- Birkenstock IPO and Growth
- Legacy of Comfort and Style
- Investor Skepticism and Potential
Birkenstock, a German sandal manufacturer, has spent decades persuading consumers that what may seem unattractive at first glimpse is, in fact, desirable.
Wall Street will now put this influence to the test.
Its initial public offering valued it at $8.6 billion (£7.08 billion), quadrupling its 2021 value to $46 a share.
The shares, however, began trading lower as a result of scepticism regarding the extent of further expansion.
Since its 18th-century beginnings as a cobbler and 1963 sandal launch, the company has grown.
The shoes initially attracted hippie individuals who were attracted to their flexible yet robust support.
Kate Moss supported the brand in the 1990s once the fashion world warmed to its unorthodox functionality.
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As a result of a pandemic-era focus on comfort, collaborations with fashion designers, and sightings of celebrities ranging from Gwyneth Paltrow to Kaia Gerber, the company has amassed a massive following in the past decade.
The brand’s appearance in the Barbie film this summer appeared to solidify its grasp of the cultural zeitgeist. Following her liberation voyage, the main character was spotted donning the iconic two-strap sandal in pastel pink. The instant reportedly caused a threefold increase in demand.
Despite persistent scepticism, the company sold approximately 30 million pairs of shoes in the previous year.
In New York, Einav Ben Hur, 47, bought a pair for her child at Birkenstock. “We think it’s ugly,” she remarked. “He says it’s fashionable, so here we are.”
As shares commence trading on the New York Stock Exchange, investors are confronted with the inquiry of whether the organisation can sustain its current rate of growth, and whether subjecting the firm to the scrutiny of public markets for the first time in its extensive chronicles will be detrimental or beneficial.
“According to some, Birkenstock is experiencing a moment.” “I always respond with the remark, ‘This moment has endured for two centuries, and it will continue to endure,'” said Oliver Reichert, chief executive, in the letter announcing the firm’s intention to list.
L Catterton, an LVMH-sponsored private equity group that acquired a majority stake in 2021, sold shares to fund $1.5 billion.
The company wants to keep 80% of Birkenstock, indicating it doesn’t think the store is done.
Each share of the company began trading at $41, an 11% decrease from the IPO price.
Certain consumers expressed concern that the listing would impose additional financial strains on the company, necessitating long-term brand-damaging trade-offs.
“I fear the IPO because I believe the quality will definitely deteriorate,” said Bella Sheth, 55, a project manager from New York who has been purchasing Birkenstocks for over three decades and currently owns six pairs. “Hopefully they won’t get ruined.”
Given the frequency with which investors pursue growth despite the risk, which is especially pronounced in luxury fashion, that expansion will backfire and dilute the brand, listing concerns are merited, according to Thomai Serdari, a marketing professor at the Stern School of Business at New York University.
She said Birkenstock’s fashion collaborations and new materials and colours had created demand.
She further stated, “Meanwhile obtaining an initial public offering does not necessarily imply that you will experience the same level of success as Gap,” an apparel brand that was ubiquitous in the 1990s but is now a mere shadow of its former prominence.
Family enterprises are the area of expertise of Morten Bennedsen, a professor at the University of Copenhagen and INSEAD. According to him, the organisation had already undergone a significant shift from being a family-owned business to becoming a modern corporation that is influenced by investor demands by the time it relinquished its family leadership in 2013 and subsequently obtained funding from L Catterton.
“Then everything changed,” he declared. In contrast to that choice, he further stated, “This progression is entirely organic.”
Birkenstock follows a path that has been traversed by numerous footwear and fashion companies by opting to list.
Allbirds and Dr Martens, which went public in 2021 during boom markets, have seen their fortunes tumble.
Some have demonstrated durability, such as Crocs, which was included in the 2006 list. With an annual sales volume exceeding 100 million pairs of shoes, the company has achieved a valuation of approximately $5.2 billion, representing a growth of over sixfold from its initial capitalization.
Susannah Streeter, director of money and markets at Hargreaves Lansdown, remarked, “It is evident that investors are cautious about the brand’s future.” She said that the IPO share price decreased almost halfway as expected.
Lacey Crocker, who purchased her initial pair of Birkenstocks during her senior year of high school, believes the brand’s popularity will persist beyond the current trend, provided that the shoes retain the comfortable qualities that initially drew attention to them.
“Arch support is everything,” said the physician’s assistant, age 39. “Even if they do go out of style, I’d still wear them.”
