What Birkenstock’s IPO Reveals About the Future of the Fashion Market

After a long lull, a successful IPO is finally on the horizon for fashion.

Birkenstock, the German brand that makes instantly recognizable leather and cork sandals, could go public as early as next month, according to media reports this week. Its listing is expected to value the company up to $10 billion – a sharp increase from the $6 billion valuation that people close to the company were considering less than a month ago.

A successful IPO would not only be good news for L Catterton, the private equity firm that acquired Birkenstock in 2021. It would also point to a thaw in capital markets, where rising interest rates, the Geopolitical uncertainty and other forces have kept many investors on the sidelines for the past 18 months. Birkenstock’s IPO would be only the fashion world’s second since 2021, following Lanvin last December (Oddity Tech, the Israeli cosmetics company that owns Il Makiage, listed in July).

And Birkenstock isn’t the only consumer-facing company poised to go public in the coming months. Chinese fast fashion giant Shein is reportedly considering an IPO – although the company has publicly denied the reports. Kim Kardashian’s shapewear brand Skims is believed to be in the early stages of planning an IPO. Its most recent investment round was led by Wellington Management, a large investment firm with a history of taking asset companies public, and valued the company at $4 billion.

Admittedly, the market still has a long way to go to recover. In the first half of the year, companies raised $10.1 billion through IPOs, according to consultancy Ernst & Young. That’s more than for all of 2022, but a pittance compared to the $84.2 billion raised in the first half of 2021. Bombas and e-tailer Luisa Via Roma. Accessories chain Claire’s announced in June that it would postpone an IPO, citing market conditions. A SPAC backed by LVMH founder Bernard Arnault was recently dissolved because it could not find a target company to acquire.

“We’ve seen a slight recovery,” said Joe Mantone, author of S&P Global Market Intelligence’s quarterly white paper on mergers and acquisitions and capital markets activity.

The risk-averse environment is one reason why companies preparing listings today tend to be more mature, with track records of profitability, Mantone said. This contrasts with the IPO craze in 2021 when backers of e-commerce start-ups like Allbirds, Rent the Runway and Warby Parker cashed in via IPO. These companies have all seen their stock prices plummet as they struggle to show a clear path to profitability.

Birkenstock, which is nearly 250 years old and made an adjusted profit of 394 million euros ($434 million) last year, doesn’t have that problem. Kardashian Skims business partner Jens Grede has said in interviews that the business is also profitable. Oddity, which is also profitable, saw its shares soar 36% on its first day of trading. They have since increased further.

“Now, with IPOs starting to roll around again, prices and multiples are still down from the highs of a few years ago,” said Ryan Nelson, partner at venture capital firm Jobi. . “I expect investors to be more discerning in the coming months and valuations to remain within reasonable ranges.”

Even with a healthier income statement and a booming market, the success of an IPO is never guaranteed. Some also wonder if the stock market rally, which has pushed the S&P 500 to its highest level since April 2022, will continue.

But there’s no denying that Oddity’s recent IPO success and expected surge in listings reflect some optimism. After all, inflation is easing, retail sales are holding up and job growth remains strong. All signs point to the possibility that central banks have pulled off a “soft landing,” in which higher interest rates cool price increases without sending the economy into recession.

“I don’t think we’ll see a full recovery in 2023,” Mantone said. But he added: “We’ve seen some momentum, and market players are looking to capitalize on that.”

NEWS IN BRIEF

FASHION, BUSINESS AND ECONOMY

Ferragamo’s sales fell in the first half. Italian luxury goods group Salvatore Ferragamo’s first-half sales fell 7.2% at constant currencies to €600 million ($657 million), impacted by double-digit declines in North America and Asia-Pacific.

Hugo Boss’ advice upgrade leaves investors wanting more. The German fashion brand raised its forecast to between €4.1 billion and €4.2 billion in full-year sales ($4.5 billion and $4.6 billion), from a previous forecast of 4 billion euros, as part of an ongoing recovery effort. The outlook for its operating profit growth was between 20% and 25%, rather than between 10% and 20%.

