Analysts and investors said German sandal company Birkenstock would need to sell more footwear and boost sales from its own website and boutiques to attract new shoppers amid a cost of living crisis.
The remarks were made ahead of the company's initial public offering (IPO) listing on the New York Stock Exchange (NYSE) next week and the poor initial performances of Arm, Instacart, and Kellogg spinoff Kellanova.
Birkenstock has disclosed plans to sell at least 32 million shares priced between $44 and $49 each, which would raise about $1.58 billion at the top end of estimates.
In its IPO filings, it said it would use the proceeds to pay down debt.
Birkenstock Goes Public Out of Season
Due to recent price hikes, worldwide footwear sales are expected to rise just 2.9% over 2022, according to market research firm Euromonitor International.
However, Quilter Cheviot consumer discretionary analyst Mamta Valechha told Reuters that sandals are considered to be seasonal products for summer, making Birkenstock's sales volatile over the year outside tropical locations they have already penetrated.
"The question is: how do you create desirability for people to buy another pair of Birkenstocks?" she added.
Meanwhile, independent equity research company New Constructs CEO David Trainer told MarketWatch that Birkenstock's very high share prices might be a red flag for investors. He estimated that the company would need to generate over $3.8 billion in annual revenue to justify such a validation, which is over triple the $1.24 billion revenue it obtained in 2022, based on its filing documents with the Securities and Exchange Commission (SEC)
"We don't see this happening anytime soon, if ever," he said.
Counterfeit products are also a factor why Birkenstock took its products off the Amazon marketplace, citing "unacceptable business practices which we believe jeopardize our brand."
"While such a move certainly protects brand integrity, it also puts a cap on revenue growth potential - growth it will need to justify its IPO valuation," Trainer added.
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Highly Adaptable to the Times
Founded in 1774 by Johann Adam Birkenstock, the company's footwear was exported worldwide and first sold exclusively in health stores in the US.
Nevertheless, the firm, just like its footwear for Crocs, was able to stay popular over the decades since it first became well-known for its sandals. More recently, a trend towards more casual dressing - heavily influenced by models, celebrities, and the COVID-19 pandemic - has kept its products popular.
This year alone, Birkenstock has been mentioned and hyped by Greta Gerwig's film "Barbie," when, in the final scene, the eponymous main character, played by Margot Robbie, wore a hot-pink pair of Birkenstock sandals.
Jane Hali & Associates senior analyst Jessica Ramirez told Reuters that both Birkenstock and Crocs were more known for comfort and less for style.
Similar trends have been observed by Roland Berger's senior partner Siobhan Gehin.
"They [Birkenstocks] tap very nicely into many strong structural changes in buying habits: health, comfort, and sustainability," she added.
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