With its unique chunky sole and colorful straps, it’s hard to mistake a pair of Birkenstocks for anything else. Although the old modest-looking hippie sandals have recently become synonymous with comfortable and stylish shoes, and have found enthusiasts among the elite. Apple co-discoverer Steve Jobs owned a pair of Birks, and his beloved sandals sold for a whopping $218,000 last year. The sandal then achieved greater celebrity prestige when it made the impression in the Barbie movie.
Now, the once-ill-gotten anti-brand has taken what is arguably the biggest leap forward in its 250-year history, as its shares began trading on the New York Stock Exchange on Wednesday after an initial public offering that first valued the corporate brand. to $8. 6 billion.
But after the long-awaited public offering finally fell 13%, which was the worst first day of trading for a U. S. board valued at more than $1 billion in the past two years, Birkenstocks’ jump into the public markets raised bigger questions. about the brand and the industry in general.
“It’s hard to comment on the evolution of a stock’s price over the course of a day,” said Javier Gonzalez Lastra, an expert in consumer sectors at Tema ETF. “But the timing of the IPO was somewhat unfortunate because it followed LVMH’s third-quarter results. in which the control highlighted how much European intake had deteriorated significantly. . . dragging down the inventory values of many customer discretionary inventories. “
Ron Faulkner, senior broker at Clear Capital Markets, said: “Birkenstock was very overvalued when it went public, which is the valuation that personal equity firms give to those types of corporations that enter the market so they can see a way out. A billion-dollar valuation [is] very optimistic, as inflation has reached a 15-year high and declining customer spending doesn’t bode well for luxury brands.
Birkenstock’s humble beginnings date back to 1774 in the German village of Langen-Bergheim, where Johann Adam Birkenstock made shoes by hand at a time when other people owned a single pair of shoes for their entire lives, but it wasn’t until 130 years ago. An initial design of the revolutionary rounded heel found in today’s sandals was later created.
The descendants of the Birkenstock family continued to be interested in the design of these sandals until in 1963 the first sandal similar to those sold by millions today was presented.
As the logo attracted more and more models, its fame began to triumph among the general public, but also among celebrities. Obviously, the Birkenstock had begun to open up a market far beyond medical and functional purposes: they were an object of fascination, even luxury.
An iconic moment in Birkenstock’s fashion adventure when Celine, the French fashion logo owned by LVMH, brought a pair of furry, jewel-adorned sandals, according to Beth Goldstein, a footwear and accessories analyst at market research firm Circana.
“This sparked renewed and broader interest in the brand,” Goldstein told Fortune. “Birkenstock began partnering with various designer brands, launching those collaborations just as comfort and casual movement were taking hold. “
Birkenstock remained in the family for six generations before being bought through private equity fund L Catterton and Financière Agache, the holding family of LVMH boss Bernard Arnault, in 2021. The deal valued the company at $4. 3 billion, according to Reuters.
Since then, the company has increased its investments in its production facilities, adding a multi-million dollar facility in Pasewalk, Germany. It sold 30 million pairs of shoes in fiscal 2022, while its profits rose 21% in the nine months ended June 30. 1. 12 billion euros ($1. 2 billion).
Birkenstock’s performance in the film Barbie reaffirmed her cultural spirit.
One of the “Arizona” sandals is presented along with a high-heeled shoe as a choice between the glamorous “Barbielandia” and the real world, which Barbie chooses hesitantly but is happy in the end. The short sandal in the film had a great effect on the company: searches for Birkenstock shoes increased by more than 500% in the UK alone.
Birkenstock responded to Fortune’s requests for comment.
While Birkenstock’s launch in the public markets symbolizes its move from what CEO Oliver Reichert called a “sleeping giant” to a major foreign fashion brand, the company continues to face challenges, adding economic pressures that have led consumers to cut back on spending.
This reluctance was reflected in the effects of companies, starting with one that has a remote link to Birkenstock: LVMH. The French conglomerate saw sales expansion slow as consumers cut back on spending, specifically in the U. S. and Europe, which are also Birkenstock’s main markets, accounting for 90% of its visitor base.
“Obviously, the customer environment presents more challenges,” Javier Gonzalez Lastra told Fortune. “There are a lot of advantages. . . But many investors are also concerned that this is just a fad and that things are reversing, which is not the first time. “”This time this has happened with a successful customer brand. “
Birkenstock’s venture as a public company is likely to encounter obstacles in the near future.
In recent months, chip company Arm and delivery app Instacart have been trading below their offering values, while tech platform Klaviyo has noticed an increase in its percentage value since the September board. Footwear brands such as Dr. Martens and On Holdings have noticed a drop in their market price since then. its IPO in 2021.
Crocs, a player in the comfortable footwear market, enjoyed by some and hated by others, is a transparent example of investors’ reluctance to praise ever-growing companies.
It posted solid quarterly earnings with consolidated earnings up 12% for the third quarter of 2023, but its inventory has fallen only about 20% this year.
Still, some shareholders have already made significant gains and expect more. Birkenstock’s heirs already earned $3. 4 billion from the company’s initial public offering on Wednesday.
And L Catterton’s managing spouse, Nikhil Thukral, told Bloomberg before the stock began trading that despite the delicate timing of the IPO amid global uncertainties, the company does not contemplate leaving Birkenstock anytime soon.
“What is a wonderful brand? In markets like this, you are left out if you have something extraordinary,” he said.