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Birkenstock's IPO

Updated: Apr 16

Why are Birkenstocks so popular?

The “Jesus Sandal”, or to use its proper name, Birkenstock’s “Arizona” sandal was released in the 1970’s. Initially popular with hippies, the Green movement fell in love with them in the 1980’s, then they became a fashion accessory in the 1990’s. In the noughties they expanded worldwide, and during the 20-teens revenue grew 5x to reach $1.3b in 2022. Being (technically) part of the LVHM stable now gives the brand luxury cachet – in 2019 Valentino showed their Birkenstock collaboration at the Men’s Fashion Week.


How do you know if a brand has really “made it”? Celebrity endorsements are usually a good sign - and here's one of the best: in 2022 the most expensive pair of Birkenstocks were sold – and they weren’t even new!



Steve Jobs' $220k used Birkenstocks
Steve Jobs' $220k used Birkenstocks


Steve Jobs loved his Jesus Sandals, and not because of his God Complex – they were so comfortable he wore them during the 70’s and 80’s. These second hand Arizonas sold for almost $220,000 (including obligatory NFT) to an unnamed buyer.


Essentially: over the past half-century Birkenstocks have become a global brand, selling luxury (read: expensive) sandals that sell everywhere, including online (making up 38% of sales within 7 years). And they’re still growing – half year revenue to March 2023 was up 19% to €644m on the previous year.


They’re definitely profitable – earning €40m net profit in the same half year to March 2023. This had reduced 45% over the prior year, but this is attributed to the impact of inflation on costs and FX movements. Still, not a bad run leading up to an IPO.

 

Birkenstock's IPO: Is it worth $10 billion?

Birkenstock’s IPO price range of $44 to $49 was released last week. L Cattern is expecting a price at the high end of that range – meaning a price of almost 20x EBITDA!


This price isn’t just high, it’s NIKE high. This isn’t a coincidence: L Cattern are using Nike’s multiple to justify Birkenstock’s.


Remember, L Cattern bought in 2021 at an earnings multiple of 13.7x EBITDA – meaning in just over 2 years LVMH must have been sprinkling magic pixie dust all over Birkenstock worldwide … and that dust must have some extra mojo, because it’s substantially more than LVMH itself.


So, is it really worth $10 billion? Let’s see how the target valuation compares:


Birkenstock's target valuation is almost 20X EBITDA
Birkenstock's target valuation is almost 20X EBITDA

 

We’ll know within a week if Birkenstock’s target valuation is justified (for the record, I think it’s not), but regardless it will be a litmus test for L Cattern / LVMH, who will still hold 83% of Birkenstock shares.


They’ll be crossing their fingers.


This article first appeared here.

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