F-1/A 1 d507917df1a.htm F-1/A F-1/A
Table of Contents

As filed with the Securities and Exchange Commission on October 2, 2023.

Registration No. 333-274483

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Birkenstock Holding Limited*

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

 

 

Jersey   3140   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

1-2 Berkeley Square

London W1J 6EA

United Kingdom

+44 1534 835600

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, Delaware 19711

Tel: +1 302 738-6680

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Joshua N. Korff, P.C.

Ross M. Leff, P.C.

Zoey Hitzert

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

+1 212 446-4800

 

Guy Coltman

Carey Olsen Jersey LLP

47 Esplanade, St Helier

Jersey JE1 0BD, Channel Islands

+44 (0)1534 888900

 

Marc D. Jaffe

Ian D. Schuman

Adam J. Gelardi

Latham & Watkins LLP

1271 Avenue of the Americas

New York, NY 10020

+1 212 906-1200

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. 

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

*

Prior to the consummation of this offering, we intend to change the legal status of our Company from a Jersey private company to a Jersey public limited company.

 

 

 


Table of Contents

The information in this prospectus is not complete and may be changed. We and the selling shareholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject To Completion Dated October 2, 2023

Preliminary Prospectus

32,258,064 Ordinary Shares

 

LOGO

Birkenstock Holding Limited

 

 

We are offering 10,752,688 ordinary shares, no par value, of Birkenstock Holding Limited (the “Company”) and the selling shareholder identified in this prospectus is offering an additional 21,505,376 ordinary shares of Birkenstock Holding Limited. The underwriters may also purchase up to 4,838,709 ordinary shares from the selling shareholder within 30 days of the date of this prospectus to cover over-allotments, if any. We will not receive any of the proceeds from the sale of the ordinary shares by the selling shareholder.

 

 

Prior to this offering, there has been no public market for our ordinary shares. We expect that the initial public offering price will be between $44.00 and $49.00 per ordinary share.

We have applied to list our ordinary shares on the New York Stock Exchange (the “NYSE”) under the symbol “BIRK.”

 

 

Following the offering, BK LC Lux MidCo S.à r.l. (“MidCo”), an entity affiliated with L Catterton and the selling shareholder, will beneficially own approximately 82.8% of our ordinary shares (or 80.2% if the underwriters exercise in full their option to purchase additional ordinary shares). As a result, we will be a “controlled company” under the corporate governance rules of the NYSE applicable to listed companies, and therefore are permitted to elect not to comply with certain corporate governance requirements thereunder.

 

 

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 33 of this prospectus.

 

     Per
ordinary share
     Total  

Initial public offering price

   $           $       

Underwriting discounts and commissions(1)

   $           $       

Proceeds, before expenses, to us

   $           $       

Proceeds, before expenses, to the selling shareholder

   $           $       

 

(1)

We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See “Underwriting” for a description of all compensation payable to the underwriters.

 

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Financière Agache has indicated an interest in purchasing up to an aggregate of $325 million of ordinary shares in this offering at the initial public offering price. Financière Agache owns an indirect interest in the Company through an investment in MidCo and, substantially concurrently with this offering, will receive a transfer of its indirect interest in the Company to hold such interest directly in ordinary shares of the Company. It is assumed that the transfer of such indirect interest will result in Financière Agache holding approximately 2% of the Company’s ordinary shares prior to its potential purchase of additional ordinary shares in this offering. The ordinary shares held in the Company as a result of Financière Agache receiving ordinary shares as a result of the transfer of its indirect interest from MidCo will be subject to a lock-up agreement with the Company. The ordinary shares to be purchased by Financière Agache in this offering will not be subject to a lock-up agreement with the underwriters or the Company. Because this indication of interest is not a binding agreement or commitment to purchase, Financière Agache may determine to purchase more, less or no shares in this offering or the underwriters may determine to sell more, less or no shares to Financière Agache. The underwriters will receive the same discount on any of our ordinary shares purchased by Financière Agache as they will from any other ordinary shares sold to the public in this offering.

One or more funds managed by Durable Capital Partners LP and Norges Bank Investment Management, a division of Norges Bank (collectively, the “cornerstone investors”), have, severally and not jointly, indicated an interest in purchasing up to an aggregate of $300 million of ordinary shares in this offering at the initial public offering price. The ordinary shares to be purchased by the cornerstone investors will not be subject to a lock-up agreement with the underwriters. Because these indications of interest are not binding agreements or commitments to purchase, the cornerstone investors may determine to purchase more, less or no shares in this offering or the underwriters may determine to sell more, less or no shares to the cornerstone investors. The underwriters will receive the same discount on any of our ordinary shares purchased by the cornerstone investors as they will from any other ordinary shares sold to the public in this offering.

The underwriters expect to deliver the ordinary shares against payment in New York, New York on or about     , 2023.

 

 

 

Joint Bookrunners

(*in alphabetical order)

Goldman Sachs & Co. LLC*   J.P. Morgan*   Morgan Stanley*
BofA Securities   Citigroup   Evercore ISI   Jefferies   UBS Investment Bank
BNP PARIBAS   Bernstein   HSBC

 

Co-Managers
Baird   BMO Capital Markets   Deutsche Bank Securities   Piper Sandler   Stifel   William Blair
Telsey Advisory Group   Williams Trading    Academy Securities    Independence Point Securities   Loop Capital Markets

The date of this prospectus is    , 2023.


Table of Contents

LOGO

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

Summary

     1  

The Offering

     23  

Summary Consolidated Financial Information

     25  

Risk Factors

     33  

Cautionary Statement Regarding Forward-Looking Statements

     74  

Use of Proceeds

     76  

Dividend Policy

     77  

Capitalization

     78  

Dilution

     80  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     82  

Letter from the CEO

     123  

Business

     126  

Management

     162  

Principal and Selling Shareholder

     178  

Description of Material Indebtedness

     180  

Related Party Transactions

     184  

Description of Share Capital and Articles of Association

     189  

Comparison of Delaware Corporate Law and Jersey Corporate Law

     193  

Ordinary Shares Eligible for Future Sale

     201  

Taxation

     203  

Underwriting

     212  

Expenses of the Offering

     220  

Legal Matters

     221  

Experts

     221  

Enforcement of Judgments

     222  

Where You Can Find More Information

     223  

Index to Financial Statements

     F-1  

Through and including    , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Neither we, the selling shareholder nor the underwriters have authorized anyone to provide any information or to make any representations other than the information contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. We, the selling shareholder and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the selling shareholder and the underwriters have not authorized any other person to provide you with different or additional information. Neither we, the selling shareholder nor the underwriters are making an offer to sell the ordinary shares in any jurisdiction where the offer or sale is not permitted. This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ordinary shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy these ordinary shares in any circumstances under which such offer or solicitation is unlawful.

 

i


Table of Contents

For investors outside the United States: Neither we, the selling shareholder nor any of the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering of ordinary shares and the distribution of this prospectus outside the United States.

Prior to the consummation of this offering, we intend to change the legal status of our Company from a Jersey private company into a Jersey public limited company. Under the rules of the SEC, we are currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Exchange Act. Moreover, a number of our directors and executive officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal or state securities laws of the United States. We have been advised by our legal counsel in Jersey that it is uncertain as to whether the courts of Jersey would entertain original actions based on U.S. federal or state securities laws or enforce judgments from U.S. courts against us or our officers and directors which originated from actions alleging civil liability under U.S. federal or state securities laws. See “Enforcement of Judgments” for additional information.

Jersey Regulatory Matters

The JFSC has given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey) Order 1958 to the issue of our ordinary shares. The JFSC is protected by the Control of Borrowing (Jersey) Law 1947 against any liability arising from the discharge of its functions under that law.

A copy of this prospectus has been delivered to the Jersey Registrar of Companies in accordance with Article 5 of the Companies (General Provisions) (Jersey) Order 2002 and the Jersey Registrar of Companies has given, and has not withdrawn, its consent to the circulation of this prospectus.

It must be understood that, in giving these consents (once received), neither the Jersey Registrar of Companies nor the JFSC takes any responsibility for the financial soundness of the Company or for the correctness of any statements made, or opinions expressed, with regard to it. If you are in any doubt about the contents of this prospectus, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser.

The price of securities and the income from them can go down as well as up.

The directors of the Company have taken all reasonable care to ensure that the facts stated in this prospectus are true and accurate in all material respects, and that there are no other facts the omission of which would make misleading any statement in this prospectus, whether of facts or opinion. All the directors of the Company accept responsibility accordingly.

Our company secretary is Crestbridge Corporate Services Limited, whose current business address is 47 Esplanade, St Helier, Jersey JE1 0BD, Channel Islands. Our registered office is 47 Esplanade, St Helier, Jersey JE1 0BD, Channel Islands.

 

ii


Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Certain Definitions

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “BIRKENSTOCK Group,” “Birkenstock,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Birkenstock Holding Limited, together with all of its subsidiaries. References to the “selling shareholder” or “MidCo” are to BK LC Lux MidCo S.à r.l., a société à responsabilité limitée incorporated under the laws of the Grand Duchy of Luxembourg.

References to “Euro” or “” means the currency of the member states of the European Monetary Union that have adopted or that adopt the single currency in accordance with the treaty establishing the European Community, as amended by the Treaty on European Union. All references to the “British Pound,” “GBP” or “£,” are to the legal currency of Jersey. All references to “U.S. Dollars,” “Dollars,” “USD” or “$” are to the legal currency of the United States. All references to “Canadian Dollars” or “CAD” are to the legal currency of Canada. In this prospectus, unless otherwise noted, amounts that are converted from Euro to U.S. Dollars are converted at an exchange rate of $1.0909 per 1 and $1.1106 per 1, the exchange rate as of June 30, 2023 and for the nine months ended June 30, 2023, respectively.

Financial Statements

We maintain our books and records in Euros and prepare our consolidated financial statements in accordance with IFRS.

Birkenstock GmbH & Co. KG is the accounting predecessor of BK LC Lux Finco 2 S.à r.l., subsequently renamed Birkenstock Holding Limited, for financial reporting purposes. Birkenstock Holding Limited will be the audited financial reporting entity following this offering. The Company’s financial statement presentation distinguishes the Company’s presentations into two distinct periods, the period up to and including April 30, 2021, the Transaction’s (as defined below) closing date (labeled “Predecessor”), and the period after that date (labeled “Successor”) and are further distinguished as follows: the Successor periods represent fiscal 2022 (“2022 Successor Period”) and the period from May 1, 2021 through September 30, 2021 (“2021 Successor Period” and, together with the 2022 Successor Period, the “Successor Periods”) and the Predecessor periods represent the period from October 1, 2020 through April 30, 2021 (“2021 Predecessor Period”) and fiscal 2020 (“2020 Predecessor Period” and, together with the 2021 Predecessor Period, the “Predecessor Periods”). The Predecessor Periods and Successor Periods (together, the “audited consolidated financial statements”) have been separated by a vertical black line on the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting.

The audited consolidated financial statements prepared in accordance with IFRS have been audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, as stated in their report included elsewhere in this prospectus.

The Company’s unaudited interim condensed consolidated financial statements as of and for the nine months ended June 30, 2023 and June 30, 2022 (the “unaudited interim condensed consolidated financial statements” and, together with the audited consolidated financial statements, the “consolidated financial statements”) have also been presented in this prospectus.

We also present revenues for the years ended September 30, 2014 to 2019, which information has been derived from the consolidated financial statements of Birkenstock GmbH & Co. KG for such periods presented, each prepared in accordance with German GAAP. The consolidated financial statements of Birkenstock GmbH & Co. KG for fiscal 2014 to fiscal 2017 do not include Birkenstock USA LP, which was not consolidated with Birkenstock GmbH & Co. KG until fiscal 2018. Therefore, the revenues presented for fiscal

 

iii


Table of Contents

2014 to fiscal 2017 consist of reported revenues for Birkenstock GmbH & Co. KG plus revenues for Birkenstock USA LP derived from management reporting. There are no significant differences in revenues recognized under German GAAP and IFRS.

Our fiscal year ends September 30. References to “fiscal 2022” or “FY 2022” refer to the fiscal year ended September 30, 2022, and references to other fiscal years follow the same convention. Our financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Rounding

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them. With respect to financial information set out in this prospectus, a dash (“—”) signifies that the relevant figure is not available or not applicable, while a zero (“0.0”) signifies that the relevant figure is available but is or has been rounded to zero.

INDUSTRY AND MARKET DATA

Certain information used in this prospectus contains statistical data, estimates and forecasts concerning the industry in which we operate that are based on external service providers (for which data is not publicly available), other publicly available information and independent industry publications, including those published by Euromonitor International Limited (“Euromonitor”) and IRRIS Composites (“IRRIS”), as well as our internal sources and general knowledge of, and expectations concerning, the industry. Our internal sources include the Consumer Survey. All Consumer Survey figures included herein are provided as of May 2023 and are based on the responses of our customers who elected to participate in the surveys. In the Consumer Survey, we calculate our NPS based on respondents’ indications of their likelihood to recommend BIRKENSTOCK on a scale from 0 to 10. Responses of 9 or 10 are considered “promoters” and responses of 6 or less are considered “detractors.” We then subtract the percentage respondents who are detractors from the percentage of respondents.

Within this prospectus, we reference information and statistics regarding the Apparel and Footwear industry. We have obtained this information and statistics from various independent third-party sources, including independent industry publications, reports by market research firms and other independent sources, such as Euromonitor and IRRIS. Some data and other information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of internal surveys and independent sources. Data regarding the industries in which we compete and our market position and market share within these industries are inherently imprecise and are subject to significant business, economic and competitive uncertainties beyond our control, but we believe they generally indicate size, position and market share within this industry. While we believe such information is reliable, we have not independently verified any third-party information. While we believe our internal company research and estimates are reliable, such research and estimates have not been verified by any independent source. In addition, assumptions and estimates of our and our industries’ future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. These and other factors could cause our future performance to differ materially from our assumptions and

 

iv


Table of Contents

estimates. As a result, you should be aware that market, ranking and other similar industry data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. Neither we, the selling shareholder nor the underwriters can guarantee the accuracy or completeness of any such information contained in this prospectus.

