German sandals maker Birkenstock is making waves with its upcoming New York stock listing, seeking a valuation of up to $11 billion, including debt. The company has garnered attention through its recent collaboration with Barbie, and owner L Catterton has secured support from anchor investors including Financière Agache, owned by Bernard Arnault, and Norway’s wealth fund. However, the share sale comes at a high cost.
With stocks priced between $44 and $49, the offer values Birkenstock’s equity between $8.3 billion and $9.2 billion. Adding $1.6 billion of net debt, the German brand will trade at a multiple of 18 to 20 times the $545 million of EBITDA it may generate in the fiscal year to September 2023. This valuation is higher than luxury conglomerate LVMH’s current year multiple of 15 times and significantly surpasses shoe brands Crocs and Dr. Martens, which trade at multiples of 6 to 7 times.
The high valuation raises concerns about Birkenstock’s market positioning. While the company’s EBITDA margin matches that of top luxury brands at 35%, its valuations appear to align more closely with sports brands like Nike, which trades at 18 times but has lower margins. This raises questions about whether Birkenstock’s pricing strategy is overly aggressive and risks backfiring, as demonstrated by the Arm IPO.
Birkenstock’s decision to pursue a New York stock listing is a bold move that aims to attract investors and solidify its position in the global market. The recent collaboration with Barbie has undoubtedly boosted the brand’s visibility and may contribute to its appeal for shareholders. However, with a high valuation compared to its competitors, the company will need to demonstrate strong growth potential and profitability in order to justify its price tag.
While Birkenstock’s EBITDA margin is impressive, its pricing may alienate potential investors who expect a more conservative valuation. The company will need to convince shareholders that its long-term prospects outweigh the risks associated with its ambitious pricing strategy.
As Birkenstock prepares for its New York stock listing, all eyes will be on its performance in the coming years. Investors will closely monitor the company’s ability to generate substantial profits and maintain its market position. Only time will tell whether Birkenstock’s bold step forward will pay off, or if its aggressive pricing will cause setbacks in the future.
(The article is based on analysis by Pamela Barbaglia from Reuters Breakingviews)
More detail via Reuters here… ( Image via Reuters )
