion, the immediate drop takes some momentum out of the IPO market where other companies, like Kim Kardashian’s Skims, are plotting their next steps.
Birkenstock priced at $46 Tuesday evening, within the $44 to $49 range targeted by the company for the initial sale to institutional investors, who then turned around and sold the stock into the open market.
Goldman Sachs & Co., JP Morgan and Morgan Stanley were joint lead book-running managers for the offering.
Jessica Ramírez, senior research analyst at Jane Hali & Associates, was skeptical in her published reports going into the IPO and on Wednesday said she wasn’t surprised the stock fell in its first outing.
“The consumer discretionary category is very difficult at the moment,” Ramírez said.
But still, the analyst is bullish on Birkenstock.
“It’s a good story overall,” she said. “It’s in the sweet spot of footwear. There have been pockets of strength within footwear and it’s been performance and comfort, and Birkenstock fits into that.
“At a time when the consumer is cautious with their spend, when they decide to spend, they’re going to spend on a brand that they trust and is going to be worth every dollar they spend — and the heritage that Birkenstock has behind it, it’s a product that’s going to last,” she said.
Birkenstock also plays into a trend that’s hard to shake.
“The consumer was introduced to comfort and there’s no way they’re going to get rid of that,” Ramírez said. “It’s hard for someone to give up comfort on their feet.”
Birkenstock’s introduction on Wall Street made it the fourth-largest footwear company trading in New York, by market capitalization. The company now sits behind Nike Inc. at nearly $150 billion, Deckers Outdoor Corp. at $13.2 billion and On Holding, which went public last year, at $7.9 billion.
Oliver Reichert, chief executive officer of Birkenstock, said in a statement that: “We are excited to embark on this new chapter as a public company and look forward to empowering even more people to walk the way nature intended. With our heritage dating back to 1774 we are a company focused on long-term sustainable growth and this is reflected in our shareholder base. At Birkenstock we believe purpose never goes out of style and our business will always be based on this philosophy.”
Birkenstock — and Reichert — are now going to have to get used to having the company’s value fluctuate moment-to-moment with the whims of investors.
And on Wall Street, both timing and adjacency can be important as a surprise from one player can depress whole sectors.
It turns out this was exactly the market that Birkenstock launched into as luxury stocks were in retreat in Europe on Wednesday after leader LVMH Moët Hennessy Louis Vuitton posted just a 1 percent gain in third-quarter revenues.
Shares of LVMH fell 6.5 percent to 686.10 euros while Burberry Group was off 3.2 percent to 17.77 pounds and Brunello Cucinelli slipped 3.2 percent to 71.40 euros.
Birkenstock does not operate at the peak of the luxury market, but the company’s sandals are a premium purchase and the brand has created a bigger profile in the high-fashion sphere, through collaborations with the likes of Dior, Rick Owens and Jerry Lorenzo’s Fear of God and ads featuring Manolo Blahnik in recent years.
Certainly, Birkenstock has plenty of friends in luxury.
Alexandre Arnault, who is the son of LVMH chief Bernard Arnault and executive vice president of products and communications at the company’s Tiffany & Co. business, sits on the Birkenstock board.
Arnault stood just to Reichert’s right and waved a sandal as the CEO rang the opening bell on the New York Stock Exchange. The two shook hands as the applause wore on and the trading day got under way. In a rare exception to the exchange’s very buttoned up dressing rule’s — “flip-flops, casual beach or boat shoes, and other extreme styles are not permitted” — traders were outfitted in Birkenstocks for the event.
The pairing of Arnault and Reichert was not surprising.
LVMH is a key backer of L Catterton, which acquired Birkenstock in 2021. The private equity giant — which bills itself as the largest investor in the consumer space in the world — sold off 21.5 million shares in the offering and now controls 82.8 percent of the company.
While this is just the beginning of L Catterton’s monetization of the investment, the deal is on its way to be a good one for the private equity player, which acquired Birkenstock for what was said at the time to be about 4 billion euros in the midst of the pandemic.
That ascent in valuation reflects, in part, Birkenstock’s dramatic growth — from revenues of 292 million euros in 2014 when Reichert took the helm to 1.2 billion euros last year.
For the nine months ended June 30, revenues advanced 21 percent to 1.1 billion euros as adjusted profits grew 47 percent to 182 million euros.
Birkenstock raised nearly $450 million in the offering and plans to use the proceeds to repay a vendor loan of about 100 million euros as well as 313 million euros due under a senior term facility.
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