Birkenstock made $1.3 billion in revenue in fiscal 2022.
Courtesy of NYSE
Shares of
Birkenstock Holdings,
the maker of cork-soled clogs, got off to a rocky stock market debut Wednesday.
The stock (ticker: BIRK) opened at $41 on the New York Stock Exchange on Wednesday afternoon, down 11% from its IPO price of $46 a share. It closed the day down 12.6%, at $40.20 a share.
The German shoe maker expected to price its IPO between $44 and $49 a share, according to documents filed last week.
Birkenstock and other insiders raised $1.48 billion through the IPO.
At the closing price, the company had a market value of $7.55 billion, not counting certain shares for employees and executives.
Still, Birkenstock has a bigger market capitalization than peers Allbirds,
Skechers
(SKX),
Crocs
(CROX), and
Steve Madden
(SHOO) and its valuation is higher than the roughly $4.3 billion private-equity firm L Catterton paid to acquire the company in early 2021.
Javier Gonzalez Lastra, portfolio manager of the
Tema Luxury exchange traded fund
(LUX), says that
LVMH Moet Hennessy Louis Vuitton
‘s lackluster results Tuesday damped investor appetite for consumer-facing brands. LVMH saw revenue growth slow in its latest quarter and warned that high-income European consumers were slowing down. With 36% of Birkenstock’s revenue coming from Europe in fiscal 2022, LVMH’s comments are “inevitably going to have an impact” in the short term, Gonzalez Lastra said.
Gonzalez Lastra considered joining the IPO, but decided against it. “I find it quite difficult to make a high-conviction judgment on it,” he said on a call with Barron’s Wednesday.
Some investors had doubts early on. To justify the roughly $8.6 billion valuation Birkenstock was targeting, it would have to generate more than $3.8 billion in annual revenue—or about three times its fiscal 2022 revenue, David Trainer, CEO at investment research firm New Constructs, said ahead of the IPO.
“We don’t see this happening anytime soon, if ever,” he wrote in a research note last week. “BIRK looks more than fully valued and does not provide investors much upside potential.”
Looming over Birkenstock’s public debut was the specter of other recent IPOs whose stocks have dropped after a first-day pop. Shares of chip designer
Arm Holdings
(ARM) have fallen below their opening trade after an impressive debut. Shares of delivery platform
Maplebear
(CART), Instacart’s holding company, have retreated below their IPO price. And stock in fast-casual Mediterranean chain
Cava Group
(CAVA), which went public over the summer, is trading well below its opening price. Perhaps most comparable, shares of fellow footwear company
Allbirds
(BIRD) now trade for under a dollar despite opening at $21.21 in November 2021. Allbirds is now valued at roughly $144 million.
Birkenstock’s lofty valuation reflects the company’s success over the past few years, says Neil Saunders, managing director and retail analyst at research firm GlobalData. Birkenstock’s revenue grew from €727.9 million ($770.9 million) in fiscal 2020 to €1.24 billion ($1.3 billion) in fiscal 2022. Net profit rose by about €86 million ($91 million) within that time frame.
Birkenstock also has several backers. L Catterton—which merged with the private equity arm of
LVMH Moët Hennessy Louis Vuitton
(LVMHF) in 2016—will remain the company’s majority owner after the offering. The company has also secured financing offers from several investors, including Financière Agache, Durable Capital Partners, and Norges Bank Investment Management, according to a filing.
Corrections & amplifications: Birkenstock shares opened at $41 a share. A previous version of this article incorrectly said $41.97.
Write to Sabrina Escobar at [email protected]
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