Birkenstock: The once-not-so-cool sandal maker is now worth billions

German sandal maker Birkenstock has spent decades convincing shoppers that what may seem at first glance unattractive is actually desirable.

The extent of that strength will now be tested on Wall Street, where its shares are scheduled to begin trading on the New York Stock Exchange.

The IPO priced the shares at $46 per share, valuing the company at about $8.6bn (£7.08bn).

This is more than double what it was worth less than three years ago.

But is there more room for growth?

The company, which traces its roots back to an 18th-century cobbler, found its first fans among hippie types in the 1960s, who were intrigued by the company’s emphasis on flexible, sturdy support.

“Birkenstocks haven’t been a fashionable shoe for decades,” New York Times fashion correspondent Elizabeth Patton told the BBC. “This was something your stupid aunt or science teacher would wear with socks.”

But it eventually began to transform the fashion world, earning the stamp of approval of 1990s supermodel Kate Moss.

Over the past decade, the company has gained a large following, as a pandemic-era focus on comfort, collaborations with fashion designers, and the visibility of celebrities from Gwyneth Paltrow to Kaia Gerber have fueled growth.

Last year the company sold about 30 million pairs of shoes.

The brand’s capture of the cultural zeitgeist seems to have been confirmed by its appearance in this year’s Barbie film, where the lead character’s liberation journey was strikingly summed up by her adoption of a pink pair of the company’s classic two-strap sandals. the moment It said Send the order go up threefold.

As shares begin trading on the New York Stock Exchange, investors face the question of whether the company can maintain this momentum — and whether opening the company to public market pressures for the first time in its long history will hurt. Helps.

“Some say: Birkenstock is having a moment,” CEO Oliver Reichert said in the letter announcing the company’s listing plans. “I always answer: This moment has lasted 250 years, and it will continue.”

The share sale allowed L Catterton, the private equity firm owned by French giant LVMH that took a majority stake in the company in 2021, to make $1.5 billion.

But the company plans to retain an 80% stake in Birkenstock, a sign that it doesn’t think the retailer’s best days are over – despite the market’s exhaustion.

However, some clients said they also feared the listing would impose new financial pressures on the company, forcing trade-offs that would hurt the brand in the long term.

“I’m afraid of IPOs because I think the quality will definitely fall apart,” said Bella Sheth, 55, of New York, a business manager who has been buying Birkenstocks for more than three decades and now has six pairs. “I hope they won’t be destroyed.”

Tumay Sirdari, a marketing professor at New York University’s Stern School of Business, said concerns about the listing are justified, given how often investors push for growth, despite the risks — especially acute in luxury fashion — that expansion will backfire and weaken… trade mark.

But for now, she said, Birkenstock has done a good job of building a sense of desire through its fashion collaborations and introducing new colors and materials.

“Just because you get an IPO doesn’t mean you’re going to be a blown hole,” she added, referring to the clothing brand that seemed ubiquitous in the 1990s but is now a shadow of its former self.

Morten Bennedsen is a professor at the University of Copenhagen and the European Institute of Business Administration (INSEAD), who studies family businesses. He said the company had already transformed from a family-owned business into a modern corporation, bowing to investor pressure, when it relinquished its family leadership in 2013 and later gained backing from L. Catterton.

“This changed everything,” he said. Compared to this decision, he added: “This is a completely normal step.”

In choosing to list, Birkenstock is following a path taken by shoe and fashion companies.

Some, like sneaker brand Allbirds and shoe company Dr Martens, which went public in 2021 when markets were hot, have seen their fortunes decline.

Other companies have proven to be viable, such as Crocs, which was listed in 2006. The company, which sells more than 100 million pairs of shoes annually, is now valued at about $5.2 billion, more than six times what it was initially worth. .

When it comes to high-profile shoe IPOs, people are often wary of valuations, of which Birkenstock has a “huge valuation,” said Elizabeth Patton of The New York Times.

“But I also think this company has a fair number of things going for it, which is the idea that looking good and feeling good are the same thing,” she said.

Lacy Crocker, who bought her first pair of Birkenstocks in high school, said she believes Birkenstocks’ appeal will continue even if the current fad fades — as long as the shoes maintain the comfortable features that got them started.

“It’s all about supporting the arch,” the 39-year-old physician assistant said. “Even if it goes out of style, I will still wear it.”