Some of the information herein has also been extrapolated from market data, reports, surveys and studies using our experience and internal estimates. Elsewhere in this prospectus, statements regarding the industry in which we operate, our position in this industry and the size of certain markets are based solely on our experience, internal studies, estimates and surveys and our own investigation of market conditions.

TRADEMARKS AND TRADE NAMES

We own or have rights to various trademarks, trade names or service marks that we use in connection with our business, including “BIRKENSTOCK,” “Birko-Flor,” “Birki,” “Birk” and “Papillio,” among others, and our other registered and common law trade names, trademarks and service marks, including our corporate logo. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the and ® symbols, but we will assert, to the fullest extent under applicable law, rights to such trademarks, service marks and trade names.

CERTAIN DEFINITIONS

The following is a summary of certain defined terms and concepts that we use throughout this prospectus:

 

   

AB-Beteiligungs GmbH refers to AB-Beteiligungs GmbH, an entity controlled by Alexander Birkenstock, one of our controlling shareholders prior to the Transaction;

 

   

ABL Facility refers to the multicurrency asset-based loan facility established by the ABL Facility Agreement;

 

   

ABL Facility Agreement refers to the asset-based-loan facility agreement entered into on April 28, 2021 by Birkenstock Group B.V. & Co. KG, Birkenstock US BidCo, Inc. and Birkenstock Limited Partner;

 

   

APMA refers to the Asia-Pacific, Middle East and Africa region;

 

   

ASP refers to average selling price;

 

   

B2B refers to business-to-business;

 

   

Birkenstock Financing refers to Birkenstock Financing S.à r.l.;

 

   

Birkenstock Limited Partner refers to Birkenstock Limited Partner S.à r.l.;

 

   

CAGR refers to compound annual growth rate;

 

   

CB Beteiligungs GmbH & Co. KG refers to CB Beteiligungs GmbH & Co. KG, an entity controlled by Christian Birkenstock, one of our controlling shareholders prior to the Transaction;

 

   

CFC refers to a controlled foreign corporation under the Code;

 

   

CGU refers to cash generating unit;

 

   

Consumer Survey refers to a series of general branding and marketing internal surveys with approximately 70,000 participants conducted in May 2023 to determine the demographics and habits of our consumers;

 

v


Table of Contents
   

DTC refers to direct-to-consumer;

 

   

EEA refers to the European Economic Area;

 

   

ESG refers to environmental, social and governance;

 

   

EU refers to the European Union;

 

   

EURIBOR refers to Euro Interbank Offered Rate;

 

   

EUR TLB Facility refers to the senior term loan facilities in the principal amount of 375.0 million under the Senior Term Facilities Agreement;

 

   

EVA refers to ethylene-vinyl acetate;

 

   

Exchange Act refers to the Securities Exchange Act of 1934, as amended;

 

   

GDPR refers to the General Data Protection Regulation;

 

   

German GAAP refers to the German Commercial Code;

 

   

HMRC refers to HM Revenue & Customs;

 

   

IFRS refers to the International Financial Reporting Standards as issued by the International Accounting Standards Board;

 

   

Incremental Senior Term Facilities refers to incremental facilities which may also be established under the Senior Term Facilities Agreement from time to time (including by way of an increase to any existing facilities or the establishment of new facilities);

 

   

IP refers to intellectual property;

 

   

IRS refers to the U.S. Internal Revenue Service;

 

   

IT refers to information technology;

 

   

Jersey Companies Law refers to the Companies (Jersey) Law 1991, as amended;

 

   

JFSC refers to the Jersey Financial Services Commission;

 

   

ManCo refers to an indirect parent entity of our Company;

 

   

Notes refers to the 430.0 million in aggregate principal amount of 5.25% Senior Notes due 2029 issued by Birkenstock Financing on April 29, 2021;

 

   

NPS refers to Net Promoter Score;

 

   

Order refers to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005;

 

   

PFIC refers to a passive foreign investment company under the Code;

 

   

Predecessor Shareholders refer to AB-Beteiligungs GmbH and CB Beteiligungs GmbH & Co. KG, collectively;

 

   

Principal Shareholder refers to L Catterton and its affiliates, which include MidCo;

 

   

Privacy Laws refers to the GDPR, UK GDPR, California Consumer Privacy Act as amended by the California Privacy Rights Act and other applicable data protection and privacy laws across various markets when taken together;

 

   

QEF Election refers to a qualified electing fund election;

 

   

PU refers to polyurethane;

 

   

Registration Rights Agreement refers to the registration rights agreement to be entered into with MidCo in connection with the offering;

 

vi


Table of Contents
   

RSP refers to retail sales price;

 

   

SCCs refer to standard contractual clauses approved by the European Commission;

 

   

SDRT refers to UK stamp duty reserve tax;

 

   

SEC refers to the United States Securities and Exchange Commission;

 

   

Securities Act refers to the Securities Act of 1933, as amended;

 

   

Senior Credit Facilities refers to the Senior Term Facilities and Incremental Senior Term Facilities when taken together;

 

   

Senior Term Facilities Agreement refers to the senior facilities agreement entered into by Birkenstock Limited Partner on April 28, 2021;

 

   

Shareholders’ Agreement refers to the shareholders’ agreement to be entered into with MidCo in connection with the offering;

 

   

SOFR refers to the Secured Overnight Financing Rate;

 

   

Tax Law refers to the Income Tax (Jersey) Law 1961 (as amended);

 

   

The Code refers to the Internal Revenue Code of 1986;

 

   

TPU refers to thermoplastic polyurethane;

 

   

TRA refers to the tax receivable agreement that we anticipate entering into with our pre-IPO owner, MidCo, in connection with this offering;

 

   

TRA Participants refers to our pre-IPO owner, MidCo, any transferee holder(s) of rights under the TRA and any successor(s) thereto;

 

   

Transaction refers to Birkenstock Holding Limited’s acquisition of the shares and certain assets that comprised the BIRKENSTOCK Group;

 

   

U.S. refers to the United States of America;

 

   

U.S. GAAP refers to U.S. generally accepted accounting principles;

 

   

UK refers to the United Kingdom;

 

   

UK Addendum refers to the UK international data transfer addendum to the SCCs;

 

   

UK GDPR refers to the UK General Data Protection Regulation;

 

   

UKIDTA refers to the UK International Data Transfer Agreement;

 

   

USD TLB Facility refers to senior term loan facilities of $850.0 million under the Senior Term Facilities Agreement; and

 

   

Vendor Loan refers to the loan agreement with AB-Beteiligungs GmbH.

 

vii


Table of Contents

LOGO

 


Table of Contents

SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements and notes to those consolidated financial statements, included elsewhere in this prospectus, before deciding to invest in our ordinary shares.

Who We Are

BIRKENSTOCK is a revered global brand rooted in function, quality and tradition dating back to 1774. We are guided by a simple, yet fundamental insight: human beings are intended to walk barefoot on natural, yielding ground, a concept we refer to as “Naturgewolltes Gehen.” Our purpose is to empower all people to walk as intended by nature. The legendary BIRKENSTOCK footbed represents the best alternative to walking barefoot, encouraging proper foot health by evenly distributing weight and reducing pressure points and friction. We believe our function-first approach is universally relevant; all humans — anywhere and everywhere — deserve to walk in our footbed.

From this insight, we have developed a broad, unisex portfolio of footbed-based products, anchored by our iconic Core Silhouettes, the Madrid, Arizona, Boston, Gizeh and Mayari. While these silhouettes drive consistent, high-visibility revenues and represent a significant portion of our overall business, we also continuously expand our extensive archive of over 700 silhouettes by extending our existing silhouettes and launching new styles. This expands our reach across price points, usage occasions and product categories. We incorporate distinctive design elements and develop new materials to create newness while staying true to our heritage and uncompromising quality standards.

We are German made. Our production capabilities reflect centuries-old traditions of craftsmanship and commitment to using only the highest quality materials. To ensure each product meets our rigorous quality standards, we operate a vertically integrated manufacturing base and produce all our footbeds in Germany. In addition, we assemble over 95% of our products in Germany and produce the remainder elsewhere in the EU. We maintain strict control over our entire supply chain, responsibly sourcing materials that originate mainly from Europe.

As described by our Chief Executive Officer, Oliver Reichert, “Consumers buy our products for a thousand wrong reasons, but they all come back for the same reason:” for our functional proposition, enduring commitment to quality and the rich tradition of our Company which enables us to establish meaningful emotional connections with our consumers. The deep trust we create allows us to enjoy long-lasting relationships with our consumers — oftentimes spanning decades — as evidenced by findings from the Consumer Survey that revealed the average BIRKENSTOCK consumer in the U.S. owns 3.6 pairs today. Through the strong reputation and universal appeal of our brand — enabling extensive word-of-mouth exposure and outsized earned media value — we have efficiently built a growing global fanbase of millions of consumers that uniquely transcends geography, gender, age and income.

We reach these consumers around the world through a multi-channel “engineered distribution” model, which balances the growing demand for our products and our constrained supply capacity to create scarcity in the market. We strategically allocate our products between our wholesale partners in the B2B channel, which we have been optimizing in recent years, and our rapidly growing DTC channel. As a result, we drive consistently robust revenue growth and operating margins, achieve excellent sell-through rates and deepen our direct connections with our consumers. In fiscal 2022, we generated revenues of

 

1


Table of Contents

1,242.8 million, gross profit margin of 60%, Adjusted gross profit margin of 62%, net profit of 187.1 million, Adjusted net profit of 174.7 million, net profit margin of 15%, Adjusted net profit margin of 14%, Adjusted EBITDA of 434.6 million and Adjusted EBITDA margin of 35%, while selling approximately 30 million units.

What We Stand For

Our core values of Function, Quality and Tradition influence everything we do and underpin our brand’s deep cultural relevance that has stood the test of time. For decades, BIRKENSTOCK has attracted independent thinkers and transcended prevailing style norms, remaining committed to our values, even as the global zeitgeist has evolved around and moved toward us. In the 1960s and 1970s, the global peace movement and hippies adopted BIRKENSTOCK, wearing our Madrid, Arizona and Boston, as part of their celebration of freedom and free-spiritedness. In the 1980s, the green movement adopted BIRKENSTOCK, proudly wearing our products for our ethical approaches to production and consumption. In the 1990s, inspired by the feminism movement, more women wore BIRKENSTOCKs to free themselves from long-standing fashion norms that required wearing painful high heels and other constricting footwear. Today, consumers turn to BIRKENSTOCK in their search for healthy, high-quality products and as a rejection of formal dress culture. By remaining true to our values of Function, Quality and Tradition, BIRKENSTOCK has endured across generations.

Function

Our proprietary footbed — the result of successive innovations, beginning in the late 19th century with the invention of the contoured shoe last, which reflects the anatomy of the human foot — represents the foundation of our brand and products. The functional nature of and growing usage occasions for BIRKENSTOCK products enable the universality of our brand, allowing us to serve every human regardless of geography, gender, age and income. At its core, the BIRKENSTOCK footbed promotes “Naturgewolltes Gehen”:

 

LOGO

 

2


Table of Contents

Every foot employs 26 bones, 33 muscles and over 100 tendons and ligaments in walking. Improper footwear can cause friction, pain, injury and poor posture, among other ailments. Our anatomically shaped BIRKENSTOCK footbed provides natural support and stimulation, promoting even weight distribution, fully supported arches and no unnatural pressure points from heel to toe. Orthopedic theory suggests the benefits of walking barefoot on natural yielding ground are far reaching, including pain reduction in the foot and throughout the body, improved mobility, and natural posture, since the foot is kept in its natural state. By mimicking the effects of natural yielding ground (“footprint in the sand”), the “System Birkenstock” leans on the benefits of this phenomenon, attempting to enable walking as intended by nature. The inherent functionality of our products enables BIRKENSTOCK to serve a distinct purpose for consumers.

As illustrated below, the Original BIRKENSTOCK footbed is comprised of several distinctive components:

 

 

LOGO

Quality

We believe how things are made matters as much as the product itself. We build BIRKENSTOCK products to be long-lasting, durable and repairable, a distinctive approach in the market today. We never compromise on material quality; for example, our uppers are made of leathers of the highest quality (i.e., 2.8-3.0 mm thick leather, sourced from European tanneries). We source over 90% of our materials and components from Europe, processing our inputs to the highest environmental and social standards in the industry by operating state-of-the-art scientific laboratories for materials testing. Furthermore, by vertically integrating our manufacturing operations in the EU — one of the safest and most regulated manufacturing environments in the world — we maintain a high degree of control over the quality and craftsmanship of our products, ensuring a consistent consumer experience.

Consumers recognize BIRKENSTOCK for its superior product quality. According to the Consumer Survey, we outperform our peers — on a statistically significant level — on measures of material quality, construction

 

3


Table of Contents

and craftsmanship, as well as durability. As a result, the loyalty of BIRKENSTOCK consumers is unparalleled, with some consumers keeping pairs for multiple decades through careful maintenance and repair.

Tradition

Honoring our heritage represents the cornerstone of our culture. We feel a profound responsibility to protect and live up to our treasured tradition — built over the last two and a half centuries — of crafting functional, high-quality products. This deep respect for our history continuously guides our actions, compelling us to emphasize our values across all aspects of our business.

