German premium footwear maker Birkenstock Holding made its debut on the US stock market on Wednesday, after pricing its initial public offering (IPO) at $46 per share, the middle of its indicated range. The company raised about $1.48 billion from the sale of 32.3 million shares, valuing it at about $9.3 billion on a fully diluted basis.
Birkenstock’s conservative pricing strategy
Birkenstock and its underwriters chose to price the offering conservatively given the market volatility, despite having enough demand to price the share sale at the top of the indicated range of $44 to $49 per share, according to people familiar with the matter. The company’s pricing was reported by the Wall Street Journal on Tuesday.
The conservative pricing strategy reflects the cautious approach that many companies have taken in recent weeks, as the US stock market has been hit by inflation fears and rising bond yields. Several high-profile IPOs, such as chip designer Arm Holdings, grocery delivery app Instacart and marketing automation platform Klaviyo, have seen their share prices fall below their IPO levels after their debuts.
Birkenstock is the fourth major company to launch a US IPO in the last four weeks, following those of Arm, Instacart and Klaviyo. The slew of recent listings briefly raised hopes of a broad recovery in equity capital markets after a nearly 18-month dry spell.
Birkenstock’s history and brand appeal
Birkenstock was founded in 1774 in the German village of Langen-Bergheim by Johannes Birkenstock and his younger brother Johann Adam Birkenstock, who were both shoemakers. The Birkenstock family ran the business for six generations after its founding.
The company is best known for its sandals with cork and rubber soles that mold to the shape of the wearer’s feet. The sandals have been popular among hippies, environmentalists and health-conscious consumers for decades. The brand has also been seeking to position itself as a fashionable item worn by models and celebrities. Barbie, played by Margot Robbie, wore a pink pair of Birkenstocks in the final scene of the movie released this summer.
Birkenstock sells its products in more than 100 countries and operates more than 1,500 stores worldwide. The company reported revenue of $1.9 billion and net income of $287 million for the fiscal year ended March 31, 2023, according to its IPO prospectus.
Birkenstock’s growth plans and challenges
Birkenstock plans to use the proceeds from its IPO to fund its expansion in new markets, especially in Asia and North America, where it sees significant growth potential. The company also intends to invest in product innovation, digital transformation and sustainability initiatives.
However, Birkenstock faces several challenges in its quest to grow its business and maintain its profitability. The company operates in a highly competitive and fragmented footwear industry, where it competes with both established players such as Nike, Adidas and Crocs, as well as emerging brands such as Allbirds, Rothy’s and Oofos.
The company also relies heavily on a single product category, sandals, which accounts for more than 80% of its revenue. This exposes it to seasonal fluctuations and changing consumer preferences. Moreover, the company faces risks related to supply chain disruptions, currency fluctuations and regulatory changes in different markets.
