Can Birkenstocks Find its Footing After an Unsuccessful IPO Opening?

Birkenstock, the cork-soled hippie sandal, went public earlier this month, recording one of the worst openings for a billion-dollar IPO in over two years. This follows a pattern of shoe brands going public and plummeting immediately after entering the market. 

Birkenstocks have long been targeted for their ugly appearance, earning nicknames like “Jesus sandals” and “hippie shoes.” A family-owned German business with a loyal customer base, the brand has always maintained a consistent identity. Yet, in 2021, Birkenstock sold its majority stake to LVMH. At the time, the company was valued around $4.85 billion.

Following this deal, the company’s revenue rapidly increased, its net profit rising by almost $91 million, according to its IPO Prospectus. Many have attributed this to a combination of celebrity endorsements, social media, lucrative partnerships (like L Catterton’s recent collaborations with Dior and the Barbie Movie), and an expansion of products. In a post-pandemic world, comfortable shoe brands are certainly appreciated. These new marketing strategies were clearly effective; in 2022, the “Boston Clog” was one of the top-purchased shoes in the United States.

Recent success led to shares being traded at an $8.6 billion market cap, only rivaled by big-name companies like Nike. This can be worrying when the company was valued at just $4.3 billion in 2021, according to the IPO report.

“Investors who want to buy may have to buckle up for a potentially volatile ride ahead. A spurt of uncertainty often follows high-profile listings,” said Susanna Streeter, an analyst at Hargreaves Lansdown. 

On their first day going public, the company ended up losing around 12.6%, expecting their shares to range from $44-49, but garnering around $40.20. They anticipated around 187 million outstanding shares, according to the company’s F-1 filing. Many investors continue to warn against buying BIRK – not only has the company already accrued public debt, but their recent underperformance coupled with the current state of the IPO market is disheartening. 

Many have wondered why Birkenstock would sell most of their shares in the first place after being so consistently family-oriented for years prior. However, an inability to develop an effective strategy and rising tensions in the family positioned selling as the most lucrative solution.

“The best thing for this business would be to stay family-owned, but in the family, there were so many problems we go to the second-best option – going public and giving the brand back to the people,” CEO Oliver Reichert said in an interview with CNBC.

Since its creation in the late 1700s, Birkenstock has maintained a clear image – one of the major selling points to its loyal fan base. However, under new leadership the brand’s identity is shifting, which some worry could negatively shift its customer base.

“Nowadays, if you look at who’s buying [Birkenstocks], it is more akin to sneakerheads and fashionistas… a much harder audience to sustain or to build on than the original audience of orthopedic and hippies,” said former chair of LVMH North America Pauline Brown in a statement to Yahoo Finance.

The decision to sell is further called into question when many of Birkenstock’s peers who have chosen to go public on the current market have produced performances that have been less than impressive. All Birds, a brand with a similar mission – sustainability with a tastefully minimal design – had an impressive revenue increase in 2021 but performed so poorly on the IPO market that it lost more than $100 million in its first year as a public company. Dr. Martens exhibited a similar pattern, dropping 75%, as well as the brand On Holding, which dropped 37%. 

Despite its initial underperformance, BIRK has been slowly increasing since its first day on the market. Only time will tell if the German brand can find its footing or if it will follow in the footsteps of its peers.