Birkenstock should not get too fashionable for comfort

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When Karl Birkenstock took the contoured “footbed” insole invented by his grandfather Konrad and turned it into a health sandal in 1963, it was not an immediate hit. But 60 years later, the inimitable German brand could be valued at $8bn in an initial public offering.

Birkenstock is feeling pretty comfortable, fresh from its walk-on role in Barbie. “Business is too good. Always. For 10 years we have been sold out,” Oliver Reichert, its ebullient chief executive, said in an interview with HTSI magazine last year. He added in its IPO filing this week, “Birkenstock is more than a shoe. It’s a way of thinking, a way of living.”

It was not always so. The cork latex sandals attracted plenty of devotees, including Steve Jobs, whose battered old pair of Birkenstocks fetched $219,000 at auction last year, but they took time to become chic. Only after the designer Phoebe Philo lined a pair of Birkenstock-style sandals with mink for Céline in 2012 did anti-fashion meld with high fashion.

Now, collaborations with Dior, Manolo Blahnik and others for Birkenstock’s 1774 line (the year to which the shoemaking dynasty traces its roots) retail for up to €1,600. Meanwhile, a pair of Arizona Shearlings lined with lamb’s wool sell for €150 in Germany, while a pair of dusty blue synthetic Barbados sandals for the beach will set you back a mere €45.

So there is a Birkenstock for every purse and purpose, in line with Alfred Sloan’s slogan for General Motors cars in 1925. The brand not only sells about three times more shoes than when Reichert became chief executive in 2013, but it has attached itself cleverly to multiple consumer trends. It is authentic, healthy and casual, and it liberated Barbie’s feet from high heels.

What could go wrong? Well, plenty. Shares in Dr Martens, another fashionable brand built on a German orthopaedic sole, have sunk steadily since its own IPO two years ago. Those in the ugly-shoe brand Crocs resemble a rollercoaster since it went public in 2006: it nearly collapsed in 2009, thrived during the pandemic, and has faced another sell-off since April.

It is difficult for footwear to escape the vagaries of taste: what looks clunky at one moment becomes chic at another, depending on who wears it. Some luxury labels try to preserve mystique by selling small quantities at high prices, but the fashion cycle can be brutal on those in the middle.

“Judging from the ugly and repugnant things that are sometimes in vogue, it would seem as though fashion were desirous of exhibiting its power by getting us to adopt [them],” the German sociologist Georg Simmel wrote in his essay “Fashion” in 1904, just after Konrad made his first insole. Birkenstocks have been mocked before, and will one day be again.

Simmel also noted that a style went abruptly out of fashion with the social elite as soon as it was widely adopted. So far, Birkenstock has escaped that trap: its average sales price has been increasing and 45 per cent of revenues come from people earning more than $100,000 a year.

But while family owners such as the Birkenstocks remain careful about growth, the public investors that will soon get their chance to buy shares tend to crave ever more. The latest drop in Crocs’ market valuation is not because sales have fallen but because they are growing a bit slower than had been expected: moderation is a dirty word in the stock market.

Birkenstock has been helped by having an inbuilt constraint: it cannot sell enough shoes to meet demand because almost all are made at its five factories in Germany, with some production in Portugal. That is where its cork latex footbeds are fixed to “silhouettes” such as the double-strapped Arizona and the Boston clog.

Made in Germany (with a bit in the rest of the EU) is a sound policy. Not only does it limit the temptation to overproduce, but it has kept the company tied to tradition. Although it makes premium rather than luxury shoes, aside from the 1774 collaborations, it was acquired in 2021 by L Catterton, the private equity firm backed by Bernard Arnault’s LVMH.

I imagine that, when growth decelerates in a couple of years, Reichert or his successor will come under pressure. Investors will be restless that it is not selling more in Asia-Pacific and a consultant will suggest an obvious solution: Birkenstock should produce some shoes in China or Vietnam, like Crocs and Dr Martens, and ease the pressure on Germany.

It will be tempting but it will be wrong, because that way the fashion cycle lies. If a Birkenstock sandal can be made anywhere, there is nothing to stop the company chasing growth until its brand falls out of vogue again. Then a downturn, then a restructuring under another chief executive, then a revival, and so on.

My advice is to save itself the trouble. The average US customer has 3.6 pairs of Birkenstocks and I own more than that myself, so it must have been doing something right since 1963. Why not carry on doing it?

john.gapper@ft.com