Barbie Drives Birkenstock to NYSE IPO

Birkenstock IPO

Birkenstock is a German footwear brand, with its origins traced back to 1774. It has a worldwide reach, since its products are sold in around 90 countries across all continents ^[1]. It is mostly known for the distinctive double-buckle sandals with the comfortable cork footbet, but its designs include clogs, sneakers and other shoes. Its sandals were part of the late Apple CEO Steve Jobs' wardrobe and a pair worn by him fetched nearly $220,000 in an auction around a year ago. ^[2]

The footwear maker announced this week, an Initial Public Offering at a price range of $44-49/share, which can lead to a valuation close to $10 billion. The firm will trade under the ticker "BIRK", on the New York Stock Exchange (NYSE) ^[3]. This will mark another high-profile listing, in a fresh indication that the IPO market is heating up after a quiet period. At the forefront of this reinvigoration, is British chip-designer Arm Holdings, which is one of my 10 stocks to watch in the current quarter.

Birkenstock Financials

The iconic shoe-maker sells its products directly to consumers (DTC), but also through wholesale partners. The DTC channel accounted for 37% of its sales for the nine months ended June 30 2023, according to an SEC filing ^[4]. The firm generated total revenues of €1.117,4 billion in that period, marking a 21% y/y increase. However, net profits dropped roughly 20% y/y to €103.3 million and margins were squeezed to 14%.

The filing also revealed the nomination of Alexandre Arnault for a seat at the Board of Directors, who is the son of the CEO of Moët Hennessy Louis Vuitton (LVMH). The LVMH Group (MC.fr) which also includes iconic designers like Bulgari and Loewe, is the French-based leader of the luxury fashion market, with revenues in excess of € 42 billion in H1 2023. ^[5]

Barbie Movie Bump

Birkenstock's IPO comes shortly after its sandals were featured in the blockbuster Barbie film. Greta Gerwig's Barbie, was played by superstar Margot Robbie, who towards the end of the movie rocked a pair of pink Birkenstock Arizonas.

Although Birkenstocks are mostly chosen for their comfort and one would be hard-pressed calling them pretty or elegant, they have emerged as fashion objects over recent years. Various celebrities have been wearing them, with the Barbie movie likely giving them an extra bump and may have played a role in the firm's push to go public.

The Warner Bros (WBD.us) movie premiered in July with a star-studded cast and became the biggest movie of 2023, having grossed more than $1.4 billion worldwide. This places Barbie roughly in par with Top Gun: Maverick, which was last year's sensation and second movie of the 2022 box office. ^[6]

Challenging Environment

Birkenstock is a highly recognizable brand, with global reach that manages to transcend passing trends. Its products are sought after by fashionistas and the Barbie movie will likely increase its appeal. According to a survey sited by the company, the average US consumers owns 3.6 pairs, underscoring the fascination. ^[4]

The company has widened its lineup and intends to continue adding new silhouettes and product categories. It also looks to increase output over the next five years, in a push to reach untapped markets. These are crucial pursuits, as it is about to go public. Its IPO has already attracted interest from Norges Bank and Financière Agache according to the firm. ^[4]

These are encouraging signs, but the external environment is challenging. Elevated inflation, high interest rates and borrowing costs pose headwinds, in a highly competitive market. Furthermore, recent IPOs like the one of Arm, have shown that investors are weary of lofty valuations, since its stock dropped after the strong debut.