By Motheo Tlhagale & Chantal Marx
Birkenstock's evolution is a rare example of how authentic functionality can become high fashion. Founded in 1774 by Johann Adam Birkenstock, a cobbler committed to foot health, the brand has remained rooted in orthopaedic expertise for more than a century. The breakthrough for the product came in 1896, when Konrad Birkenstock developed the contoured "Fussbett" footbed, an innovation designed to mirror the foot's natural shape and support its anatomical needs. For decades, Birkenstock's reputation was built on podiatric function, comfort, and durability, serving a loyal but largely niche audience far removed from the fashion mainstream.
The brand's transition into a cultural and fashion phenomenon began in earnest in the 1990s, when the grunge movement and minimalist fashion trends brought utilitarian design into the spotlight. Editorial features and celebrity endorsements gave Birkenstock newfound cultural relevance, but the true inflection point came in 2012. When Phoebe Philo, then creative director of Céline, sent fur-lined Birkenstocks down the runway, the brand's aesthetic was recontextualised, no longer just comfortable, but covetable. This moment opened the door to a series of high-profile collaborations with luxury designers, firmly establishing Birkenstock as a staple of modern, fashion-forward wardrobes.
The company's growth further accelerated with private equity investment in 2021, followed by a successful public listing in 2023. Cultural milestones, such as the brand's symbolic appearance in the 2023 film Barbie, reinforced its relevance in a world increasingly prioritising comfort, authenticity, and personal well-being, values deeply embedded in Birkenstock's DNA.
What sets Birkenstock apart is that its cultural significance was not manufactured through marketing hype or artificial scarcity. Instead, it emerged from something profoundly personal: the experience of wearing a product that genuinely improves comfort and foot health. For decades, this commitment to function over form positioned Birkenstock as an "anti-status" symbol, embraced by those who valued substance over style. Ironically, this very rejection of trend-driven aesthetics evolved into a new kind of status: one rooted in confidence, practicality, and authenticity.
Today, Birkenstock occupies a uniquely democratic space in global culture. It is worn across generations, subcultures, and social classes, not as a uniform, but as an expression of individual values. Its identity is user-defined, not brand-imposed, which is why it resonates so widely and endures so effortlessly. In a fashion landscape often driven by fleeting desire, Birkenstock stands as a timeless icon of utilitarian design, cultural credibility, and uncompromising integrity.
Vertical integration and engineered distribution
Supporting its product-led growth strategy is its vertically integrated supply chain and disciplined "engineered distribution" model. In supply chain, Birkenstock manufactures all its products in Germany and Portugal, with most of its materials responsibly sourced in Europe. In this, the company has full control over quality and output. The company continues to invest in production capacity to support demand driven growth while maintaining a measure of scarcity as well.
Its engineered distribution approach plays into the strategic scarcity model and strategically balances a growing direct-to-consumer (DTC) presence with carefully selected wholesale partnerships (B2B), optimising both profitability and brand control. Rather than overextending its presence, Birkenstock prioritises brand integrity and long-term equity, deliberately avoiding overexposure in discount-driven or lower-tier retail environments. In the US, as an example, the company enjoys ~90% full price realisation - meaning that margin integrity is preserved. Geographically, the company is focused on capturing "whitespace" in underpenetrated markets, particularly where brand awareness is high, but access remains limited. By targeting these areas of latent demand, Birkenstock aims to deepen its global footprint while maintaining its premium positioning.
The competitive landscape is complex
Birkenstock's strategy is built with full recognition of the brand's competitive context. Birkenstock must defend its position not only against traditional comfort brands and casual lifestyle players like Clarks, Ecco, Crocs, and UGG, but also against high-fashion labels entering the sandal space and fast-fashion imitators offering lower-priced alternatives.
This necessitates a constant reinforcement of its brand differentiation, functional superiority, and manufacturing quality. To strengthen consumer engagement, Birkenstock also invests in education and brand storytelling, highlighting the orthopaedic benefits and craftsmanship behind its products. This is complemented by strategic collaborations and targeted content marketing designed to convert broad awareness into lasting loyalty, especially among younger and style-conscious demographics.
Finally, underpinning the entire strategy is a significant investment in the company's vertically integrated European manufacturing and logistics infrastructure. This operational backbone enables Birkenstock to maintain its "Made in Germany" promise, scale efficiently, and meet growing global demand without compromising on quality or delivery standards.
Financial performance
Birkenstock listed in October 2023, which means we have limited financial information related to years earlier than 2021 (from where disclosure was provided prior to listing). Between 2021 and 2024, the company grew revenue by 23.3% on a compounded annual growth rate (CAGR) basis, reaching revenue of €1.8 billion in its year ended 30 September 2024. The market anticipates a slight tempering of growth over the next four years to ~15% per annum.
The gross margin has expanded from 45% in FY21 to ~60% where it is expected to remain. This is despite a strong expansion in margin of 120-basis points (bps) y/y to 62.7% in 3Q25, supported by pricing discipline, favourable product mix, and improved operational efficiencies.
The EBITDA margin has also expanded since FY21 from 18% to ~32% currently. There seems to be some operating margin expansion baked into current forecasts, which will be supportive of the bottom line medium term.
Additional support is anticipated to come from meaningfully lower net finance costs as a result of substantially lower debt levels. Birkenstock was spun out of a private equity environment with a heavily geared balance sheet. The company is highly cash generative, however, with comparatively low levels of capital expenditure planned, and it is expected that it could be debt free by FY28.
Birkenstock is building towards a positive spread between return on invested capital (ROIC) and weighted average cost of capital and is expected to achieve an economic profit in FY26 latest.
Birkenstock maintains an ambitious yet measured outlook. Investments in capacity, digital infrastructure, and new product lines are expected to drive further market share gains, particularly in North America and APAC. The focus will remain on scaling the DTC business, deepening brand engagement, and executing a disciplined international rollout. Consensus is looking for adjusted earnings growth of 34% in FY25, 23.1% in FY26, and 20.8% in FY27.
Investment case
Risks
Consensus considerations
Consensus is exceptionally positive on the stock with 90% of sell-side analysts maintaining a "Buy" on the stock and 10% having a "Hold" recommendation. The consensus 12-month target price is $69.24, representing a 43.0% upside from current levels.
Valuation
Birkenstock is trading at a forward PE ratio of 18.5 times, representing a discount to both its long-term average of 24.5 times and slightly below peers (where it has previously traded at a premium). Earnings growth forecasts are still well ahead of peers.