While our family tradition of shoemaking can be traced back to 1774, the evolution of our brand gained momentum in the early 20th century with our development of the footbed in 1902. We invented the word “Fussbett,” or “footbed,” and this discovery laid the groundwork for what became the “System Birkenstock,” a doctrine and practice of orthopedic principles, built around “Naturgewolltes Gehen,” that still guides us today. The footbed remains the guiding principle for everything we do and the platform we use to explore new product categories. It reminds us to develop products that make our consumers’ lives better, embedding function, quality and purpose in everything we make. The philosophy of the “System Birkenstock” grounds our approach to shoemaking to this day.

Where We Are Today

Over a decade ago, the Birkenstock family brought in its first outside management team, commencing the present era of BIRKENSTOCK. Under the leadership and vision of Oliver Reichert, first as a General Manager in 2009 and then as the Chief Executive Officer beginning in 2013, we have transformed our business from a family-owned, production-oriented company into a global, professionally managed enterprise committed to growing our brand. In the current era, we have built on our legacy while continuing to revolutionize processes and strategies to unleash our global potential, growing revenues at a 20% CAGR from fiscal 2014 to fiscal 2022.

 

 

LOGO

Note: See “Presentation of Financial and Other Information — Financial Statements.”

 

4


Table of Contents

We use a highly intentional “celebrate the archive, build the archive” approach to product architecture and innovation across our expanding portfolio of over 700 silhouettes. We incorporate our legendary footbed across all silhouettes, several of which have developed significant global recognition and acclaim of their own. Our top five silhouettes collectively generated nearly 76% of our annual revenues in fiscal 2022. We continually reinterpret or “celebrate” these timeless, iconic silhouettes through makeovers and adaptations, enabling us to drive consistent, recurring growth with minimal risk. Alongside our classics, we consistently build our extensive archive by innovating new silhouettes; nine of the top 20 products in fiscal 2022 represent new styles that we have introduced since fiscal 2017. In particular, we have focused on expanding our closed-toe silhouette assortment — which represented over 20% of revenues in fiscal 2022 — to enable us to address additional usage occasions as well as balance seasonality.

Our commitment to creating functional, purpose-driven products with the highest integrity has enabled us to build a strong brand reputation with universal appeal. In addition, powerful secular trends — an increased focus on health, the casualization of daily life, the breakthrough of modern feminism and the rise of purpose-led, conscious consumption — have converged around BIRKENSTOCK and will continue to fuel our brand relevance and reach for the next 250 years. We strive to match our universal appeal with democratic access to products; we offer our unisex products across a broad range of prices, from a retail entry price point of 40 for our EVA styles to over 1,600 for our highest-end collaborations.

The deep connections we build with our diverse, global fan base engender profound trust, high levels of loyalty and unparalleled word-of-mouth endorsement. In a recent Consumer Survey, approximately 70% of our existing U.S. consumers indicated they had purchased at least two pairs of BIRKENSTOCKs, with the average U.S. consumer owning 3.6 pairs today. In that same Consumer Survey, nearly 90% of recent purchasers indicated a desire to purchase again and over 40% of consumers indicated they did not even consider another brand when last purchasing BIRKENSTOCK, a testament to our category ownership.

Given the increasing relevance and strength of our brand, demand for our products has historically exceeded supply. As a consequence, we have spent the past decade refining our engineered distribution model through which we mindfully and strategically allocate product across channels and regions. We have consolidated control over our brand globally by converting distributor markets, rationalizing wholesale distribution to focus on strategic accounts that support our brand positioning and reach, and investing in our DTC business, which has grown at a 42% CAGR between 2018 and 2022. We allocate our finite production capacity globally, creating scarcity in the market and facilitating strong control over our brand, as well as predictable, consistent growth. Our strongest, most developed regions are the Americas and Europe, which represented 54% and 36% of revenues in fiscal 2022, respectively. Our APMA region has demonstrated considerable growth potential, which historically has not been fully realized because of deliberate decisions to prioritize the Americas and Europe due to finite supply.

Recent Financial Performance

Our powerful business model and consistent execution have delivered continuous top-line growth and an expanding margin profile. Our financial performance reflects the strong demand for our brand and the benefits of our engineered distribution model that delivers the right product for the right channel at the right price point. This approach enables us to enjoy a rare combination of consistent, predictable growth and high levels of profitability, providing us with significant flexibility to invest in our operations and growth initiatives.

This strategy has resulted in:

 

   

Revenues increasing from 727.9 million in fiscal 2020 to 1,242.8 million in fiscal 2022, a 31% two-year CAGR;

 

   

Number of units sold increasing at a 12% CAGR between fiscal 2020 and fiscal 2022;

 

5


Table of Contents
   

ASP increasing at a 16% CAGR between fiscal 2020 and fiscal 2022;

 

   

DTC penetration increasing from 30% of revenues in fiscal 2020 to 38% of revenues in fiscal 2022;

 

   

Gross profit margin expanding from 55% in fiscal 2020 to 60% in fiscal 2022;

 

   

Adjusted gross profit margin expanding from 55% in fiscal 2020 to 62% in fiscal 2022;

 

   

Net profit increasing from 101.3 million in fiscal 2020 to 187.1 million in fiscal 2022, with net profit margin expanding by 1 percentage point from 14% in fiscal 2020 to 15% in fiscal 2022;

 

   

Adjusted net profit growing at a 22% two-year CAGR from 117.5 million in fiscal 2020 to 174.7 million in fiscal 2022, with Adjusted net profit margin contracting 2 percentage points from 16% in fiscal 2020 to 14% in fiscal 2022; and

 

   

Adjusted EBITDA growing at a 49% two-year CAGR from 194.8 million in fiscal 2020 to 434.6 million in fiscal 2022, with Adjusted EBITDA margin expanding 8 percentage points from 27% in fiscal 2020 to 35% in fiscal 2022.

This strategy has also yielded strong results in the most recent nine months ended June 30, 2023, where we have observed:

 

   

Revenues increasing from 921.2 million for the nine months ended June 30, 2022 to 1,117.4 million for the nine months ended June 30, 2023, a 21% increase;

 

   

Number of units sold increasing by 5% from the nine months ended June 30, 2022 to the nine months ended June 30, 2023;

 

   

ASP increasing by 15% in the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022;

 

   

DTC penetration increasing from 34% of revenues for the nine months ended June 30, 2022 to 37% of revenues for the nine months ended June 30, 2023;

 

   

Gross profit margin expanding from 59% for the nine months ended June 30, 2022 to 61% for the nine months ended June 30, 2023;

 

   

Adjusted gross profit margin decreasing slightly from 62% for the nine months ended June 30, 2022 to 61% for the nine months ended June 30, 2023;

 

   

Net profit decreasing from 129.1 million for the nine months ended June 30, 2022 to 103.3 million for the nine months ended June 30, 2023, with net profit margin contracting by 5 percentage points from 14% for the nine months ended June 30, 2022 to 9% for the nine months ended June 30, 2023;

 

   

Adjusted net profit increasing by 47% from 124.2 million for the nine months ended June 30, 2022 to 182.0 million for the nine months ended June 30, 2023, with Adjusted net profit margin increasing by 3 percentage points from 13% for the nine months ended June 30, 2022 to 16% for the nine months ended June 30, 2023; and

 

   

Adjusted EBITDA growing by 16% from 332.5 million in the nine months ended June 30, 2022 to 387.0 million for the nine months ended June 30, 2023, with Adjusted EBITDA margin contracting 1 percentage point from 36% for the nine months ended June 30, 2022 to 35% for the nine months ended June 30, 2023.

 

6


Table of Contents

 

LOGO

Our Addressable Market

Inspired by “Naturgewolltes Gehen,” we construct our products to empower all humans to walk as nature intended. We believe this function-first ethos limits the reach of our products only by the global population.

Our core opportunity lies in deploying our iconic footbed across the broader footwear market globally, including in our largest markets of North America and Europe, as well as newer markets in Asia and the Middle East. Beyond geographical expansion, significant market share opportunity exists in our established and new product categories.

Global Footwear Market

The global footwear industry is a large and fragmented market. According to Euromonitor, it was estimated to generate approximately 340 billion in retail sales in 2022, with the top 5 brands accounting for 20% of the overall footwear market. On average, the global footwear market is projected to grow at a CAGR of 5.1% over the next five years, reaching approximately 440 billion in sales by 2027. Based on our current market penetration of less than 1%, we believe there is ample whitespace to continue growing the BIRKENSTOCK brand. We expect to capture market share globally, particularly in Asia Pacific, which is expected to be one of the fastest growing regions in the world at a CAGR of 5.9% between 2022 and 2027 and where we are meaningfully underpenetrated.

 

7


Table of Contents

We believe we are uniquely positioned to win share in the large and growing global footwear market given our commitment to delivering superior orthopedic functionality in support of the following key enduring consumer megatrends:

Growing Preference for Healthy Products

Consumers prioritize purchases that benefit their overall health as they become aware of the negative effects of wearing unsupportive footwear. According to ARRIS Composites survey data, nearly 2 in 5 U.S. workers have recurring foot pain and discomfort at any given time. In addition, 86% of U.S. workers prefer comfort over style in their footwear. Our footbed-based products meet inherent consumer demand through their functionality and encouragement of the natural walking motion and proper foot health.

Casualization Across Usage Occasions

Over the last generation, the use of formal footwear has declined as a result of the ongoing shift towards casual dress and rise of sneaker culture, both trends accelerated by COVID-19. We find ourselves at a nexus of these changing consumer behaviors as consumers increasingly free themselves from long-standing fashion norms, seeking more functional footwear and apparel choices across usage occasions. This enduring trend also coincides with the shift towards healthy products as consumers seek alternatives to traditional work and other non-casual footwear options that do not promote or negatively impact foot health.

Breakthrough of Modern Feminism

The ongoing evolution and expansion of the role of women in society continues to drive meaningful shifts in their preferences in footwear and apparel. While trends in fashion come and go, we believe women’s increasing preference for functional apparel and footwear has and will prove secular in nature. As a brand that has long stood for functionality, we believe this ongoing tailwind will continue to drive relevance and growth for the BIRKENSTOCK brand.

Appreciation and Affinity for Heritage and Craftsmanship

We believe consumers increasingly value brands that have rich traditions, have clarity in their purpose and take significant responsibility for their operations. We have observed these trends across various consumer industries, including luxury leather goods and ready-to-wear clothing, watches and personal care products, among others. We believe BIRKENSTOCK’s functional, purpose-led brand, uncompromising commitment to quality and centuries-old crafting traditions align well with the ongoing shift towards brands with authentic heritages and craftsmanship.

Our Competitive Strengths

We believe the following strengths are central to the power of our brand and business model:

Purpose Brand Built Around our Legendary Footbed and Products

An Orthopedic Tradition

The heart of our brand is the footbed, which forms the core of our own orthopedic methodology, the “System Birkenstock.” The benefits of our system are supported by decades of research, podiatrist recommendations and consumer loyalty. Our purpose to empower all people to walk as intended by nature has created an enduring connection with our consumers, who recognize us for functionality, craftsmanship, German engineering, uncompromising quality and a differentiated product experience. This authentic connection with our consumers positions BIRKENSTOCK at the center of a shift toward conscious, responsible and health-oriented consumption instead of “fast fashion” or trend-chasing.

 

8


Table of Contents

Much of our success can be traced back to our long history of product innovations, including the contoured shoe last, footbed and footbed sandal. We outline our groundbreaking innovations below:

 

 

LOGO

Category-Defining, Universally Relevant Silhouettes

While these innovations started orthopedically in nature, we have since launched several distinctive, instantly recognizable silhouettes that blend the functionality of our legendary footbed with timeless aesthetics. Many of these silhouettes — including our Core Silhouettes, the Madrid, Arizona, Boston, Gizeh and Mayari — have come to define and become synonymous with their respective categories, resulting in a distinct competitive advantage for our brand. All but one — the Mayari — have been in the market for over 40 years and continue to attract significant attention today. From the beginning, these silhouettes have been conceptualized, promoted and sold as unisex products, further supporting our fundamental purpose and driving mass appeal of the brand. These top selling models undergo regular seasonal makeovers and serve as the “canvas” for many of our collaborations created within our 1774 premium line, generating newness while allowing us to celebrate this core collection. Since 2018, our Core Silhouettes have grown at a revenue CAGR of 18%, evidencing the ability of these iconic silhouettes to drive consistent, recurring growth.

 

 

LOGO

 

9


Table of Contents

Proven Innovation Strategy

We have developed an extensive archive of over 700 silhouettes through our differentiated innovation engine. We approach product innovation through two primary lenses: (1) “celebrating the archive” by utilizing distinct design elements to modify existing silhouettes and introduce newness in a low-risk manner and (2) “building the archive” by leveraging our footbed as the development platform, enabling us to create new products from the “inside-out.”

Our approach leverages our product archive, market insights and whitespace analysis to identify areas where we can create trends from within and export those to the market through a proven roadmap of product development, demand creation and engineered distribution.

Celebrate the Archive

We routinely update our Core Silhouettes and other existing silhouettes by adjusting parameters such as color, materials and other details (e.g., buckles) to create newness and strategically extend their reach. For example, we have expanded the Arizona silhouette across price points and usage occasions, adding a water-friendly variant utilizing EVA, while also broadening the Arizona’s appeal through collaborations. This approach continuously infuses the brand with newness while undertaking minimal risk. As a result, revenues from the Arizona silhouette have grown at a CAGR of 24% between fiscal 2018 and 2022.

