Legendary German footwear company Birkenstock priced its highly anticipated initial public offering at $46 per share on Tuesday, at the lower end of its projected range of $44 to $49 per share.
The conservative pricing comes as investors are displaying caution towards new public offerings in the face of market volatility. At $46 per share, Birkenstock would raise approximately $1.5 billion in proceeds and gain a valuation of $8.6 billion.
The sandal maker is slated to begin trading Wednesday on the New York Stock Exchange under the ticker symbol “BIRK.”
Birkenstock is going public at an intriguing moment for the footwear industry, as major players like Nike and Adidas adapt their offerings to capitalize on surging demand for comfortable, casual styles that became popular during the pandemic.
As a storied brand known for its sandals and clogs, Birkenstock is uniquely positioned to ride this trend. However, questions remain about the nearly 250-year old company’s growth trajectory and valuation.
Built on Heritage, Positioned for Growth
Dating back to 1774, Birkenstock has a long legacy as a comfort-focused footwear brand, securing devotees across the decades with its contoured footbeds and versatile sandal styles. The company lays claim to inventing the original cork footbed.
In recent years, Birkenstock has experienced a resurgence in popularity, spearheaded by its iconic Boston clogs. Younger consumers are discovering the brand, enticed by its commitment to quality, comfort and sustainability.
This has fueled strong financials, with Birkenstock generating 1.2 billion euros in revenue in its latest fiscal year, representing a CAGR of 17% over the last decade. Its sales are split nearly evenly between Europe and the Americas.
To stoke further growth, Birkenstock plans to expand its digital presence, having already grown e-commerce sales to just under 20% of total revenue. It will also continue broadening its product portfolio into areas like athletic leisure.
Reasons for Caution Among Investors
However, Birkenstock also holds substantial debt of around 1 billion euros, sparking questions about its financial profile.
Additionally, the company conceded in its prospectus that it has “identified material weaknesses in our internal control over financial reporting” – never reassuring words for potential investors.
The Birkenstock IPO comes on the heels of disappointing public debuts from companies like grocery delivery platform Instacart and chip technology firm ARM Holdings. This rocky landscape has left investors apprehensive about overvalued offerings.
Some analysts argue that Birkenstock’s projected valuation range of up to $5 billion was simply too optimistic, given the market environment. The tepid pricing indicates investors are unwilling to take an exuberant bet on the storied brand.
Many also point to the fiercely competitive footwear arena, where Birkenstock must compete with a range of established casual brands and new direct-to-consumer upstarts. While Birkenstock enjoys enviable brand cachet, it may lack the scale and resources of giants like Nike and Adidas.
The Road Ahead
While Birkenstock took a conservative approach with its IPO pricing, the offering will still generate a substantial cash infusion to fuel the company’s expansion.
The true test will be whether Birkenstock can sustain momentum among younger demographics while defending its turf against deep-pocketed rivals. Its ultimate post-IPO performance will be determined by strategic decisions in areas like brand positioning, product innovation, and digital sales.
But with almost 250 years of history behind it, few companies can claim a legacy comparable to Birkenstock’s. This pedigree provides confidence that the brand has staying power, whatever public market challenges may arise. For long-term investors, Birkenstock remains a compelling story combining heritage and growth.