The Birkenstock may boast of adhering perfectly to the ground with its orthopedic sole, but for it too, sky is the limit. After having conquered the arches of all Western hipsters and fashion addicts, the sandal is now taking on the New York Stock Exchange. The German brand is aiming for nothing less than a $10 billion valuation for its debut, which is set to take place this week. But seeing itself as bigger than the ox, doesn’t the shoe risk a misstep?
On January 29, 2021, another shoe iconic, Dr Martens, began its adventure on the London stock market with a share priced at 450 pence sterling. After reaching a high of 503 pence in early June of the same year, the shoe continued to stumble thereafter. A share is now worth just 135 pence, down 70% from its listing.
Don’t see yourself too beautiful, don’t go too fast
Could such a mishap happen to Birk’? “Going to the stock market is still a gamble,” points out Thomas Zylberman, fashion expert at the Carlin International trend office. Where you have to be careful not to see yourself as too beautiful. The valuation of 10 billion euros that Birkenstock hopes for was “only” 8 billion a few months ago, and 4 billion two years ago. Above all, this hoped-for valuation represents more than seven times the brand’s turnover in 2022 (1.2 billion). “The beginnings will certainly be euphoric,” estimates Antoine Fraysse-Soulier, market analyst at eToro. The risk is that then, investors consider that the brand is too highly valued compared to what it is really worth and abandon it, which would cause its stock to fall into a vicious circle. »
Who says capitalization on the stock market also means exposure to a more short-term and more random logic, where the Birkenstock, 250 years old, is a fan of the long term. Carine Mamou, co-founder of the Fashion Light Up agency and former marketing director of major brands, warns: “Their success is based on the quality of their materials and their sandals. We must be wary of the fact that shareholders do not impose a reduction in quality standards, a reduction in the workforce or its know-how, a constant renewal of the brand in order to maximize profits, making lose quality. Even if the expert recognizes it, the story telling of the small German family business had taken a hit before even giving in to the sirens of Wall Street: “For two years, Birkenstock has belonged to an investment fund without this having distracted the consumer. On the contrary, shoes have never been more popular. »
Sandals at the top
Indeed, these are sandals in top form that appear before Wall Street. Turnover ? Quadrupled in eight years (it was 292 million euros in 2014). The net profit of the last balance sheet, in September 2022? 187 million euros. The number of shoes sold in the world? 30 million pairs, compared to 11 million in 2012. But arriving too aggressively on the stock market is not necessarily a good idea. “The risk is to be listed on the ‘hype’, and that the latter passes. In this case, the stock market – quickly impatient – panics and collapses the Birkenstock economy,” explains Antoine Fraysse-Soulier.
This was Dr. Martens’ sin. The punk shoe was listed for trading after the British lockdowns, with sales up 18% year-on-year, driven by the end of lockdowns, online sales and an expansion plan in the United States. But if the stock market embellishes good news, it also transforms the slightest bad patch into a storm. In 2023, the action fell by 25% on January 19, undermined by the announcement of poor results due to British inflation (more than 10%, twice as much as in France) and sales considered disappointing to the States. -United. Rebelote on June 1, where the action fell by 10%, still because of the failure of the American dream.
The Birkenstock has kidneys as strong as its soles
The success or otherwise of Birkenstocks therefore rests on one question: are sandals currently experiencing their Everest or are they still far from the summits? “The hype won’t pass soon,” predicts Carine Mamou. Birkenstocks are now firmly established in our daily lives, like sneakers. » As for the need of shareholders to see rapid changes and to constantly create new trends, the expert remains optimistic. “Birk’ already does it. At the start of the year, it was the Arizona model that was all the rage, now it’s the Boston. It is renewed and corresponds to the expectations and requirements of the stock market. »
More than prolonged hype, the Birk should therefore continue its conquest. “That’s the whole point of this stock market listing,” says Thomas Zylberman. Raise equity capital to help finance and develop the brand, including improving distribution networks and factory launches. » Going public also makes it possible to “increase the legitimacy of the brand and bring it into another league. »
The Birk’ conquers the world
François Levêque, professor of economics at Mines-ParisTech, seems rather convinced of future success: “I don’t see how Birkenstock could go wrong.” Already, apart from Dr Martens, the shoe market is experiencing a love story with the stock market. The ten largest listed shoe brands have seen their shares soar by an average of 387% in ten years, and by 124% over the last five years. Crocs, closer to Birk’s in marketing than Dr Martens, went from $13 when they were introduced in 2006 to $85 today, with a peak of $180 at the end of lockdowns in 2021.
Second argument from the economics professor: an area of progress for Birk’ is clearly identified. Currently, more than half of their customers (54%) are in the United States, and 36% in Europe. Or 10% for the rest of the world, and in particular the Asian market, particularly buoyant – and in demand since the success of the film barbie, which put the sandal in the spotlight. Globalization is such that you sometimes have to go through the New York Stock Exchange to conquer China.