Build the Archive

We also consistently build our archive by introducing new silhouettes developed around our celebrated footbed. Given the functional nature of our products and the loyalty BIRKENSTOCK consumers have for their footbeds, we have successfully expanded our assortment across new silhouettes and product categories. The success of this approach can be seen in the popularity of our recent launches; new silhouettes introduced since fiscal 2017 represented nine of the top 20 selling products in fiscal 2022. Furthermore, we have focused on the significant opportunity in closed-toe silhouettes, which have grown to over 20% of revenues in fiscal 2022, supported by silhouettes such as the Zermatt, Buckley and Bend. This approach has enabled us to expand our brand reach across seasons and usage occasions, as well as drive growth through higher ASPs. Launched in 2020, the Bend sneaker exemplifies the success of our approach to building the archive in new, strategically important categories, with Bend revenues growing over 100% between fiscal 2021 and 2022.

Go-Forward Product Strategy

Looking ahead, we will continue to grow our Core Silhouette collections through low-risk newness while also deploying our footbed across more product categories and usage occasions. Specifically, we expect to refine existing silhouettes and create new silhouettes that incorporate new materials and production techniques, such as PU direct injection, to specifically address identified consumer needs and broaden our product range across usage occasions. For example, our PU technology will enable extensive innovation in outsoles, allowing us to create products tailored for active and outdoor and professional usage occasions. To further strengthen our innovation capabilities and extend our functional leadership, we formed a dedicated biomechanics team and created a laboratory for new technical and materials innovations in 2018.

 

10


Table of Contents

Global Fan Community Enabling Efficient Demand Creation

Broad and Democratic Fan Base

We serve a global community of millions of highly engaged consumers, who we attract with our function-first collection of high-quality footwear. Our fans, many of whom have been with us for decades, are enthusiastic, loyal, quality seekers across all aspects of society, including doctors, adventurers, professional athletes, families and models on the runways of Paris Fashion Week. We attract a diverse range of consumers that transcends geography, gender, age and income.

 

 

LOGO

Source: Consumer Survey; geographical split based on share of fiscal 2022 revenues

Our holistic approach to foot health serves as the foundation for a globally accessible, relevant and democratized brand experience that serves a broad consumer base across usage occasions and price points. We have demonstrated success across a broad price range, from our EVA styles, which have a RSP starting at 40, to our 1774 collection styles and collaborations, which have a RSP of upwards of 1,600.

Unparalleled Consumer Engagement and Loyalty

Our diverse set of consumers discover our brand in many ways, sometimes not for the inherent orthopedic benefits, but become loyal fans through their continued use of our products. According to the Consumer Survey, the average BIRKENSTOCK consumer in the U.S. owns 3.6 pairs of our product today, reflecting the enthusiasm with which consumers engage with our brand. In addition, 86% of recent BIRKENSTOCK purchasers indicated a desire to purchase again. Anecdotally, “Birkenstories” of obsessive fan loyalty are plentiful, with grandparents passing on the tradition of BIRKENSTOCK to future generations and others building collections of BIRKENSTOCKs over time.

Efficient Demand Creation

The deep connection consumers feel with our beloved brand leads to significant word-of-mouth exposure and extensive, high-quality earned media, enabling highly efficient marketing spend. According to the Consumer Survey, nearly 90% of BIRKENSTOCK buyers come to us through unpaid channels, with the

 

11


Table of Contents

top three sources of awareness being: (1) heard about it from a friend, (2) saw someone wearing it and (3) growing up with it. Our consumers’ love for BIRKENSTOCK and their strong desire to organically promote the brand are further demonstrated by our NPS of 55%.

Furthermore, we amplify BIRKENSTOCK in the cultural zeitgeist through calculated demand creation strategies, including through creative content developed by our content house as well as through strategic product collaborations led by our 1774 office in Paris. Our unique brand, iconic footbed and instantly recognizable aesthetic have generated significant unsolicited attention from well-known brands seeking to collaborate with us. This has enabled us to partner with diverse brands such as Rick Owens, Stüssy, DIOR and Manolo Blahnik to create products that activate specific consumer groups and markets for BIRKENSTOCK. We benefit from the unpaid advocacy and support that is the natural byproduct of celebrities, public figures and other influential fans who are frequently seen wearing our products.

Engineered Distribution Approach

Complementary Multi-Channel Strategy

We optimize growth and profitability through a complementary, multi-channel distribution strategy for DTC and B2B. 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. Across both channels, we execute a strategic allocation and product segmentation process, often down to the single door level, to ensure we sell the right product in the right channel at the right price point. This approach is centered on the strategic calibration of our ASP and employs key levers such as the expansion of our DTC channel, market conversions from third-party distributors, optimization of our wholesale partner network, increased overall share of premium products and strategic pricing. This process allows us to manage the finite nature of our production capacity, with a rigorous focus on control of our brand image and on profitability. As a result, we drive top-line growth and margins, prevent brand dilution and deepen our connection to consumers.

We pioneered this engineered distribution model in our U.S. market, ultimately helping drive a 32% revenue CAGR in the U.S. between fiscal 2014 and fiscal 2022. This transformative approach now serves as a blueprint for all our regions, where we have strategically converted from third-party distributors to owned distribution, accelerated DTC penetration, strategically expanded our retail footprint and increased our share of closed-toe and other high ASP products. Building on our success in the U.S., we have taken back distribution in key markets, including the UK, France, Canada, Japan and South Korea, reducing the share of business in third-party distribution from 32% of revenues in fiscal 2018 to 14% in fiscal 2022. Our strongest, most developed regions are the Americas, which accounted for 54% of revenues in fiscal 2022, and Europe, which accounted for 36% of revenues, while APMA represented 10% of revenues.

Balanced Shift Towards DTC

Our DTC footprint promotes direct consumer relationships and provides access to BIRKENSTOCK in its purest form. We have grown DTC revenues at a 42% CAGR between 2018 and 2022 as part of our strategy to increase DTC penetration. Our DTC channel enables us to express our brand identity, engage directly with our global fan base, capture real-time data on customer behavior and provide consumers with unique product access to our most distinctive styles. Additionally, our high levels of organic demand creation, together with higher ASPs, support consistently attractive profitability in the DTC channel, which reached a 38% share of revenues in fiscal 2022, up from 18% in fiscal 2018.

Since 2016, we have invested significantly in our online platform to support the penetration of our DTC channel, establishing our own e-commerce sites in more than 30 countries with ongoing expansion into new markets. In fiscal 2022, e-commerce represented 89% of our DTC channel. In addition, as of June 30,

 

12


Table of Contents

2023, we operated a network of approximately 45 owned retail stores, complementing our e-commerce channel with the live experience of our best product range. The largest concentration of our retail locations is in Germany, where we operated 20 locations. We have recently embarked on a disciplined strategy of opening new retail stores in attractive markets globally, including Soho and Brooklyn in New York City, Venice Beach in Los Angeles, Tokyo, London and Delhi.

Intentional Wholesale Partnerships

Our wholesale strategy is defined by intentionality in partner selection, identifying the best partners in each segment and price point. We segment our wholesale product line availability into specific retailer quality tiers, ensuring we allocate the right product to the right channel for the right consumer. For example, we limit access to our premium 1774 and certain collaboration products to a curated group of brand partners.

For our wholesale partners, we are a “must carry” brand based on the enthusiasm with which our consumers pursue our products. We believe that the BIRKENSTOCK brand is consistently amongst the top performers in sell-through in our core categories at most of our retail partners. We generate significantly more demand from existing and prospective wholesale customers than we can supply, putting us in an enviable position where we can create scarcity in the market and obtain consistently favorable economic terms on wholesale distribution. The early placement of wholesale orders approximately six months in advance greatly aids in our production planning and allocation. In addition, sell-through transparency from important wholesalers provides real-time insight into the overall market and inventory dynamics.

During fiscal 2022, we worked with approximately 6,000 carefully selected wholesale partners in over 75 countries, ranging from orthopedic specialists to major department stores, to high-end fashion boutiques. As of June 30, 2023, our strategic partners also operated approximately 270 mono-brand stores to provide our consumers a multi-channel experience in select markets.

Vertically Integrated Manufacturing

A key differentiator of BIRKENSTOCK is our vertically integrated manufacturing which creates strong competitive and operational advantages in an industry that has largely been offshoring production since the 1980s. During 2022, we assembled over 95% of our overall products and produced 100% of our footbeds in our five owned factories in Germany, with supplemental component manufacturing in Portugal. These facilities are critical to delivering the high-quality products our brand promises and our consumers expect. With nearly every silhouette requiring over 50 hands to complete, the approximately 4,400 skilled workers we employ ensure we complete production in rigorous accordance with centuries-old know-how and craftsmanship. Inside our factories, most of our machines and automation are custom-made and cannot be found anywhere else in the world. For example, if no standard equipment is available on the market to fulfill these goals, we design and build our own proprietary machines.

Our approach to owned manufacturing ensures we produce our products to the highest quality standards, that we remain deliberate in the environmental resources we use and that we invest appropriately in innovation to support the brand’s continued growth. Our consumers can take comfort in that we engineer and produce 100% of our footwear in the EU, one of the safest and most regulated markets in the world. Furthermore, we source most of our raw materials from across Europe in compliance with strict quality, social and environmental standards based on industry best practices. We believe this vertical integration creates a unique degree of strategic control, further supported by robust contingency measures and the benefits of sourcing redundancy and diversity across multi-supplier relationships to ensure continuity of operations and flow of product.

 

13


Table of Contents

LOGO

We are currently adding to and expanding our owned manufacturing footprint globally at two facilities. Our newest factory in Pasewalk, Germany began operations in September 2023, expanding our popular EVA and PU product capacity while freeing up incremental capacity in our other factories to further meet the strong demand for our brand. We also plan on expanding our recently acquired component manufacturing facility in Arouca, Portugal over the next two years. We remain committed to our policy that all footbed production and engineering take place in Germany and that all final assembly occurs in the EU to ensure the highest quality products are manufactured according to centuries-long tradition.

Passionate and Proven Management Team

Our brand’s ethos is rooted in an enduring commitment to the highest standards of corporate citizenship that encompasses a dedication to our employees and to the highest quality and broad support of innovation and creativity. Our leadership team remains committed to supporting a centuries-old legacy of aligning our corporate ethos to actions that support positive social, economic and environmental outcomes for both the localities in which we operate and our global community.

We benefit from the industry expertise and know-how of our passionate, experienced, visionary and proven senior management team led by Oliver Reichert, our Chief Executive Officer; Dr. Erik Massmann, our Chief Financial Officer; Markus Baum, our Chief Product Officer; Klaus Baumann, our Chief Sales Officer; David Kahan, our President Americas; Mehdi Nico Bouyakhf, our President Europe; Jochen Gutzy, our Chief Communications Officer; Christian Heesch, our Chief Legal Officer; and Mark Jensen, our Chief Technical Operations Officer who together have an average of more than 20 years of industry experience. The executive leadership team is executing on a bold vision to continue to unlock the power and significance of BIRKENSTOCK, which, through fiscal 2022, has grown revenues at a 20% CAGR since fiscal 2014, after Oliver Reichert took over as Chief Executive Officer. This has been accomplished while significantly expanding profitability through greater control over our brand, increased DTC share and operational efficiencies.

 

14


Table of Contents

For a description of the challenges we face and the limitations of our business and operations, see “—Risk Factors Summary” and “Risk Factors.”

Key Pillars of Our Growth

We believe we have only just begun to unlock the power of our profound transformation and realize the full global potential of BIRKENSTOCK. We estimate our share of the massive 340 billion global footwear industry to be less than one percent, presenting substantial opportunity for further growth. We believe we are well-positioned to significantly expand our market share and drive sustainable growth and profitability through the following pillars, each of which represents a continuation of the proven strategies we have been executing over the past decade.

Expand and Enhance the Product Portfolio

We will continue to expand our product archive through our “celebrate and build” approach to innovation, entering into new usage occasions while investing in categories we serve today through new and innovative offerings. We intend to diversify our product portfolio, strengthen loyalty with consumers who already love BIRKENSTOCK, drive higher penetration in our existing markets and channels and expand our reach and appeal across new consumers, geographies and usage occasions. Through the broad application of the BIRKENSTOCK footbed, we intend to develop our product offering through the following strategies:

 

   

Drive the Core Through “Inside-out” Innovation: We will continue to incorporate our legendary footbed as the central functional element in our proven product formula as we celebrate and build our archive. We will renew existing silhouettes and introduce new ones by strategically using aesthetics, construction, design and materials updates that flex elements across uppers, outer soles, buckle details and other embellishments to deliver innovative functionality and renewed purpose. In doing so, we will continue to broaden and deepen our product assortment across price bands, building on the success of our opening price point EVA line as well as collaborations through our 1774 line. “Inside-out” innovation drives growth across our product portfolio:

 

 

LOGO

 

15


Table of Contents
   

Strengthen Year-Round Product Mix with Closed-Toe Offerings: We will continue to diversify into closed-toe silhouettes (clogs and shoes), enabling the brand to serve different usage occasions for consumers, balance seasonality and drive growth and profitability through higher ASPs. We have made substantial progress in this strategic effort, as demonstrated by expansion in the share of closed-toe products, which accounted for over 20% of total revenues in fiscal 2022, in addition to the performance of the Boston, a clog originally launched in 1978 that has enjoyed a revenue CAGR of 100% between fiscal 2020 and fiscal 2022 as we expanded the style count and more prominently featured this silhouette in collaborations, our stores and e-commerce sites.

 

   

Develop Presence in Underpenetrated Categories: We intend to drive business by staying true to our orthopedic heritage and creating highly functional products across a variety of usage occasions, including professional, active and outdoor, kids, home and orthopedic. We have already achieved promising success with our recent offerings in these expansionary categories, such as our outdoor products where we have created new silhouettes by using PU direct injection technology to develop water-friendly and high-grip outsoles. Additionally, our use of EVA similarly expands our portfolio by creating products suitable for use in and around water. These developments broaden our potential product range across usage occasions by creating highly functional, water ready, anti-slip outsoles and more rugged constructions. This approach continues to support a strong pipeline of new products that is expected to accelerate growth:

LOGO

 

   

Leverage our Brand in Function-led, Non-Footwear Categories: We will leverage our functional expertise, brand equity and trust from our consumers to extend the BIRKENSTOCK brand into non-footwear categories. We are launching a new, highly functional prestige shoe care and footcare line made in Germany exclusively from materials of natural origin and rooted in our deep heritage in foot health. We have also extended our brand’s heritage in health into the sleep category, introducing a range of BIRKENSTOCK sleep systems that leverage our core expertise in orthopedic research and functional product design.

