Will the Birkenstock IPO be a wake up a call to others thinking of following in its footsteps?

Footwear giant Birkenstock stepped into the limelight by becoming one of the very few businesses to see through a public listing.

Just a week on, rivals weighing up their own IPO may now be having second thoughts as the 249-year-old footwear brand saw its shares drop 12% on the first day of trading (or down 15% at last night’s closing price).

This performance on a business which listed with a value of $8.6 billion, makes it one of the worst debuts for a billion-dollar deal of the last decade, according to Renaissance Capital.

Of the 95 IPOs that have raised at least $1 billion in the past 10 years, only five have performed worse than Birkenstock on their first day of trade. That poor share price performance ‘could quash the fledgling rebound of Initial Public Offerings’.

But is this a problem with the company or continued market jitters that look likely to remain for some time to come?

Birkenstock was always expected to face an uphill battle. Retailers and consumer-facing firms going through an IPO tend to face greater scrutiny than others and timing is everything. Now is not good timing.

On the positive side, the brand’s popularity surged in the summer when a pair of its shoes were featured in the highly anticipated Barbie film.

Birkenstock’s communications team certainly leveraged that scene as much as possible ahead of the IPO. But the Birkenstock success came way before that.

Over the last decade, the company has won a mass following, with a pandemic-era emphasis on comfort, collaborations with fashion designers, and sightings on celebrities from Gwyneth Paltrow to Kaia Gerber stoking growth.

As a Hackney mum, I have three pairs myself (yes three!) and a pair for every member of my family. The brand was very successful as a privately owned business and there was no real need to change.

“You can go back to your regular life (shows her a pretty high heel shoe), or you can know the truth about the universe (shows her a Birkenstock slipper). The choice is now yours” said Barbie - Birkenstock chose the IPO route (Spoiler alert: Margot Robbie chose the pair of heels in the movie)

Timing can sometimes be everything when it comes to an IPO - a lack of confidence in the footwear sector and disappointing earnings from backer LVMH, just hours before the new stock was set to open trading in New York, hurt its share price performance. The outbreak of war in Israel further delayed listings in Europe and a looming recession will most likely also have an impact.  

There is no doubt that I have high expectations for the brand but the general narrative from the media around the IPO is around its shaky debut, thus becoming a warning to other brands.

Journalists quickly forgot all the key points that drove that valuation in the first place such as the 70% growth between 2020 to 2022, strong current trade, as well as the brand’s leading position in the market.

Some, such as sneaker brand Allbirds and boot company Dr Martens, which both went public in 2021 when markets were hot, have seen their fortunes tumble. But other, more niche brands, have proven to have staying power, like Crocs, which listed in 2006. The company, which sells more than 100 million pairs of shoes a year, is worth about $5.2bn, more than six times what it was at the start. It will be important for Birkenstock to ensure its relevance is well-communicated in a highly competitive sector.

Just because its share price is weak doesn’t mean the brand is a stock market loser.

Very few fashion companies have floated plans to go public in the coming months, but there are still some big names on the horizon, notably Skims and Shein and there is no doubt that Birkenstock will have deterred investors from putting money into power brands. I expect more companies may stay private for longer.