Birkenstock Brings Profitability Back Into IPO Fashion

The cash cows are coming to Wall Street.

Unlike the IPO rush of 2021, which was driven by companies with big sales gains and little else, the follow-up round of offerings being led by the sandal icon Birkenstock is focused instead on the bottom line.

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Once-bitten-twice-shy investors seem to want companies that have proven they can not only grab market share, but are making money while they do it.

In fiscal 2022, the L Catterton-backed Birkenstock produced adjusted earnings before interest, taxes, depreciation and amortization of 434.6 million euros and net income of 187.1 million euros — out of 1.2 billion euros in revenues.

It doesn’t hurt, of course, that the brand’s revenues have increased four-fold since chief executive officer Oliver Reichert took control of the business in 2013.

But it doesn’t look like sales growth is going to be enough this time through.

And so it’s the companies considered profit powerhouses that are seen as potentially defining the next round of offerings — from sports platform Fanatics to the Kim Kardashian-led Skims to fast fashion mega company Shein. The profitable licensing giant Authentic Brands Group filed for an IPO in 2021 and stepped back after cutting its deal for Reebok, but is expected to come back to the public market eventually.

The brands that might make the scene are also busy on the bottom line.

Sneaker brand Golden Goose, which is said to be laying the groundwork for an offering, weighed in with first-half EBITDA margins of 34.6 percent  — on sales of 276.4 million euros.

Apparel brands that are seen as IPO candidates sooner or later include Reformation and Veronica Beard.

In an earlier age, smaller individual brands and their owners might have looked to cut a deal with a strategic player, but buyers are few and far between these days.

VF Corp. is resetting. Tapestry Inc. is busy buying Capri Holdings for $8.5 billion. Ralph Lauren Corp. is focused on elevating its own brand and PVH Corp. seems to want to expand with its Tommy Hilfiger and Calvin Klein businesses.

For now, that has smaller brands looking to build their businesses and their profitability — if they want to take the next step and go public.

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