Birkenstock: $8bn IPO valuation could lead to blisters

Receive free Lex updates

We’ll send you a myFT Daily Digest email rounding up the latest Lex news every morning.

Birkenstocks are having a moment. The sandals, once associated only with comfort, are now a fashion accessory. They appear in the pages of Vogue magazine and were spotted on the normally stiletto-clad feet of Barbie in this summer’s blockbuster film. Yet a mooted $8bn market valuation looks uncomfortably high. 

The company is putting its best foot forward. Revenues in 2020 were $728mn The following year it was bought for €4bn ($4.3bn) by L Catterton, a private equity house backed by luxury group LVMH. In 2022, revenues had grown to $1.24bn — a two-year compound annual growth rate of over 30 per cent.

Birkenstocks have mass-market appeal. They retail for around $100 with luxury goods margins. LVMH is forecast to make a 35 per cent ebitda margin this year, according to S&P Capital IQ. Birkenstock achieved that in the year to September 2022, albeit on an adjusted basis.

Investors might reasonably question whether Birkenstock can keep on striding at such a brisk pace. Revenues are rising much faster than units sold. Ambitions to expand beyond sandals will be hard to pull off.

A strategy to take control of sales channels by opening retail space and selling directly to consumers will be pricey. Rising operating costs in the first half of 2023 point to the perils. 

An initial public offering valuation of $8bn would price the shoemaker at around 18 times forecast adjusted ebitda for this year. That is about in line with sportswear behemoth Nike, which has lower margins but many more products to sell. Dr Martens, which has scarcely put a foot right since it was floated by private equity house Permira in 2021, trades at 7.5 times ebitda. 

L Catterton may have to accept a discount. That is especially true if it wants to take advantage of the recently reopened IPO window. Equity markets are quiet and companies planning to list are cutting valuations. It would be prudent to take a markdown before the other shoe drops.