Yeezy destocking helps boost Adidas sales prospects. The German brand’s annual sales are expected to decline only slightly, confirming strong demand for its remaining Yeezy shoes, which would help reduce the projected full-year loss to 450 million euros, from a previously forecast loss of 700 million. euros.

Canada Goose sees weak second quarter as choppy US demand stifles China’s rebound. Revenue from Canada Goose’s Asia-Pacific segment jumped 52.2% to C$24.5 million in the first quarter that ended July 2, building on a 65.4% increase seen in previous quarter. This was boosted by the return of tourism to China, leading to strong growth in key regions like Macau and Hong Kong.

Zalando almost doubled its operating profit in the second quarter thanks to a better economy. Its adjusted profit before interest and tax (EBIT) for the second quarter rose 87%, to 144.8 million euros ($158.24 million), compared to the same quarter last year.

American Eagle sees second-quarter revenue above previous forecasts. The teenage clothing maker now expects revenue in the quarter to be flat from a year earlier, compared to its earlier guidance of a single-digit decline. He sees operating profit beating previous forecasts by $25 million to $35 million.

Duty-free retailer Dufry nearly doubled its turnover in the first half, surpassing pre-pandemic levels. The company, which operates stores in tourist locations around the world, posted revenue of 95.6% to 5.72 billion Swiss francs ($6.54 billion), up 27% from compared to the pre-pandemic level of 2019.

Next raises its full-year profit forecast. British fashion retailer Next has raised its full-year profit forecast by £10m ($12.7m) to £845m.

US fashion brands call for rapid renewal of trade program in Africa. The African Growth and Opportunity Act, first signed into law in 2000, is due to expire in 2025, and US officials have said the criteria for qualifying recipients could be revised or the program replaced.

Armed robbers steal millions of jewels from a Piaget boutique in Paris. Armed robbers raided a store of luxury Swiss watch brand Piaget in central Paris on Tuesday, escaping with between 10 and 15 million euros ($11 million and $16.5 million) worth of jewelry .

Goosedown out, Bulrush in: Factory reshapes down jackets. BioPuff, a new plant-based material made by start-up Saltyco, could coat clothes at a fraction of the environmental footprint of traditional padding.

THE BEAUTY BUSINESS

Launch of the Prada beauty line. The products – starting at $50 for lipstick and $360 for face cream – were developed by French conglomerate L’Oreal, which acquired the Prada fragrance license, formerly owned by Puig, in 2019 .

Elf raises its sales outlook. Elf Beauty Inc. raised its sales outlook for the year to $802 million from $705-720 million previously, while adjusted earnings per share are expected to reach $2.19-2.22 . Meanwhile, the brand said it continues to have success with budget shoppers who expect to double its US business over the next decade.

Beiersdorf raises organic on-demand sales target for Nivea sunscreen. Beiersdorf expects organic sales for the year to grow in a high-to-low-double-digit percentage range, after its core brand Nivea and strong demand for sunscreen boosted organic sales growth half-yearly. First-half sales increased 12.3% year-on-year to €4.9 billion ($5.35 billion), with adjusted operating profit (Adjusted EBIT) of 852 million euros, compared to 710 million euros a year ago.

Fragrance maker Symrise reports lower profits. The German flavor and fragrance maker posted an 8% drop in its half-year core profit, posting EBITDA of 446 million euros ($490 million) after being impacted by a production stoppage and a increase in energy and raw material costs as well as a reorganization of its fragrances and skincare business.

Estée Lauder bulls run away, citing China recovery concerns. Several stock analysts downgraded Estée Lauder Cos. ahead of its fiscal fourth quarter earnings report on Aug. 18. A major concern for analysts is the slow recovery in China, a key market that would typically account for around a third of its revenue. .

PEOPLE

Premier League football team Crystal Palace are hiring a creative director. English football team Crystal Palace have become the first club in the Premier League, the world’s most watched football competition, to hire a creative manager to oversee clothing collections and fashion partnerships.

Revlon appoints interim CEO, Debra Perelman leaves. The cosmetics company, which emerged from Chapter 11 bankruptcy in May, has named Elizabeth A. Smith as interim chief executive.

Compiled by Sarah Elson.