 

16


Table of Contents

Drive Engineered Distribution on a Global Scale

We will continue to leverage our engineered distribution approach to strategically allocate our production capacity across channels, regions and categories in a manner that supports our continued success. Specifically, we aim to drive growth across regions by continuing to operate our proven playbook in the U.S. and Europe, where we have significantly grown our DTC channel while optimizing our B2B presence with wholesale partners who support our brand positioning.

Our DTC channel has expanded from 18% of revenues in fiscal 2018 to 38% of revenues in fiscal 2022. 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. We also intend to pursue disciplined, strategic additions to our retail footprint given our relatively limited presence today of approximately 45 owned stores, 20 of which are in Germany. We expect DTC penetration will increase slightly in the coming years as we balance DTC growth with continued expansion with new and existing strategic wholesale partners globally.

We have extensive whitespace to grow within and outside of our largest geographies, the U.S. and Europe. We believe there are still sizable growth opportunities in key developed markets where the brand has a presence but remains significantly underpenetrated, including the UK, France, Southern Europe and Canada.

As we ramp up our production capacity, we will unlock the large growth potential of the APMA region, which has generated significant latent demand that we have been unable to fulfill in recent years given more limited supply. Our targeted growth strategies will build upon our growing popularity in the region’s emerging markets, including China and India, where our brand is nascent, and in countries such as South Korea, Australia and New Zealand, where we have a more established presence and brand awareness.

Educate Fans on Our Brand Purpose and Grow the BIRKENSTOCK Fan Base

We will continue to educate consumers globally about the advantages of BIRKENSTOCK products. We believe consumers become evangelists for our brand when they become aware of the merits of our superior functional design. The function of our products and the power of our brand has enabled us to build our Company largely through organic, unpaid sources, including word-of-mouth, repeat buying, earned media, high profile influencer support and our 1774 collaborations office. These organic factors support a virtuous cycle of consumer consideration, trial, conversion and repeat purchase. Our recently established BIRKENSTOCK content house was created to produce powerful stories of BIRKENSTOCK’s craftsmanship, fan love and other core values across various social media platforms, providing powerful organic vehicles to engage with and attract new fans. We will further amplify this content through the introduction of “ambassador retail,” a new physical retail strategy focusing on a small footprint of stores operated in partnership with local entrepreneurs who will serve as brand ambassadors by virtue of their professions, pursuits or social media presences. Additionally, our newly launched BIRKENSTOCK loyalty program, which offers exclusive access to products and other unique benefits, will serve as a principal tool for driving increased engagement with new and existing consumers in the future.

While our brand has achieved substantial traction globally and those who have experienced our products demonstrate strong loyalty, our presence remains relatively nascent in many of our markets. Our unaided brand awareness outside of Germany and the United States remains well below that of our most established markets and of other leading footwear brands, providing us with a clear runway for growth. According to the Consumer Survey, aided brand awareness, which we define as consumer awareness about the brand when specifically asked about the brand, in the United States is 68%. We believe increasing consumer awareness of our brand, the functional benefits of our products and our constantly evolving product offering will generate substantial growth as we introduce new consumers to our brand and convert those who are aware of the brand into consumers.

 

17


Table of Contents

Invest in and Optimize the Company to Support the Next Generation of Growth

We will continue to invest in our people and our manufacturing and supply chain to support future growth. We will also seek operational improvements to drive efficiencies and increase the speed and flexibility of our operations.

 

   

Optimize and Expand our Production Capacity: We will further optimize our current production footprint by introducing automation where appropriate, while also strategically expanding capacity by investing in new facilities. We are currently making investments that will increase our capacity and extend our capabilities, as evidenced by our new facility in Pasewalk, Germany, which began operations in September 2023.

 

   

Expand our Owned and Third-Party Logistics Infrastructure: We will strengthen our owned and operated fulfillment centers while adding significant through-put via third-party partners. We will continue to invest in expanding our outbound capacity by adding incremental logistics capabilities in the U.S. and other key markets. This will also allow us to optimize our current logistics infrastructure to better service our growing business, while lowering operational costs.

 

   

Drive Operational Efficiencies: We have invested ahead of our growth in all areas of the business, including product creation and manufacturing, multi-channel distribution and corporate infrastructure. As we continue our growth trajectory, we plan to leverage these investments, realize economies of scale and optimize efficiency in our business.

Risk Factors Summary

Investing in our ordinary shares involves risk. The risks described in “Risk Factors” in this prospectus may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our growth strategy. Some of the more significant risks include the following:

 

   

our dependence on the image and reputation of the BIRKENSTOCK brand;

 

   

the continued effects of the COVID-19 pandemic;

 

   

the intense competition we face from both established companies and newer entrants into the market;

 

   

our ability to execute our DTC growth strategy and risks associated with our e-commerce platforms;

 

   

our ability to adapt to changes in consumer preferences and attract new customers;

 

   

harm to our brand and market share due to counterfeit products;

 

   

our ability to successfully operate and expand retail stores;

 

   

failure to realize expected returns from our investments in our businesses and operations;

 

   

risks related to business, economic, market and political conditions;

 

   

our dependence on third parties for our sales and distribution channels, as well as deterioration or termination of relationships with major wholesale partners;

 

   

adverse events influencing the sustainability of our supply chain or our relationships with major suppliers, or increases in raw materials or labor costs;

 

   

our ability to effectively manage inventory;

 

   

unforeseen business interruptions and other operational problems at our production facilities, as well as disruptions to our shipping and delivery arrangements;

 

18


Table of Contents
   

failure to attract and retain key employees and deterioration of relationships with employees, employee representative bodies and stakeholders;

 

   

adequate protection, maintenance and enforcement of our trademarks and other intellectual property rights;

 

   

regulations governing the use and processing of personal data, as well as disruption and security breaches affecting information technology systems;

 

   

risks related to international markets;

 

   

compliance with existing laws and regulations or changes in such laws and regulations;

 

   

risks related to our amount of indebtedness, its restrictive covenants and our ability to repay our debt;

 

   

our Principal Shareholder controls us, and their interests may conflict with ours or yours in the future; and

 

   

our status as a foreign private issuer and, upon the listing of our ordinary shares on the NYSE, as a “controlled company” within the meaning of the NYSE rules.

Please see “Risk Factors” for a discussion of these and other factors you should consider before making an investment in our ordinary shares.

Tax Receivable Agreement

We expect to enter into a tax receivable agreement with our pre-IPO owner, MidCo, in connection with this offering, in consideration for the repurchase of certain shares of the Company from MidCo. Pursuant to the TRA, we will generally be required to pay to the TRA Participants (who initially shall be solely MidCo) 85% of the savings, if any, in (a) U.S. federal, state or local income tax, and (b) German income tax and trade tax, in each case, that we actually realize (or are deemed to realize in certain circumstances, including as a result of certain assumptions) as a result of certain tax attributes created by MidCo’s acquisition of the BIRKENSTOCK Group in 2021 or that are otherwise available to the Company as of the date of this offering, plus interest in respect of delay between the date on which we realize (or are deemed to realize) tax savings and the date of payment specified by the TRA. Under the TRA, generally, we will retain the benefit of the remaining 15% of the applicable tax savings. The payments expected to be made under the TRA are expected to be substantial and may total approximately $550 million in the aggregate over the next 13 years. See “Related Party Transactions—Tax Receivable Agreement” for more information.

 

19


Table of Contents

Corporate Structure

A simplified organizational chart showing certain legal entities within our corporate structure is set forth below (all subsidiaries are, directly or indirectly, 100% owned by Birkenstock Holding Limited):

 

LOGO

Capital Reorganization

Prior to the consummation of this offering, Birkenstock Holding Limited will change its legal status to become a Jersey public limited company with the name Birkenstock Holding plc. In connection with such change of status, the current share classes and shares of the Company will be redesignated into one class of ordinary shares and such ordinary shares will be changed into no par value shares. Following such change of status, we expect to enter into a tax receivable agreement with MidCo in consideration for the repurchase of 5,648,465 ordinary shares of the Company from MidCo, as a result of which there will be 177,072,904 ordinary shares of the Company outstanding immediately prior to consummation of this offering. We refer to the foregoing steps as our “capital reorganization.”

Corporate Information

Birkenstock Holding Limited was formed on February 19, 2021 as BK LC Lux Finco 2 S.à r.l., a Luxembourg private limited liability company. On April 25, 2023, we changed our name from BK LC Lux Finco 2 S.à r.l. to Birkenstock Group Limited and converted (by way of re-domiciliation) the legal form of our Company to a Jersey private company. On July 12, 2023, we changed our name from Birkenstock Group Limited to Birkenstock Holding Limited. In addition, prior to the consummation of this offering, we intend to change the legal status of our Company to a Jersey public limited company.

Our registered offices are located at 47 Esplanade, St Helier, Jersey JE1 0BD, Channel Islands. Our principal executive offices are located at 1-2 Berkeley Square, London W1J 6EA, United Kingdom. Our telephone number is +44 1534 835600. Our principal website is www.birkenstock-holding.com. The reference to our website is an inactive textual reference only and information contained therein or

 

20


Table of Contents

connected thereto are not incorporated into this prospectus or the registration statement of which it forms a part.

Implications of Being a Foreign Private Issuer

We are considered a “foreign private issuer.” Accordingly, upon consummation of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. This means that, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

In addition, as a foreign private issuer, the Company will also be entitled to rely on exceptions from certain corporate governance requirements of the NYSE. As a result, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

In this prospectus, we have taken advantage of certain of the reduced reporting requirements as a result of being a foreign private issuer. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.

Our Principal Shareholder

L Catterton

L Catterton invested and acquired a majority stake in the Company in 2021 through affiliated entities. Catterton is a market-leading consumer-focused investment firm, managing approximately $34 billion of equity capital across three multi-product platforms: private equity, credit and real estate. Leveraging deep category insight, operational excellence and a broad network of strategic relationships, L Catterton’s team of more than 200 investment and operating professionals across 17 offices partners with management teams to drive differentiated value creation across its portfolio. Founded in 1989, the firm has made over 250 investments in some of the world’s most iconic consumer brands. L Catterton was formed through the partnership of Catterton, LVMH and Financière Agache.

After the completion of this offering, entities affiliated with L Catterton will control a majority of the combined voting power of our outstanding ordinary shares. As a result, we will be a “controlled company” within the meaning of the NYSE corporate governance rules. Under the NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or

 

21


Table of Contents

another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (iii) the requirement that our director nominations be made, or recommended to our full board of directors, by our independent directors or by a nominations committee that consists entirely of independent directors and that we adopt a written charter or board resolution addressing the nominations process. We may take advantage of certain of these exemptions, and, as a result, you may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements. In the event that we cease to be a “controlled company,” we will be required to comply with these provisions within the transition periods specified in the NYSE corporate governance rules.

 

22


Table of Contents

THE OFFERING

This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our ordinary shares. You should carefully read this entire prospectus before investing in our ordinary shares including “Risk Factors” and our consolidated financial statements.

 

Issuer

Birkenstock Holding Limited.

 

Ordinary shares offered by us

10,752,688 ordinary shares.

 

Ordinary shares offered by the selling shareholder

21,505,376 ordinary shares.

 

Over-allotment option

The selling shareholder has granted the underwriters the right to purchase up to an additional 4,838,709 ordinary shares from it within 30 days of the date of this prospectus, to cover over-allotments, if any, in connection with the offering.

 

Ordinary shares to be outstanding after this offering

187,825,592 shares.

 

Use of proceeds

We estimate that the net proceeds to us from the offering will be approximately $450.2 million, assuming an initial public offering price of $46.50 per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our ordinary shares and facilitate our future access to the capital markets. We currently intend to use the net proceeds we receive from this offering to repay approximately 100 million of the Vendor Loan and approximately 313 million in aggregate principal amount of borrowings outstanding under our Senior Term Facilities.

 

 

We will not receive any of the proceeds from the sale of the ordinary shares by the selling shareholder.

 

Voting rights

Each outstanding ordinary share will be entitled to one vote on all matters submitted to a vote of shareholders.

 

Listing

We have applied to list our ordinary shares on the NYSE under the symbol “BIRK.”

 

Dividend policy

We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future decisions regarding the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then-existing conditions,

 

23


Table of Contents
 

including our financial condition, results of operation, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

Directed share program

At our request, the underwriters (the “DSP Underwriters”) have reserved up to 8% of the ordinary shares offered by this prospectus for sale, at the initial public offering price, to the Company’s employees (subject to certain exceptions) and other parties related to the Company (the “Directed Share Program”). The number of ordinary shares available for sale to the general public will be reduced to the extent these persons purchase such reserved ordinary shares. Any reserved ordinary shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other ordinary shares offered by this prospectus. Except for reserved shares purchased by our executive officers and directors, these reserved ordinary shares will not be subject to the lock-up restrictions described elsewhere in this prospectus. We have agreed to indemnify the DSP Underwriters and their affiliates against certain liabilities and expenses, including liabilities under the Securities Act. See “Underwriting—Directed Share Program.”

 

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our ordinary shares.

Except as otherwise noted, all information contained in this prospectus assumes:

 

   

an initial public offering price of $46.50 per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus;

 

   

no purchase of ordinary shares in this offering by directors, officers or existing shareholders (including pursuant to such person’s participation in our Directed Share Program); and

 

   

no exercise of our outstanding options (as set forth below).

