Timing The Market With Birkenstock's Upcoming IPO

By Kirsteen Mackay


Birkenstock targets a $10 billion valuation in its U.S. IPO. Here's why retail investors should pay attention and what investment angles to consider.

Birkenstock display rack of footwear.
Birkenstock Steps into Wall Street with $10 Billion Valuation

TL: DR - What You Need To Know

Birkenstock, the well-known German footwear brand, is gearing up for a big splash in the U.S. stock market with a targeted valuation of $10 billion. Backed by private equity firm L Catterton, the company aims to sell a minimum of 32 million shares at a price range of $44 to $49 each, aiming to raise up to $1.58 billion. This move comes at a time when the IPO market is showing signs of revival, although investor sentiment remains cautious due to lingering high interest rates.

Adding a dash of glamour to the board, Alexandre Arnault, son of LVMH Chairman Bernard Arnault, is set to join. Financial firms have also shown keen interest, with Financière Agache and funds managed by Durable Capital Partners and Norges Bank Investment Management planning to invest hundreds of millions.

If you want to buy shares in Birkenstock stock, you will be able to find it on the New York Stock Exchange (NYSE) under the symbol BIRK from Wednesday, October 11.

Last month, the company reported a 21% revenue increase, showcasing resilience in a tough luxury goods market.

Post-IPO, Birkenstock plans to use the funds to pay down debt, with L Catterton retaining an 83% stake. Underwriting the offering are major banks like Goldman Sachs, J.P. Morgan, and Morgan Stanley.

In terms of market positioning, Birkenstock has traditionally focused on comfort, but it's gaining traction in the fashion world. Despite this newfound fame, challenges like counterfeit goods could pose risks.

Why This Is Important for Retail Investors

  1. Valuation and Investment Opportunity: The targeted $10 billion valuation and the plan to raise up to $1.58 billion make this IPO a sizable event in the investment world. For retail investors, it offers an opportunity to invest in a well-established brand that's pivoting towards broader market appeal, from comfort to fashion.

  2. Market Timing: Birkenstock is entering the public market when IPO activities are reviving, yet investor sentiment remains cautious. This environment could present a unique buying opportunity for retail investors who are discerning and well-timed in their investment strategies.

  3. High-Profile Backing and Interest: The involvement of L Catterton and the Arnault family, along with financial giants like Goldman Sachs, J.P. Morgan, and Morgan Stanley, lends credibility and could instill confidence among retail investors. It signals that large, savvy investors see potential in the company.

  4. Strong Financial Performance: Birkenstock reported a 21% revenue increase in a challenging market, demonstrating resilience and business acumen. For retail investors, this strong financial performance could signify a potentially stable and profitable investment.

  5. Strategic Partnerships and Branding: The company has collaborated with luxury brands like Dior and Manolo Blahnik, and its products have been featured in pop culture, enhancing its brand value. Retail investors might view these strategic moves as an indication that the company is well-positioned for growth and diversification, making it an attractive investment option.

How Can You Use This Information?

  • Growth Investing: The brand is making strides in expanding its appeal from comfort to fashion and has formed partnerships with luxury names like Dior. For those looking for companies with the potential for high growth, Birkenstock could fit the bill. Its plans to use IPO proceeds to pay down debt also signal an intent to free up capital for growth initiatives.

  • Momentum Investing: Given the high-profile backing and a recent revival in IPO activities, there might be a strong momentum play here. If the stock experiences a successful debut and gains traction quickly, momentum investors could ride the wave for short-term gains.

  • Thematic Investing: Those interested in consumer discretionary or luxury goods sectors could consider this IPO a chance to diversify their portfolio. Birkenstock's entrance into the public market adds another option in these themes, which may be particularly attractive if you believe in the enduring power of brand names.

  • Contrarian Investing: Given the caution surrounding high interest rates and the mixed performance of recent IPOs, some investors might be steering clear of new listings. For a contrarian investor, this could be the perfect time to buy into a strong company when others are hesitant.

  • Global Exposure: As a German company with a significant market in the U.S., investing in Birkenstock could offer geographical diversification. This could be appealing for those looking to spread risk across different markets and currencies.

These strategies offer various angles for retail investors to consider, based on their risk tolerance, investment objectives, and market outlook. However, investing in IPOs often carries speculative risk, as demonstrated by the recent sharp declines in  Instacart (NASDAQ: CART), and Arm Holdings PLC (NASDAQ: ARM) since their recent IPOs.

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Birkenstock Steps into Wall Street 

Founded in 1774, Birkenstock is known for its function-first approach, when it comes to footwear.  Here's a comprehensive look at what this iconic brand brings to the table and why its IPO is gaining so much attention.

A Legacy Rooted in Tradition

Guided by the principle of "Naturgewolltes Gehen," which emphasizes natural walking, Birkenstock has always prioritized human comfort. The brand's legendary footbed, designed to mimic the benefits of walking barefoot, evenly distributes weight while reducing pressure points and friction. This commitment to quality is a key reason the brand has endured for nearly 250 years.

Product Portfolio

Birkenstock's product range isn't limited to just one or two styles. Anchored by its iconic Core Silhouettes—the Madrid, Arizona, Boston, Gizeh, and Mayari—the company has an extensive archive of over 700 silhouettes. By continuously extending existing styles and launching new ones, Birkenstock appeals to a broad and diverse audience across various price points and usage occasions.

Quality and Craftsmanship

The "Made in Germany" tag comes with a promise of quality. Birkenstock produces over 95% of its products in Germany and sources the majority of its materials from Europe. The company's vertically integrated manufacturing base ensures that each product meets rigorous quality standards, reflecting a centuries-old tradition of craftsmanship.

Strong Financials

The numbers speak for themselves. In fiscal 2022, Birkenstock reported impressive revenues of €1,242.8 million and a net profit of €187.1 million. With an Adjusted EBITDA of €434.6 million and an Adjusted EBITDA margin of 35%, the company sold approximately 30 million units last fiscal year.

What Does This Mean for Retail Investors?

The robust financial health of the company and its long-lasting legacy make this BIRK stock IPO a notable event. Whether you're looking at it from a thematic, growth, or momentum investing standpoint, Birkenstock's public debut offers various angles for retail investors to consider.

Final Thoughts

Birkenstock's IPO is not just another event; it's a culmination of years of quality, tradition, and strong financial performance. For retail investors, this IPO presents a unique opportunity to be part of a global brand that has stood the test of time while continuously evolving. With its multi-channel distribution model and growing direct-to-consumer channel, Birkenstock is well-poised for future success.

So, mark your calendars for October 11, 2023, because this is one IPO you will want to keep an eye on. 

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In this article:

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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