Birkenstock IPO Stumbles, Losing 13% After Pricing at $46

Barbie may like Birkenstocks, but investors seem to think the iconic German shoemaker’s IPO is already out of style.

Birkenstock began trading at $41 per share on Wednesday—a roughly 11% drop from the $46 price tag announced Tuesday evening, which valued the company at more than $8.5 billion. By the end of the trading day, the stock had slipped to $40 per share for a 13% loss.

The company’s shares are trading under the symbol BIRK on the New York Stock Exchange.

Birkenstock originally targeted a share price between $44 and $49.

Private equity firm L. Catterton acquired the company for $4.8 billion in 2021. Birkenstock raised roughly $1.5 billion through the advance sale of its shares this week. According to Renaissance Capital, this makes the listing one of the largest consumer discretionary IPOs of the past 20 years.

Morningstar analyst Jelena Sokolova points out that Birkenstock appeals both to customers who are fashion-forward and those who are not, and that the firm has seen strong growth over the past few years. She adds that the stock got a publicity boost thanks to its shoes being featured in the recent Barbie movie. However, Sokolova notes that the company’s valuation doesn’t appear to factor in some risks, such as the fact that Birkenstock relies heavily on one type of product.

This Fall’s Hot IPOs Have Cooled

Birkenstock’s listing follows a trio of buzzy September IPOs: chip designer ARM Holdings ARM, grocery delivery platform Instacart CART, and marketing software platform Klaviyo KVYO.

All three priced at the top of or above their expected ranges and popped in early trading, but have since produced relatively lackluster results.

Some analysts have attributed that disappointing performance to a change in the overall market environment. Investors now expect interest rates to remain relatively high for the foreseeable future, and stocks overall have fallen as bond yields have soared.

Birkenstock’s Revenue Grows While Profits Fall

Birkenstock saw its revenue grow 21% on an annual basis during the nine months ending in June, according to a registration statement filed with the SEC earlier this month. Net profits dropped nearly 20% over the same period.

The company said inflation is pushing up the cost of its materials and employee wages, but that so far it has been able to “mitigate such pressures through price increases and other measures.”

That pressure on Birkenstock’s bottom line shouldn’t come as too much of a surprise, given the changes in the economy over the past few years, from the spending boom brought on by the COVID-19 pandemic to the pullback prompted by rising inflation.

“Coming off strong results in 2021, it was almost inevitable that operating margins for many apparel firms would weaken in 2022 and 2023,” wrote Morningstar senior equity analyst David Swartz in his latest pulse report on the apparel industry. “They have dropped even more than expected in an environment of high inflation and slowing consumer spending.”

Investors will be closely watching how Birkenstock shares perform in the coming weeks.