In addition, except as otherwise indicated, all information contained in this prospectus relating to the number of ordinary shares to be outstanding reflects 187,825,592 ordinary shares outstanding immediately after this offering, after giving effect to the capital reorganization and the sale of ordinary shares in this offering, and excludes:

 

   

an aggregate of 11,269,535 ordinary shares reserved for issuance under the Equity Plan (as defined below), including the initial annual equity grant to certain of our directors (See “ManagementExecutive CompensationCompensation of Directors and Senior ManagementPost-IPO Compensation of Non-Employee Directors”), that will become effective in connection with this offering; and

 

   

an aggregate of 3,756,511 ordinary shares reserved for issuance under the Employee Share Purchase Plan (as defined below) that will become effective in connection with this offering.

 

24


Table of Contents

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

We have prepared our consolidated financial statements in accordance with IFRS and our consolidated financial statements are presented in thousands of Euros, except where indicated otherwise. Historical results for any prior period are not necessarily indicative of results to be expected in any future period. In particular, our results for the nine months ended June 30, 2023 are not necessarily indicative of our results for the fiscal year ending September 30, 2023. The summary financial data presented below should be read in conjunction with the information included under the headings “Presentation of Financial and Other Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the consolidated financial statements included elsewhere in this prospectus.

The summary audited consolidated statement of comprehensive income data distinguishes the Company’s financial results into two distinct periods, the period up to and including April 30, 2021, the Transaction’s closing date (labeled “Predecessor”), and the period after that date (labeled “Successor”) and are further distinguished as follows: the Successor periods represent fiscal 2022 (the “2022 Successor Period”) and the period from May 1, 2021 through September 30, 2021 (the “2021 Successor Period” and, together with the 2022 Successor Period, the “Successor Periods”) and the Predecessor periods represent the period from October 1, 2020 through April 30, 2021 (the “2021 Predecessor Period”) and fiscal 2020 (the “2020 Predecessor Period” and, together with the 2021 Predecessor Period, the “Predecessor Periods”). The Predecessor Periods and the Successor Periods have been separated by a vertical black line on the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting. We have derived the summary audited consolidated income statement data and consolidated cash flows data for the Predecessor Periods and the Successor Periods from our audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

We have derived the summary unaudited interim condensed consolidated statement of comprehensive income data and unaudited interim condensed consolidated cash flows data for the nine months ended June 30, 2023 and June 30, 2022 from our unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

We have also included summary consolidated financial position information as of June 30, 2023, September 30, 2022, September 30, 2021 and September 30, 2020, which have been derived from the consolidated financial statements of the Company included elsewhere in this prospectus.

Consolidated Statement of Comprehensive Income Data

 

     Successor            Predecessor  
(In thousands of Euros)    Nine months
ended
June 30,
2023
(unaudited)
     Nine months
ended
June 30,
2022
(unaudited)
     Year ended
September 30,
2022
    Period from
May 1, 2021
through
September 30,
2021
           Period from
October 1, 2020
through
April 30, 2021
    Year ended
September 30,
2020
 

Revenue

     1,117,368        921,225        1,242,833       462,664            499,347       727,932  

Cost of sales

     (436,532)        (377,270)        (493,031     (311,693          (213,197     (328,298
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Gross profit

     680,836        543,955        749,802       150,971            286,150       399,634  
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Operating expenses

     (396,357)        (295,501)        (433,960     (154,702          (164,436     (254,511

Foreign exchange (loss)

     (51,350)        31,615        45,516       20,585            (1,523     (15,984

Other income, net

     2,452        (2,691)        1,669       (1,673          1,280       245  
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Profit from operations

     235,581        277,378        363,027       15,181            121,471       129,384  
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Finance (cost), net

     (81,358)        (89,939)        (112,503     (28,958          (1,753     (3,950
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Profit (loss) before tax

     154,223        187,439        250,524       (13,777          119,718       125,434  
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Income tax expense

     (50,914)        (58,307)        (63,413     (3,428          (20,694     (24,116
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

Net profit (loss)

     103,310        129,132        187,111       (17,205          99,024       101,318  
  

 

 

    

 

 

    

 

 

   

 

 

        

 

 

   

 

 

 

 

25


Table of Contents

Consolidated Balance Sheet Data

 

     Successor            Predecessor  
(In thousands of Euros)    June 30, 2023
(unaudited)
     September 30,
2022
     September 30,
2021
           September 30,
2020
 

Cash and cash equivalents

     289,609        307,078        235,343          96,177  

Total assets

     4,753,506        4,788,627        4,267,538          803,557  

Total liabilities

     2,380,855        2,430,809        2,203,107          395,393  

Shareholder’s equity

     2,372,651        2,357,818        2,064,431          408,164  

Consolidated Cash Flows Data

 

     Successor            Predecessor  
(In thousands of Euros)    Nine months ended
June 30, 2023
(unaudited)
    Nine months ended
June 30, 2022
(unaudited)
    Year ended
September 30,
2022
    Period from
May 1, 2021
through
September 30,
2021
           Period from
October 1, 2020
through
April 30, 2021
    Year ended
September 30,
2020
 

Total cash provided by (used in)

               

Operating activities

     240,974       108,009       234,136       106,367          70,406       193,604  

Investing activities

     (79,981     (35,300     (71,646     (6,207        (11,426     (3,499

Financing activities

     (167,258     (92,635     (105,317     (13,415        (69,896     (130,254

Non-IFRS Financial Measures

 

     Successor                    Predecessor  
     Nine months ended
June 30,
     Year ended
September 30,
2022
     2021 Successor and
Predecessor Periods
            Year ended
September 30,
2020
 
(In thousands of Euros)    2023      2022  

Constant currency revenue(1)

     1,098,208        N/A        1,178,643        993,935           N/A  

Constant currency revenue growth(1)

     19%        N/A        23%        37%           N/A  

Adjusted gross profit(1)

     680,836        568,322        774,169        548,021           399,634  

Adjusted gross profit margin(1)

     61%        62%        62%        57%           55%  

Adjusted EBITDA(1)

     387,018        332,506        434,555        292,340           194,784  

Adjusted EBITDA margin(1)

     35%        36%        35%        30%           27%  

Adjusted net profit(1)

     182,020        124,232        174,682        156,500           117,499  

Adjusted net profit margin(1)

     16%        13%        14%        16%           16%  

 

(1)

Unaudited.

Non-IFRS Financial Measures

We review a number of operating and financial metrics, including the following non-IFRS financial measures, to measure the operating performance and financial condition of the business and to make strategic decisions. A non-IFRS financial measure is generally defined as one that purports to measure financial performance but includes adjustments that are not included in the most comparable IFRS measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Financial Measures” for additional information regarding our non-IFRS financial measures.

We use Adjusted net profit, Adjusted net profit margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross profit, Adjusted gross profit margin, Constant currency revenue and Constant currency revenue growth, which are non-IFRS financial measures, in this prospectus.

 

26


Table of Contents

Our non-IFRS financial measures are calculated as set forth below:

 

   

“Adjusted EBITDA” is defined as net profit (loss) for the period adjusted for income tax expense (benefit), finance cost (net), depreciation and amortization, further adjusted for the effect of events such as: effects of applying the acquisition method of accounting for the Transaction, Transaction-related costs, IPO-related costs, realized and unrealized foreign exchange gain (loss), share-based payments and other adjustment relating to non-recurring items such as restructuring, as further described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Financial Measures”;

 

   

“Adjusted EBITDA margin” is defined as Adjusted EBITDA for the period divided by revenues for the same period;

 

   

“Adjusted gross profit” is defined as gross profit, exclusive of the impact on inventory valuation of applying the acquisition method of accounting for the Transaction;

 

   

“Adjusted gross profit margin” is defined as adjusted gross profit for the period divided by revenues for the same period;

 

   

“Adjusted net profit” is defined as net profit (loss) for the period adjusted for the effects of applying the acquisition method of accounting for the Transaction, Transaction-related costs, IPO-related costs, realized and unrealized foreign exchange gain (loss), share-based payments, other adjustments relating to non-recurring items such as restructuring and the respective income tax effects as applicable, as further described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Financial Measures”;

 

   

“Adjusted net profit margin” is defined as Adjusted net profit for the period divided by revenues for the same period;

 

   

“Constant currency revenue” is calculated by translating current period foreign currency revenues using the prior period exchange rate; and

 

   

“Constant currency revenue growth” is calculated, as a percentage, by determining the increase in current period revenues over prior period revenues, where current period foreign currency revenues are translated using prior period exchange rates.

We use non-IFRS financial measures, such as Adjusted net profit, Adjusted net profit margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross profit, Adjusted gross profit margin, Constant currency revenue and Constant currency revenue growth, to supplement financial information presented in accordance with IFRS. We believe that excluding certain items from our IFRS results allows management to better understand our consolidated financial performance from period-to-period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare IFRS-based financial measures. Moreover, we believe these non-IFRS financial measures provide our stakeholders with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period-to-period comparisons. There are limitations to the use of the non-IFRS financial measures presented in this prospectus.

Adjusted net profit, Adjusted net profit margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross profit, Adjusted gross profit margin, Constant currency revenue and Constant currency revenue growth are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with IFRS. Some of these limitations include that:

 

   

they do not reflect our cash expenditures or future requirements for capital investments or contractual commitments;

 

27


Table of Contents
   

they do not reflect changes in, or cash requirements for, our working capital needs;

 

   

they do not reflect the significant interest expense or cash requirements necessary to service interest or principal payments on our debt;

 

   

they do not reflect any cash income taxes that we may be required to pay;

 

   

they are not adjusted for all non-cash income or expense items that are reflected in our consolidated statement of comprehensive income;

 

   

they do not reflect the impact of earnings or charges resulting from certain matters we consider not to be indicative of our ongoing operations;

 

   

assets are depreciated or amortized over differing estimated useful lives and often have to be replaced in the future, and these measures do not reflect any cash requirements for such replacements; and

 

   

other companies in our industry and analysts may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Reconciliation of Constant Currency Revenue to Revenues

The tables below present a reconciliation of constant currency revenue to the most comparable IFRS measure, revenues, for the periods presented:

 

     Successor            Predecessor  
(In thousands of Euros)    Nine months ended
June 30, 2023

(unaudited)
    Nine months ended
June 30, 2022

(unaudited)
     Year ended
September 30, 2022
    2021 Successor And
Predecessor Periods
     Year ended
September 30, 2020
 

Revenues

     1,117,368       921,225        1,242,833       962,011        727,932  

Add (Less):

            

U.S. Dollar impact(1)

     (24,394        (56,503     30,268     

Canadian Dollar impact(1)

     1,119          (4,909     472     

Other(1)

     4,115          (2,778     1,184     

Constant currency revenue(1)

     1,098,208       N/A        1,178,643       993,935        N/A  

 

(1)

Unaudited.

Reconciliation of Adjusted Gross Profit to Gross Profit

The table below presents a reconciliation of Adjusted gross profit to the most comparable IFRS measure, gross profit, for the periods presented:

 

     Successor            Predecessor  
(In thousands of Euros)    Nine months ended
June 30, 2023
(unaudited)
     Nine months ended
June 30, 2022
(unaudited)
     Year ended
September 30,
2022
     Period May 1,
2021, through
September 30,
2021
           Period October 1,
2020, through
April 30, 2021
     Year ended
September 30,
2020
 

Gross profit

     680,836        543,955        749,802        150,971            286,150        399,634  

Add:

                     

Effect of applying the acquisition method of accounting for The Transaction under IFRS(1)

     —         24,367        24,367        110,900            —         —   

Adjusted gross profit(2)

     680,836        568,322        774,169        261,871            286,150        399,634  

 

(1)

Represents the effect of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on costs of sales. In fiscal 2022 and in the 2021 Successor period, cost of sales

 

28


Table of Contents
 

included inventory that had been measured at fair value as part of the Transaction. This effect amounted to 24.4 million, 24.4 million and 110.9 million for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, respectively.

(2)

Unaudited.

Reconciliation of Net Profit to Adjusted EBITDA

The table below presents a reconciliation of net profit (loss) to Adjusted EBITDA for the periods presented:

 

     Successor            Predecessor  
(In thousands of Euros)    Nine months ended
June 30, 2023
(unaudited)
     Nine months ended
June 30, 2022
(unaudited)
    Year ended
September 30,
2022
    Period May 1,
2021, through
September 30,
2021
           Period October 1,
2020, through
April 30, 2021
     Year ended
September 30,
2020
 

Net profit (loss)

     103,310        129,132       187,111       (17,205          99,024        101,318  

Add (Less):

                   

Income tax expense

     50,914        58,307       63,413       3,428            20,694        24,116  

Finance income (cost), net

     81,358        89,939       112,503       28,958            1,753        3,950  

Depreciation and amortization

     61,807        56,049       81,261       29,021            25,872        46,052  

EBITDA(1)

     297,388        333,427       444,288       44,202            147,343        175,436  

Add (Less) Adjustments:

                   

Effect of applying the acquisition method of accounting for the Transaction under IFRS(2)

            24,367       24,367       110,900                    

Transaction-related costs(3)

            2,053       2,598       2,463            3,025         

Realized and unrealized FX gains / losses(4)

     51,350        (31,615     (45,516     (20,585          1,523        15,984  

IPO-related costs(5)

     14,739        2,757       7,300                          

Share-based payments(6).

     18,085                                       

Other(7)

     5,455        1,517       1,518       3,360            109        3,364  

Adjusted EBITDA(1)

     387,018        332,506       434,555       140,340            152,000        194,784  

 

(1)

Unaudited.

(2)

Represents the effect of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on costs of sales. In the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, cost of sales included inventory that had been measured at fair value as part of the Transaction. This effect amounted to 24.4 million, 24.4 million and 110.9 million for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, respectively.

