Even before its IPO, Birkenstock was leaning on DTC channel

Do you hear that? That’s the patter of cork-soled sandals on Wall Street’s cobblestones.

Iconic ugly shoe brand Birkenstock made its public debut on Wednesday, and while so far, the stock is underperforming, a recent SEC filing offers a closer look at a company that’s increasingly leaning on its direct-to-consumer (DTC) channel to drive growth.

DTC sales jumped from 30% of revenues in fiscal 2020 to 38% two years later, according to a prospectus Birkenstock filed on Thursday.

• Between 2018 and 2022, DTC experienced a compound annual growth rate of 42%.
• In the nine months ended June 30, 2023, DTC brought the business $416 million in revenue, compared to $310 million the previous year.
• E-commerce also represented a whopping 89% of DTC sales in fiscal 2022, and the company is banking on this segment to fuel future sales growth.

“We expect that future DTC growth will be primarily driven by e-commerce, which is rapidly growing through active customer growth and new online store openings,” the company said.

Beyond e-commerce, the DTC channel encompasses sales from ~45 owned-and-operated stores. While many of them are located in Germany, the brand has recently opened stores in cities including New York and Los Angeles.

Command and control: Birkenstock emphasized that DTC is its preferred way of engaging customers, and that wholesale is a way to funnel customers into the direct channel, which it said offers greater profitability and better access to customer data.

“We operate our channels synergistically, utilizing the B2B channel to facilitate brand accessibility while steering consumers to our DTC channel, which offers our complete product range and access to our most desired and unique silhouettes,” the company said.

Relatedly, Birkenstock allocates its supply strategically to “create scarcity in the market and obtain consistently favorable economic terms on wholesale distribution.”

Leaning into DTC comes with some risks, however. One challenge the company identified is making sure its e-commerce platforms stay up to snuff.

“Any failure by us, or by any of our third-party digital partners, to provide attractive, reliable, secure and user-friendly online platforms could negatively impact the shopping experience of consumers, resulting in reduced website traffic, diminished loyalty to the Birkenstock brand and lost revenues,” the prospectus said.