From modern sandals to mainstream attraction: Will Birkenstock’s IPO be successful? | Preliminary public choices

IIt might be laborious to imagine, however Birkenstock footwear had been as soon as fully retro, the footwear of alternative amongst hippies who had been prepared to sacrifice model for arch assist. Now, those that have embraced the modern sandal may be vindicated, because the German footwear maker makes an attempt to shore up its mainstream attraction now with a multi-billion pound itemizing.

However will this week’s IPO in New York – which if there may be robust demand for its shares, might worth the 250-year-old medical footwear model at round £8bn – be a turning level for a trusted model cherished by these on the earth? Recognized for many years?

The glare of the inventory market, with pressures to ship gross sales development each quarter, just isn’t all the time a snug place for personal firms – even these with an extended observe file of success. Different shoemakers, similar to Allbirds and Dr Martens, haven’t fared effectively in current flotations, which has to date confirmed to disappoint traders.

In his pitch to potential traders, Birkenstock CEO Oliver Reichert, who turned the primary non-family member to run it when he took over in 2013, says that is no extraordinary shoe model and they’re getting a “generational alternative”. “To purchase a bit of the corporate.

A Birkenstock sign outside a store in Paris, France
Birkenstock gross sales rose virtually 30% to £1.1bn in 2022. Images: Benoit Tessier/Reuters

By her footwear, Reichert says, she “has been shaping the zeitgeist for many years… opinionated in a constructive sense, undeterred by trend traits and proudly German.” He provides: “Birkenstock is greater than only a shoe. It’s a mind-set, a lifestyle.”

Exaggeration apart, strolling round in Birkenstock sandals that suit your ft actually matches into the “way of life” ushered in by the coronavirus pandemic. In the course of the disaster, curiosity in manufacturers that provide consolation and heritage has risen, and stays robust. Employees are again at their desks, however gown codes are extra relaxed than ever, with no eyebrows raised in case your boss can see your toes as an alternative of the shine of your footwear.

This relaxed temper helped Birkenstock shift 30 million pairs final 12 months, with gross sales rising virtually 30% to £1.1 billion, producing web earnings of £162 million. Should you like Birkenstocks, apparently you like them. The corporate boasts in its floating brochure that folks have been sticking with it for many years, with a survey of US prospects revealing they personal a mean of three.6 pairs.

With a buyer base of 72% ladies, Birkenstock can also be benefiting from a change in mindset amongst younger ladies who not subscribe to excessive heels and delicate footwear as a female excellent. The corporate calls this a “breakthrough for contemporary feminism,” and that Margot Robbie is sporting a pair of pink Arizona sandals on the finish of Greta Gerwig’s Barbie film most likely says all of it.

All issues thought-about, it additionally helps that her sandals are often seen on the ft of film stars and fashions, together with Kendall Jenner, Gigi Hadid, and Kaia Gerber (the latter two fashions have been seen out and about sporting them with socks).

Birkenstock shoes in a store in Sweden
A survey of American customers signifies that they personal a mean of three.6 pairs of Birkenstocks. Photograph: Jeppe Gustafsson/Shutterstock

Birkenstock has managed to fully change its model picture from that of medical footwear to a modern staple, says Louise Deglis Favre, a trend analyst at retail consultancy GlobalData.

“Birkenstock has managed to show the natural endorsement of fashions and celebrities into a long-lasting trend development, because of the standard and luxury of its merchandise, in addition to by increasing its vary to incorporate extra stylish designs and colours whereas sustaining its core aesthetic.” She provides.

Whereas a profitable itemizing would offer an emblem of success and legitimacy throughout the business, the necessity to fulfill a wider vary of traders might result in a “dilution of name identification,” she says.

Birkenstock has advised traders it’ll value its shares at someplace between $44 and $49 per share, elevating as much as $1.6bn (£1.3bn) for the corporate and personal fairness proprietor L Catterton, which is backed by French luxurious trend home LVMH.

Nevertheless, analysts warn that the shoemaker is mired in tough market circumstances, with traders involved concerning the financial backdrop and declining client confidence, in addition to the poor efficiency of preliminary public choices by different shoe manufacturers.

The outcome, anticipated to be introduced on Wednesday, will mark one other milestone for the corporate, which was based by cobbler Johann Birkenstock in 1774 to make medical footwear. The corporate remained within the palms of the founding household till 2021, when it offered a majority stake to L Catterton.

So what is the huge plan? Extra of the identical, in line with Reichert. Its 5 fundamental kinds: Arizona, Madrid, Giza and Mayari sandals, in addition to Boston clogs, make up the lion’s share of gross sales and it plans to decide to reinventing them every season in new colours and supplies.

It additionally goals to grow to be an all-season footwear model, with extra “closed shoe choices,” not socks however clogs, sneakers, boots and boots that also use its proprietary footbed that displays the anatomy of the foot. This push has already began and appears to be paying off to date. After introducing extra kinds, together with lined and waterproof variations, Boston clog gross sales have doubled on common annually since 2020.

Shoes at a Birkenstock store in Berlin, Germany
Birkenstock has a buyer base of 72% feminine. Images: Fabrizio Benche – Reuters

Its sandals have turned Birkenstock right into a family identify, however that will make it tough to diversify, says Mamta Valecha, an fairness analysis analyst at Quilter Cheviot.

“You need to keep recognized for that big-selling product, however you additionally need to usher in new strains to develop the enterprise, and that may be tough,” she says. “Should you take a look at different shoe retailers’ IPOs, current historical past hasn’t been form. It is a robust market to go public in.”

However Reichert is optimistic. He says that when folks say Birkenstock is “dwelling a second,” he all the time responds that “this second has lasted for 250 years, and it’ll proceed.”

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