(3)

Represents Transaction-related advisory costs of 2.1 million, 2.6 million and 2.5 million for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, respectively. In addition, the 2021 Predecessor Period includes 3.0 million of fees for the termination of interest rate swaps related to the predecessor syndicated loan.

(4)

Represents the primarily non-cash impact of foreign exchange rates within profit (loss). We do not consider these gains and losses representative of operating performance of the business because they are primarily driven by fluctuations in the USD to Euro foreign exchange rate on intercompany receivables for inventory and intercompany loans.

(5)

Represents IPO-related costs, which include consulting, legal as well as audit fees for the PCAOB re-audit of fiscal 2020 and 2021 Successor and Predecessor Periods.

(6)

Represents share-based payments relating to the management investment plan.

 

29


Table of Contents
(7)

Represents non-recurring expenses that we do not consider representative of the operating performance of the business, primarily comprised of consulting fees for integration projects of 0.7 million for the nine months ended June 30, 2022, 0.7 million for fiscal 2022, 1.9 million for the 2021 Successor Period, none for the 2021 Predecessor Period and none for fiscal 2020, restructuring expenses of 2.0 million for the nine months ended June 30, 2023, 0.8 million for the nine months ended June 30, 2022, 0.8 million for fiscal 2022, 1.5 million for the 2021 Successor Period, 0.1 million for the 2021 Predecessor Period and 2.1 million for fiscal 2020 and relocation expenses of 3.5 million for the nine months ended June 30, 2023, none for the nine months ended June 30, 2022, none for fiscal 2022, none for the 2021 Successor Period, none for the 2021 Predecessor Period and 1.3 million for fiscal 2020.

Reconciliation of Net Profit to Adjusted Net Profit

 

     Successor            Predecessor  
     Nine months ended
June 30, 2023
    Nine months ended
June 30, 2022
    Year ended
September 30,
2022
    Period May 1,
2021 through
September 30,
2021
           Period October 01,
2020 through
April 30, 2021
    Year ended
September 30,
2020
 

Net profit (loss)

     103,310       129,132       187,111       (17,205          99,024       101,318  

Add (Less) Adjustments:

                 

Effect of applying the acquisition method of accounting for the Transaction under IFRS(2)

           24,367       24,367       110,900                   

Transaction-related costs(3)

           2,053       2,598       2,463            3,025        

Realized and unrealized FX gains / losses(4)

     51,350       (31,615     (45,516     (20,585          1,523       15,984  

IPO-related costs(1)(5)

     14,739       2,757       7,300                 

Share-based payments(6)

     18,085                                     

Other(1)(7)

     5,455       1,517       1,518       3,360            109       3,364  

Tax adjustment(8)

     (10,920     (3,980     (2,696     (24,410          (1,705     (3,167
  

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Adjusted net profit (loss)(1)

     182,020       124,232       174,682       54,523            101,976       117,499  
  

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(1)

Unaudited.

(2)

Represents the effect of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on costs of sales. In the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, cost of sales included inventory that had been measured at fair value as part of the Transaction. This effect amounted to 24.4 million, 24.4 million and 110.9 million for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, respectively.

(3)

Represents Transaction-related advisory costs of 2.1 million, 2.6 million and 2.5 million for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, respectively. In addition, the 2021 Predecessor Period includes 3.0 million of fees for the termination of interest rate swaps related to the predecessor syndicated loan.

(4)

Represents the primarily non-cash impact of foreign exchange rates within profit (loss). We do not consider these gains and losses representative of operating performance of the business because they are primarily driven by fluctuations in the USD to Euro foreign exchange rate on intercompany receivables for inventory and intercompany loans.

(5)

Represents IPO-related costs, which include consulting, legal as well as audit fees for the PCAOB re-audit of fiscal 2020 and 2021 Successor and Predecessor Periods.

(6)

Represents share-based payments relating to the management investment plan.

 

30


Table of Contents
(7)

Represents non-recurring expenses that we do not consider representative of the operating performance of the business, primarily comprised of consulting fees for integration projects of 0.7 million for the nine months ended June 30, 2022, 0.7 million for fiscal 2022, 1.9 million for the 2021 Successor Period, none for the 2021 Predecessor Period and none for fiscal 2020, restructuring expenses of 2.0 million for the nine months ended June 30, 2023, 0.8 million for the nine months ended June 30, 2022, 0.8 million for fiscal 2022, 1.5 million for the 2021 Successor Period, 0.1 million for the 2021 Predecessor Period and 2.1 million for fiscal 2020 and relocation expenses of 3.5 million for the nine months ended June 30, 2023, none for the nine months ended June 30, 2022, none for fiscal 2022, none for the 2021 Successor Period, none for the 2021 Predecessor Period and 1.3 million for fiscal 2020.

(8)

Represents income tax effects for the adjustments as outlined above, except for unrealized foreign exchange gain (loss) as well as share-based payments since these have not been treated as tax deductible in the initial tax calculation.

 

31


Table of Contents

LOGO

 


Table of Contents

RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this prospectus before making an investment in our ordinary shares. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our ordinary shares could decline and you could lose all or part of your investment.

This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks facing our Company or investments worldwide described below and elsewhere in this prospectus.

Risks Related to Our Business, Brand, Products and Industry

Our success is dependent on the strength of our premium brand; if we are unable to maintain and enhance the value and reputation of our brand and/or counter any negative publicity, we may be unable to sell our products, which would harm our business and could materially adversely affect our business, financial condition and results of operations.

Our business and financial performance is largely dependent on the image, perception and recognition of the BIRKENSTOCK brand, which, in turn, depends on many factors such as the distinctive character and quality of our products and product design, the image and presentation of our online and retail stores, our social media and content distribution activities, public relations and marketing and our general corporate and market profile, which can be adversely affected for reasons within and outside our control. For example, our products can be actively or mistakenly presented in a specific context not related to our brand (e.g., ethically, religiously, politically); we could experience customer dissatisfaction through our customer service in our DTC or B2B channels; we could have issues with our suppliers, such as quality control problems, which could affect the quality of our products or our reputation; and we could be the subject of negative publicity, including inaccurate adverse information.

Our brand value also depends on our ability to maintain positive consumer perception of our corporate integrity and culture, including with regard to the sustainability of our products. Negative claims or publicity involving us or our products, the third-party brands we partner with for collaborations or the production methods of any of our suppliers or the materials we or they source or use could seriously damage our reputation and brand image, regardless of whether such claims or publicity are accurate. In addition, we have been increasing our online presence through our expanding e-commerce business. Our social media presence amplifies consumer engagement with the BIRKENSTOCK brand; however, it reduces our control over brand perception due to the proliferation of consumer comments and hashtags and, thus, our brand could become associated with content that is not aligned with our values. Customers may provide feedback and public commentary about our products and other aspects of our business online through social media platforms and any negative information concerning us, whether accurate or not, may cause immediate harm to our brand without affording us an opportunity for redress or correction. Social media influencers or other endorsers of our products could engage in behavior that reflects poorly on our brand, the occurrence of which is beyond our control, and their behavior may be attributed to or associated with us or otherwise adversely affect us. Further, our brand reputation could be harmed if it becomes associated with negative media, such as if we or our senior executives were to take positions on social or other issues that may be unpopular with some consumers, which may impact our ability to attract or retain customers. Our brand reputation could also be harmed if we experience a cyber-attack or loss of consumer data. Adverse publicity could undermine consumer confidence in the BIRKENSTOCK brand and reduce long-term demand for our products, even if such publicity is unfounded. Moreover, our transformation from a historically family-owned German company to a publicly held company listed on a U.S. stock exchange may negatively impact our reputation. Any failure to maintain favorable brand recognition could have a material adverse effect on our business, financial condition and results of operations.

 

33


Table of Contents

Our business, financial condition and results of operations have been, and may continue to be, adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has had, and could have, an adverse effect on us. The global spread of COVID-19 and its related variants has created significant volatility, disruption and uncertainty and has had a material impact on global economies, both near-term and potentially long-term. There remains uncertainty regarding the extent to which and how long COVID-19 and its related effects will impact economies globally and related demand for our products. The extent to which COVID-19 will impact our business and operating results during 2023 and beyond will depend on future developments, including the duration, continued spread and future outbreaks of COVID-19, the availability, adoption and effectiveness of vaccines and other preventative therapies and the impact on our consumers and employees, as well as the global economy, all of which are highly uncertain and cannot be predicted.

As a response to the COVID-19 pandemic, we initiated a shutdown of production at several of our production sites in 2020, increasing the average production cost per unit during that period. We incurred additional costs associated with stocking raw materials in March 2020 in anticipation of delays and supply chain disruptions and significantly ramped up production in the last three months of that calendar year. While we do not currently expect further disruption to our supply chain and distribution channels from the COVID-19 pandemic, any future mandatory shutdowns, outbreaks of disease, reductions in operations or other restrictions could have a material adverse effect on our business, financial condition and results of operations.

In addition, during the course of the COVID-19 pandemic, all of our retail stores have been closed at times, resulting in a decrease in our revenues from our DTC channel during such periods. If governments reintroduce lockdown measures, we may have to close our retail stores again in certain locations and we cannot predict how long such lockdown measures would last. Many of our wholesale and distributor partners have also closed at times, with some rescheduling orders, resulting in deferred wholesale and distributor revenues and requiring a build-up of inventory in order to mitigate any disruptions in our B2B channel. At the beginning of the COVID-19 pandemic, we initiated proactive measures to compensate for the adversely affected revenues in the retail and wholesale channels.

Any of the foregoing, including any resulting deterioration in general economic conditions or change in consumer behavior, could have a material adverse effect on our business, financial condition and results of operations. To the extent the COVID-19 pandemic adversely affects our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

We face intense competition from both established companies and newer entrants into the market, and our failure to compete effectively could have a negative impact on our revenues and our reputation.

The footwear, skincare, accessories and sleep system industries are very competitive, and we expect to continue to face intense competitive pressures. Competitive factors that affect our market position include our ability to predict and respond to changing consumer preferences and tastes in a timely manner, our ability to continue marketing and developing new products that appeal to consumers, our ability to accurately predict customer demand and ensure product availability, the strength and recognition of the BIRKENSTOCK brand, our ability to price our products competitively, our ability to manage the impact of the rapidly changing retail environment and the expansion of our online presence, and our marketing and content distribution efforts.

Our competitors may have significantly greater financial resources, more developed consumer and customer bases or more comprehensive product lines and greater distribution capabilities, and may spend substantially more on product advertising, marketing and endorsements. Our competitors may also own more recognized brands, implement more effective marketing campaigns, adopt more aggressive pricing

 

34


Table of Contents

policies, make more attractive offers to potential employees and distribution partners, have a larger online presence or respond more quickly to changes in consumer preferences. Some of our competitors may be better able to take advantage of market opportunities and withstand market downturns better than we can. For example, we face competition from established competitors in our APMA segment, where we are a relatively new market entrant. Additionally, the general availability of offshore footwear manufacturing capacity allows for rapid expansion by competitors and new entrants in the footwear market. The majority of our branded peers have outsourced large parts of their value chain to third-party manufacturers in Asia, which may enable competitors to sustain more aggressive pricing policies compared to ours. We may be unable to compete successfully in the future, and increased competition may result in price reductions, reduced gross profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our development, which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to effectively execute our DTC growth strategy, or if we encounter certain risks and uncertainties associated with our e-commerce platforms, our business may be harmed.

Our DTC channel consists of our e-commerce sites and a network of owned retail stores. Since 2016, we have significantly expanded our DTC channel through the expansion of e-commerce, particularly in the United States. For the fiscal year ended September 30, 2022, our DTC channel represented 38% of our revenues. One of our strategies is to continue to increase the proportion of our revenues from e-commerce.

The success of our e-commerce business depends, in part, on our ability to offer attractive, reliable, secure and user-friendly online platforms for consumers across our markets, including by continuing to invest in our digital infrastructure and digital team. However, our e-commerce business also depends on factors over which we have limited control, including changing consumer preferences and buying trends. 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.

We are also subject to certain additional risks and uncertainties associated with our e-commerce platforms, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues from website software upgrades, data and system security, computer viruses and changes in applicable international, federal and state regulations. We also must keep up-to-date with competitive technology trends, including, among other things, the use of new or improved technology, creative user interfaces and other e-commerce marketing tools, such as paid and unpaid search, and mobile applications, which may increase our costs and which may not succeed in increasing revenues or attracting consumers. In addition, the use of credit and debit cards in our online platform, which are handled by external service providers, are subject to rules relating to the processing of credit card payments.

Any of these risks could have a material adverse effect on our business, financial condition and results of operations. See also “Risks Related to Intellectual Property, Information Technology and Data Security and Privacy Our operations, products, systems and services rely on complex IT systems and networks that are subject to the risk of disruption and security breaches.”

Our business is subject to changes in consumer preferences, and if we are unsuccessful in adapting to any such changes, it may adversely impact our business.

Our continued success depends in part on the continued attractiveness of the design, styling, production, merchandising and pricing of our products to consumers. Our products must appeal to a consumer base whose preferences cannot be predicted with certainty and are subject to change as our industry is subject to sudden shifts in consumer trends and spending. Consumers also increasingly focus

 

35


Table of Contents

on ESG matters when making purchasing decisions. It is possible that consumer preferences may continue to change based on evolving ethical or social standards, such that certain of our products may potentially become less desirable to certain consumers.

As much of our business is highly concentrated on a single, discretionary product category, footwear, we are vulnerable to changes in consumer preferences that could harm our revenues, profitability and financial condition. We have experienced fluctuations in consumer demand for our products, and our success depends in large part on our ability to develop, market and deliver innovative and stylish products at a pace, intensity and price competitive with other brands in the markets in which we sell our products. Failure on our part to adequately predict and respond timely to consumer demand and market conditions and to regularly and rapidly develop innovative and stylish products and update core products could limit revenue growth, adversely affect consumer acceptance of our products, harm our competitive position and if consumer demand for our footwear decreases in the future, our business, financial condition and results of operations could be materially adversely affected.

