Birkenstock kicks Europe in the rear with US IPO

Oddity Tech

02/08/2023 11:02

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Pamela Barbaglia
       LONDON, Aug 2 (Reuters Breakingviews) - Birkenstock
owners are hoping to tempt fashion-obsessed shoppers to swap
high heels for sandals. In a key scene of the recently released
blockbuster movie “Barbie”, Hollywood star Margot Robbie faces a
similar dilemma, eventually settling for uber-comfortable
Arizona Big Buckle slippers. Banking on the giant advertising
campaign provided by the film’s global release, L Catterton and
luxury tycoon Bernard Arnault are eyeing an $8 billion-plus New
York listing, according to Bloomberg. Ditching luxury’s
traditional European listing ground could make sense. But
dressing up the no-frills cork-soled shoes amid slowing U.S.
consumer demand looks tricky.
    Just two years ago, LVMH-backed L Catterton valued
Birkenstock at 4 billion euros as it bought a majority stake.
Now Arnault’s private equity arm hopes to double its money by
taking the company public across the Atlantic. Pursuing a U.S.
listing is not illogical given the meagre returns European IPOs
produced this year. Valuations are also traditionally more
generous across the Atlantic: U.S. stocks currently trade at 20
times their forward earnings against 13 times in Europe,
Refinitiv data show. And Birkenstock generates almost half of
its 1.2 billion euro revenue in the United States against just
around 30% in Europe, a person familiar with the company told
Reuters Breakingviews.
    Only a fortnight ago L Catterton's beauty firm Oddity Tech
 ODD.O  rose 40% on its Nasdaq debut. To replicate that
performance, the brand loved by German tourists as well as
billionaires like Steve Jobs needs to convince investors it
belongs to catwalks rather than hiking trails. A valuation of $8
billion including debt would represent a multiple of nearly 17
times its 435 million euro EBITDA for the fiscal year to
September 2022, based on data from a person familiar with the
company. That's not cheap: it’s higher than the average of 13
times 2022 EBITDA for major sector players but above the 16
times multiple fashion house Valentino grabbed in July in a
stake sale to Gucci-owner Kering  PRTP.PA . At 35% of revenue,
its EBITDA margin is however already in the same league of
pricey sneakers maker Golden Goose and not far from that of
upscale jacket maker Moncler  MONC.MI . Recent collaborations
with Dior and Manolo Blahnik are also adding to Birkenstock’s
high-end appeal.
    Yet, a slowdown in U.S. luxury demand this year is causing a
headache even to bling behemoths like LVMH  LVMH.PA  and Kering.
Also, a New York listing is not a guarantee of luxury-style
multiples: America’s Ralph Lauren  RL.N  and Michael Kors-owner
Capri  CPRI.N  are both trailing the valuations of their
European peers. Italian menswear house Ermenegildo Zegna
 ZGN.N , which went public in the U.S. in 2021, trades at just
11 times its 2022 EBITDA multiple. A further risk is that the
"Barbie"-inspired Birkenstock enthusiasm fizzles out, causing
investors some blisters.
    The real sore point is however for the struggling European
IPO market. Following on the heels of high-profile departures
like Arm, a New York Birkenstock equity offering would be
another visible sign of Europe’s diminished footfall.
     
    Follow @pamela_msg on Twitter
    
    CONTEXT NEWS
    L Catterton, a private equity firm backed by Bernard
Arnault’s luxury behemoth LVMH, is considering an initial public
offering of German sandals maker Birkenstock, Bloomberg said on
July 31 citing people with knowledge of the matter. The listing
could take place in the United States as soon as September and
value the shoe brand at more than $8 billion, Bloomberg added.
    L Catterton, along with Arnault’s investment vehicle
Financière Agache, bought a majority stake in Birkenstock from
its family owners for 4 billion euros in 2021.
    Birkenstock sandals are featured in the Hollywood
blockbuster “Barbie”, which was released last month in the UK
and Europe.

 (Editing by Lisa Jucca and Pranav Kiran)
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