Buyers Bypass Birkenstock IPO

Although the initial public offering (IPO) market is trying its best to revive itself, investors remain skeptical of new issues. Birkenstock, the market’s latest suitor, failed to attract first-day fanfare. 🥱

The German shoemaker expected to price its IPO between $44 and $49 per share, according to its initial Securities and Exchange Commission (SEC) filings. However, it ultimately priced last night at $46 per share, raising $1.5 billion and giving it a market value of roughly $8.6 billion.

Still, at that valuation, it is still worth more than peers like Allbirds, Crocs, and Steve Madden. It was also double the $4.3 billion private equity firm L Catterton acquired it for in 2021. Because of that somewhat lofty valuation, investors hesitated to jump on board. ⚠️

Shares opened late in the day at $41.30, representing a roughly 10% discount from yesterday’s pricing. Although they saw an initial 4% pop, they could not make their way up toward that $46 level and quickly faded, closing down at the day’s lows. 🙃

Despite solid growth over the last few years, analysts say the company is fairly valued at current levels and doesn’t give the public markets much to chew on. Additionally, the recent fanfare from its appearance in the hit movie Barbie failed to impress retail investors, who worry that it’s simply a shoe company facing the same consumer slowdown the rest of the industry is battling.

Given the lackluster performance from other high-profile IPOs, what will set Birkenstock apart from the rest of the group remains unclear. Some argue that its profitability is a major differentiating factor, especially in the current high interest-rate environment. 🤔

As always, we’ll have to wait and see. But for now, follow along with the 555 other $BIRK stream watchers and share your thoughts! 👀

Luxury goods conglomerate LVMH was the talk of the town earlier this year after it briefly became Europe’s most valuable company by topping a $500 billion valuation. However, it’s seen a slow descent back to Earth since then. Today, that trend continued, with shares falling another 7% after management’s comments stoked growth fears. 😰

Third-quarter revenues grew 9% YoY to roughly $21 billion, down from a 17% increase in the second quarter. Driving the decline was a 14% YoY decline in sales from its wines and spirits division. And Asia’s slow recovery continues to weigh on results, with revenues from Asia excluding Japan rising just 11% YoY, down from 34% in the second quarter. 🔻

CFO Jean-Jacques Guiony had this to say, “After three roaring years, and outstanding years, growth is converging toward numbers that are more in line with historical average.”

While average growth may be acceptable in some environments, it’s much harder to swallow after your stock has experienced a significant rally. With the stock extending its recent drawdown to 24%, it’s clear the market was expecting above-average growth to justify recent above-average returns. 👎

It’s unclear where the stock will find its footing. But what is clear is evidence is building that even the higher-end consumer is beginning to pull back. And that means management at LVMH and its peers will likely need to do more to reset expectations among stock market investors. 🔮

After twelve straight months of year-over-year declines, producer prices have stabilized and are back on the rise these last three months. That, combined with the stickiness in core consumer prices, has investors wondering if inflation could return from the dead. 😬

The headline producer price index (PPI) rose 0.5% MoM and 2.2% YoY in September. Excluding food and energy, core PPI rose 0.3% MoM as services drove the larger-than-expected increase. 🔺

Analysts say today’s report suggests that sticky inflation and higher interest rates are here to stay. Although inflation has fallen significantly from last year’s peak, getting it down to the Fed’s 2% target and keeping it there steadily will take time and patience. 🕰️

Investors hoping to gain additional insights from September’s FOMC Minutes were left disappointed, with the Fed echoing what it did in recent weeks. They’re remaining data-dependent and not taking another rate hike off the table until they’re fully convinced inflation has been conquered.

All eyes will turn to tomorrow’s consumer price index (CPI), where analysts will most closely assess the progress in services inflation. 👀