Birkenstock shares sink at the start of trading, rather than making a big splash
- Birkenstock slides 11% in stock market debut.
- Shares started trading at $41, below the initial price set at $46 and lost further ground.
- Investors are wary about future profits path, given high costs and fickle nature of fashion.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The sandals have landed but Birkenstock shares have sunk at the start of trading in New York, rather than making a big hoped for splash. The company has made huge strides into the fashion world, but there is a lot of caution surrounding its future profit path, given the cost pressures which have weighed recently. Shares were priced around the middle of the range at $46 but started trading at $41, and then lost further ground. Investors are assessing that the Barbie boost will only last so long and deals with high-end designers won’t come cheap. Fashion followers can be fickle, and the company will have to run fast to keep up with the stylish set. However, it’s popularity across diverse age groups will help provide some resilience, especially as the sandals can rely on their reputation for comfort, even if the fashion frenzy surrounding the brand calms down.
Investors who have hesitated before jumping feet first into Birkenstock, may have been mindful of the trajectory of Dr Martens since its launch onto the stock market in 2021. Its shares have fallen around 70% since the IPO, which was partly due to a frothy valuation, but also raises questions about the firm’s long-term growth trajectory, given it’s been beset by distribution problems. With cost-of-living pressures still swirling, and the Federal Reserve intent on keeping interest rates at ‘restrictive’ levels to calm inflation, there will also be concern that consumers might have less money to spend on non-essential footwear.’’
