With their unique chunky sole and often colored straps, it’s hard to mistake a pair of Birkenstocks for anything else. Though unassuming in appearance, the one-time hippie sandals have lately become synonymous with comfortable yet chic footwear, and have found fans among the elite—Apple cofounder Steve Jobs owned a pair of Birks, and his beloved sandals sold for a whopping $218,000 last year. The sandal then achieved more mainstream celebrity status when it featured in the Barbie movie.
Now, the once frumpy anti-brand has made what is arguably the biggest jump in its 250-year history, as its shares began trading Wednesday on the New York Stock Exchange after an IPO that initially valued the company at $8.6 billion.
But after the highly anticipated public offering ultimately slumped 13% in what was the worst first-day trading for a U.S. listing valued at over $1 billion in the last two years, Birkenstocks's leap to public markets has raised bigger questions about the brand, and the wider industry as a whole.
“It’s always tricky to comment on one-day share price performance,” said Javier Gonzalez Lastra, a consumer sector expert at Tema ETFs. “But the timing of the IPO was in a way unfortunate as it followed LVMH Q3 results, in which management stressed how European consumers had deteriorated in a significant way…dragging down the share prices of many consumer discretionary stocks.”
Senior broker at Clear Capital Markets Ron Faulkner said: "Birkenstock was heavily overvalued at IPO, it’s the valuation that private equity firms put on these type of companies coming to market so they can see an exit. An $1 billion valuation [is] very optimistic, inflation rising at 15-year highs and consumer spending dwindling doesn’t bode well for luxury consumer brands."
Why are Birkenstocks so special?
Birkenstock’s humble beginnings go back to 1774 in the German village of Langen-Bergheim where Johann Adam Birkenstock hand-made shoes at a time when people owned a single pair of shoes their entire lives, but it wasn’t until some 130 years later that an initial design of the breakthrough rounded “footbed” heel that features in the sandals today was created.
The Birkenstock family’s descendants continued to dabble with the sandal’s design before the first one resembling those sold in the millions today was introduced in 1963.
As the brand introduced more models, its fame began to reach average people, but also celebrities. Birkenstocks had clearly begun to crack open a market far beyond medical, functional purposes—it was an object of fascination, and luxury, even.
An iconic moment in Birkenstock’s path to becoming the in style was when LVMH-owned French fashion brand Céline introduced a furry, bejeweled pair of sandals, according to market research firm Circana’s footwear and accessories analyst, Beth Goldstein.
“This kicked off the renewed and broader interest in the brand,” Goldstein told Fortune. “Birkenstock began partnering with various designer brands, releasing these collaborations just as the comfort and casual movement was really taking hold.”
Birkenstock remained in the family for six generations before being acquired by private equity firm L Catterton and Financière Agache, the family holding company of LVMH boss Bernard Arnault, in 2021. The deal valued the company at $4.3 billion, according to Reuters.
The company has since been expanding investment in its production sites, including a multimillion-dollar site in Pasewalk, Germany. It sold 30 million pairs of shoes in the 2022 fiscal year, while its revenue rose 21% in the nine months ending June 30 to €1.12 billion ($1.20 billion).
Birkenstock’s appearance in the Barbie movie reaffirmed its cultural zeitgeist.
One of the “Arizona” sandals is shown alongside a high-heeled shoe as a choice between glamorous “Barbieland” and the real world, which Barbie hesitantly chooses but is ultimately happy with. The short plug of the sandal in the movie had a big impact on the company—searches for Birkenstock shoes reportedly jumped over 500% in the U.K. alone.
Birkenstock didn’t return Fortune’s requests for comment on this story.
“BIRK” comes to NYSE
While Birkenstock's launch into public markets symbolizes its rise from what CEO Oliver Reichert called a "sleeping giant" to a major international fashion brand, it continues to face challenges, including economic pressures that have prompted shoppers to pull back on spending.
This reluctance has been reflected in the earnings of companies, starting with one that has a distant connection with Birkenstock—LVMH. The French conglomerate saw sales growth slow as consumers cut spending, especially in the U.S. and Europe, which also happen to be Birkenstock’s core markets—they account for 90% of its customers.
“Clearly, the consumer environment has become more difficult,” Javier Gonzalez Lastra told Fortune. “There’s a lot of upside…but there’s also concerns by many investors that this may be just a fad and then things reverse, which is not the first time it would happen with a successful consumer brand.”
Is Birkenstock a good stock to buy?
Birkenstock's path as a public company is likely to face obstacles in the near future.
In recent months, chip company Arm and delivery app Instacart have been trading below their offer prices, while tech platform Klaviyo has seen a slight increase in its stock price since its September listing. Shoemakers like Dr. Martens and On Holdings have seen market value slide since their public listing in 2021.
Crocs—another player in the comfy footwear market loved by some and detested by others—is a clear example of the reticence of investors to reward ever-growing companies.
It has posted strong quarterly earnings with consolidated revenues up 12% for the third quarter of 2023, but its stock has slid nearly 20% this year.
Still, some shareholders have already make handsome gains—and are expecting more. Birkenstock’s heirs have already become $3.4 billion richer following the company’s IPO on Wednesday.
And L Catterton’s managing partner Nikhil Thukral told Bloomberg before the shares began trading that despite the tricky timing of the IPO amid global uncertainties, the firm was not planning on exiting Birkenstock anytime soon.
“What is a great brand? You find out in markets like this, if you have something extraordinary,” he said.
