• by Sarah Mahoney  @mahoney_sarah, November 6, 2023

Birkenstock stumbled in its public markets debut last month, and the company’s stock is still selling below the initial pricing. But despite that underwhelming performance, the German company is finding new fans on Wall Street, who think those clunky clogs and fleece-lined sandals still have the opportunity to dazzle America’s feet.

The company, started some 250 years ago, said earlier this week that it is using the proceeds from the IPO to pay down debt, boosting financial flexibility and bringing the business more in line with industry benchmarks.

“It’s as simple as this: We don’t like to be in debt, and we don’t need to because we run a profitable and cash-rich business,” says Oliver Reichert, chief executive officer of the Birkenstock Group, in the announcement. “Taking this important step of early repayments emphasizes our commitment to debt reduction.”

A handful of investment banks have responded by recommending the company as a “buy,” including Goldman Sachs, J.P. Morgan, Citigroup and Jefferies.

“Birkenstock is an iconic brand with a storied history that has endured through decades/generations of fashion cycles,” writes Mark Altschwager, an analyst at Baird, which has just initiated coverage with an “outperform” rating. “The company is unlocking the potential of the brand through disciplined channel management, compelling product innovation, and investments in production capacity, together supporting growth even in a weaker macro spending backdrop.”

He's mindful of the fashion risk and acknowledged waves of popularity since the 1960s. And currently, the high demand for the Boston clog may be giving the company a “Barbie bump.” Still, he’s confident that consumers have shifted their focus to casual looks and wellness trends. He forecasts unit growth of 10% in the next two years.

Not everyone is as optimistic. In a report called “Comfortable shoes, uncomfortable valuation,” Deutsche Bank’s Gabriella Carbone is initiating coverage with a “hold” recommendation.

She writes that to become more excited about the company, she’d need to see increased sales driven by more product innovation and a bigger shift into direct-to-consumer channels.

In 2021, L Catterton, an investment firm whose portfolio includes Equinox, West Marine and Hanna Andersson, bought a majority stake in Birkenstock. At the time, Birkenstock was valued at about $4.35 billion.