Birkenstock Holding, the European sandal-maker, is planning an initial public offering (IPO) that values the company at $8.6 billion. The IPO will involve the sale of 32.3 million shares. Lead underwriters for the IPO are Goldman Sachs, Morgan Stanley, and JPMorgan Chase. The company plans to list under the ticker symbol BIRK. Despite its strong brand and growth potential in markets like Asia and Europe, Birkenstock’s valuation is considered high by some measures, such as its price-to-earnings ratio.
Barron’s estimates that Birkenstock’s valuation is about 37 times earnings, which is higher than comparable companies like Deckers Outdoor and Crocs. Luxury-goods companies with similar valuations are also rare, with one example being Hermès International. Birkenstock’s adjusted after-tax profits for the nine months ended June 30 were $193 million. After subtracting stock-based compensation and annualizing the amount, Barron’s arrived at an estimated annualized adjusted earnings of approximately $232 million, or roughly $1.25 per share for the fiscal year that ended in September.
Some critics argue that Birkenstock’s valuation is even more inflated when considering its treatment of stock compensation. Birkenstock adds back stock compensation to calculate its adjusted earnings, despite the fact that it is typically treated as an expense. Despite these concerns, Birkenstock has seen strong sales growth, particularly in the first nine months of its current fiscal year, where it generated approximately $1.2 billion in sales. The company sees growth potential in underpenetrated European markets like the U.K. and France, as well as in Asia.
Overall, while Birkenstock has a strong brand and growth potential, some investors remain skeptical about its expected valuation and the need for continued strong sales to justify it. The IPO is set to be a lucrative payday for existing shareholders, including the Birkenstock brothers and the private-equity firm that currently controls the company.