Our future growth may depend on our marketing efforts, and any failure in our ability to increase or enhance our marketing position could adversely affect demand for our products.

Our success and future growth depends on our ability to attract and retain consumers, which in part may depend on the effectiveness and efficiency of our marketing efforts, including our ability to continue to improve brand awareness, identify the most effective brand messaging and efficient levels of spending in each market, determine the appropriate creative messages and media mix for marketing and promotional expenditure and effectively manage marketing costs. In particular, we may need to increase our marketing spend in order to take advantage of growth opportunities in our growth markets, particularly in Asia and the Middle East. We may also be required to increase marketing spend in order to develop our e-commerce business consistent with our strategy. Any factors adversely affecting our ability to increase or enhance our marketing activities and capabilities could adversely affect demand for our products and in turn have a material adverse effect on our business, financial condition and results of operations.

If we fail to attract new customers, retain existing customers or maintain or increase sales to customers, our business, financial condition and results of operations could be harmed.

Our success depends in large part upon increased and repeat adoption of our products by our customers. In order to attract new customers and continue to expand our customer base, we must appeal to and attract customers who identify with our products. If the number of people who are willing to purchase our products does not continue to increase, if key international markets do not provide anticipated growth opportunities, if we fail to deliver a high-quality shopping experience or if our current or potential customers are not convinced that our products are superior to alternatives, then our ability to retain existing customers, acquire new customers and grow our business may be harmed. Further, we may not continue to attract new customers or increase our revenues at the same rates as we have in the past.

In addition, our future success depends in part on our ability to increase sales to our existing customers over time, as a significant portion of our net revenues is generated from sales to existing customers, particularly those existing customers who are highly engaged and make frequent and/or large purchases of the products we offer. If existing customers no longer find our products appealing or are not satisfied with our customer service or if we are unable to timely update our products to meet current trends and customer demands, our existing customers may not make purchases, or if they do, they may make fewer or smaller purchases in the future.

If we are unable to continue to attract new customers or our existing customers decrease their spending on the products we offer or fail to make repeat purchases of our products, our business, financial condition and results of operations could be harmed.

 

36


Table of Contents

Merchandise returns could harm our business.

We allow customers to return products purchased through our e-commerce and owned retail stores. For example, for footwear and accessories, we generally accept merchandise returns for full refund or exchange if returned within 30 days of delivery. We do not refund shipping charges. Our revenue is reported net of sales tax, estimated returns, sales allowances and discounts. We estimate expected product returns based on our historical return rate adjusted for any known factors impacting expectations for future return rate. The return rate impacts reported revenues and profitability. The introduction of new products, changes in customer shopping habits or other competitive and general economic conditions could cause actual returns to exceed our estimates. If actual return costs differ from previous estimates, the amount of the liability and corresponding revenues are adjusted in the period in which such costs occur. In addition, from time to time, our products may be damaged in transit to the customer, which can also increase return rates. Returned goods may also be damaged in transit as part of the return process, which can impede our ability to resell the returned goods. From time to time, customers have abused our return policy by, for example, returning products that have been worn repeatedly for all or most of the 30-day return window and cannot be resold. Competitive pressures could cause us to alter our return policies or our shipping policies, which could result in an increase in damaged products and an increase in product returns. If the rate of product returns increases significantly or if product return economics become less efficient, our business, financial condition and results of operations could be harmed.

Counterfeit or “knock-off” products, as well as products that are “inspired-by-BIRKENSTOCK,” may siphon off demand we have created for our brand, and may result in customer confusion, harm to our brand, a loss of our market share or a decrease in our results of operations.

We face competition from counterfeit or “knock-off” products manufactured and sold by third parties in violation of our IP rights, as well as from products that are inspired by our footwear in terms of design and style, including private label offerings by retailers. In the past, third parties have established websites to target users on Facebook or other social media platforms with “look alike” websites intended to trick users into believing that they were purchasing BIRKENSTOCK products at a steep discount. These activities of third parties have in the past and may in the future result in customer confusion, require us to incur additional administrative costs to manage customer complaints related to counterfeit goods or poor service, divert customers from us, cause us to miss out on sales opportunities and result in a loss of our market share. In addition, third parties may try to sell their counterfeit products through online platforms and marketplaces, taking advantage of business practices applicable to open market operating models. Should counterfeit products be successfully sold on e-commerce platforms managed by third parties, our brands and reputation could be damaged. In addition, we have refrained, and we may in the future refrain, from using certain third-party websites to distribute our products due to the selling of counterfeit products on such platforms.

In addressing these or similar issues in the future, we may also be required to incur substantial expense to protect our brand and enforce our IP rights, including through legal action in Germany, the United States or other countries, which could negatively impact our business, financial condition and results of operations. These and similar “counterfeit” or “inspired-by-BIRKENSTOCK” issues could result in customer confusion, harm to our brand and/or a loss of our market share and in turn have a material adverse effect on our business, financial condition and results of operations.

Our ability to successfully operate and expand retail stores depends on many factors.

As of June 30, 2023, we operate a network of approximately 45 owned retail stores, largely concentrated in Germany, where we operate 20 locations. Our ability to successfully operate and expand our owned retail stores depends on many factors, including, among others, our ability to negotiate acceptable lease terms, including desired rent and tenant improvement allowances, achieve brand awareness, affinity and purchase intent in our markets, achieve increased revenues and gross profit

 

37


Table of Contents

margins at our stores, hire, train and retain store associates and field managers, assimilate store associates and field managers into our corporate culture and source and supply sufficient inventory levels. If we are unable to successfully operate any of our retail stores due to our failure to satisfy any of these factors, our business, financial condition and results of operations could be materially adversely affected.

Leasing of significant amounts of real estate exposes us to possible liabilities and losses.

We lease certain of our logistics and production sites, office spaces, retail spaces and storage spaces. Accordingly, we are subject to the risks associated with leasing real estate. Store leases generally require us to pay a fixed minimum rent and sometimes a variable amount based on a percentage of revenues at that location. For certain leases, if revenue targets are not achieved or if the revenue-based rent amount decreases below a certain minimum, the lessor may terminate the lease agreement, unless we agree to an increased fixed fee rent. Moreover, in relation to certain lease agreements entered into for retail space in shopping or outlet centers, we may also enter into a service and marketing agreement, specific to that specific shopping or outlet center, which may contain conditions that differ from the marketing practices we usually adopt. Some of our lease agreements provide for an annual automatic renewal if not terminated by either of the parties, which may allow our lessors to terminate on relatively short notice. If an existing or future store is not profitable, and we decide to close it, we may be committed to perform certain obligations under the applicable lease, including, among other things, paying rent for the balance of the applicable lease term. As each of our leases expires, if we do not have a renewal option, we may be unable to negotiate a renewal on commercially acceptable terms, or at all, which could cause us to close stores in desirable locations. Any of the above could have a material adverse effect on our business, financial condition and results of operations.

We own the majority of our production sites and our largest logistics site. Because real property investments are relatively illiquid, our ability to promptly sell one or more properties on reasonable terms in response to changing economic, financial and investment conditions may be limited and we may be forced to hold non-income producing properties for extended periods of time, exposing us to possible liabilities and losses.

We own the majority of our production sites and our largest logistics site. Because real property investments are relatively illiquid, our ability to promptly sell one or more properties on reasonable terms in response to changing economic, financial and investment conditions may be limited and we may be forced to hold non-income producing properties for extended periods of time, exposing us to possible liabilities and losses. In addition, even if we are able to promptly sell one or more of our properties, we cannot predict whether we will be able to sell such properties for the price or on the terms that we set or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of any property we might wish to sell. Switching production sites would involve increased expenses, including due to potential idling of existing owned production sites. Any of the above could expose us to possible liabilities and losses and have a material adverse effect on our business, financial condition and results of operations.

Our non-footwear products face distinct risks, and our failure to successfully manage these businesses could have a negative impact on our profitability.

In addition to our core footwear products, our product offering includes skincare, accessories and sleep systems. The successful operation and expansion of these products are subject to certain business and operational risks that are different from those we experience with our footwear products, including an intense competitive environment, where we face a number of large and specialized competitors with an established market presence. A failure to successfully manage these products could result in increased costs and a reduction of revenues affecting our profitability, as well as damage to our reputation and brands, which could in turn have a material adverse effect on our business, financial condition and results of operations.

 

38


Table of Contents

Our financial results may be adversely affected if substantial investments in businesses and operations fail to produce expected returns.

From time to time, we may invest in technology, business infrastructure, new businesses, new product offerings, manufacturing innovation and the expansion of existing businesses, such as our investment in our Pasewalk, Germany production site, redesign of our Görlitz, Germany production site and investment in a Portuguese components operation, which require substantial cash investments and management attention. We believe cost-effective investments and further integration of our production operations are essential to business growth and profitability; however, significant investments are subject to risks and uncertainties inherent in developing a new business or expanding an existing business. The failure of any significant investment to provide expected returns or profitability could have a material adverse effect on our business, financial condition and results of operations.

We may seek to grow our business through acquisitions of, or investments in, facilities or technologies or through other strategic initiatives; the failure to adequately manage these acquisitions, investments or initiatives, integrate them with our existing business or realize anticipated returns could adversely affect us.

From time to time, we may consider opportunities to acquire or make investments in facilities or technologies or pursue other strategic initiatives that may enhance our capabilities or expand our production and supplier network. Acquisitions, investments and other strategic initiatives involve numerous risks, including problems integrating the acquired facilities or technologies, including issues maintaining uniform standards, procedures, controls, policies and culture; unanticipated costs associated with acquisitions, investments or other strategic initiatives; diversion of management’s attention from our existing business; adverse effects on existing business relationships with suppliers, outsourced manufacturing partners and other third parties; potential loss of key employees of acquired businesses; and increased legal and accounting compliance costs.

We may be unable to identify acquisitions, investments or other strategic initiatives we deem suitable. Even if we do, we may be unable to successfully complete any such transactions on favorable terms or at all, or to successfully integrate any acquired facilities or technologies into our business or retain any key personnel, suppliers or customers. Furthermore, even if we complete such transactions and effectively integrate the newly acquired business or strategic initiative into our existing operations, we may fail to realize the anticipated returns and/or fail to capture the expected benefits, such as strategic or operational synergies or cost savings. The efforts required to complete and integrate these transactions could be expensive and time-consuming and may disrupt our ongoing business and prevent management from focusing on our operations. If we are unable to identify suitable acquisitions, investments or other strategic initiatives, if we are unable to integrate any acquired facilities or technologies effectively or if we fail to realize anticipated returns or capture expected benefits, it could have a material adverse effect on our business, financial condition and results of operations.

We have grown rapidly in recent years and we have limited operating experience at our current scale of operations. If we are unable to manage our operations at our current size or manage any future growth effectively, our brand image and financial performance may suffer.

We have expanded rapidly, leading our transition to become a revered global brand and we have limited operating experience at our current size. Our substantial growth to date has placed a significant strain on our management systems and resources. If our operations continue to grow, of which there can be no assurance, we will be required to continue to expand our sales and marketing, product development and distribution functions, to upgrade our management information systems and other processes and to obtain more space for our production facilities. Moreover, our new innovations may require either new or different infrastructure, relationships or processes. Our continued growth could increase the strain on our resources, and we could experience serious operating difficulties, including difficulties in hiring, training and managing an increasing number of employees, difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products and delays in production and shipments. These difficulties

 

39


Table of Contents

would likely result in the erosion of our brand image and may have a material adverse effect on our business, financial condition and results of operations.

Challenging business, economic, market or political conditions may adversely affect our business, financial condition and results of operations.

Our business, financial condition and results of operations may be materially adversely affected by a challenging economic climate, including reductions in consumer spending, adverse changes in interest rates, adverse changes in currency exchange rates, volatile commodity and other markets, inflation and contraction in the availability of credit in the market. For example, discretionary spending generally declines during periods of economic uncertainty. In a prolonged economic downturn, we may experience declining revenues as a result of general reduced consumer spending. In addition, consumers have access to lower-priced offerings and, during economic downturns, may shift purchases to these lower-priced or other perceived value offerings. These trends also affect the business of our wholesale customers, which in turn has an adverse impact on our revenues from these distribution channels. As a result, a slow-down in the general economy may cause a decline in demand for our products. If economic conditions result in decreased spending on footwear and have a negative impact on our consumers and suppliers, our business, financial condition and results of operations may be materially adversely affected.

It is difficult to predict how economic conditions will develop, as they are impacted by macro movements of the financial markets and many other factors, including the stock, bond and derivatives markets as well as measures taken by various governmental and regulatory authorities and central banks. Uncertainty remains in the global markets and the global economy could experience another recession, or a depression, which could be more prolonged or have a greater financial impact than the global recession that began in 2008. Any downturns in general economic conditions that impact consumer spending, particularly in the countries where we sell a significant portion of our products, could have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations may also be materially adversely affected by a challenging political climate, including events such as invasions, wars, civil unrest and terrorist activities and the imposition of sanctions and importation limitations. As an example, the conflict between Russia and Ukraine has led to disruption, instability and volatility in global markets and industries. In response to the conflict, the United States, the EU and other governments in jurisdictions in which we operate have imposed sanctions and export controls against Russia and Russian interests, including restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia. Such governments have threatened additional sanctions and controls and may take other actions should the conflict further escalate. We have no operations in Russia or Ukraine, but the conflict continues to impact the surrounding region. In particular, the conflict and the responses thereto have increased the risk of energy shortages and resulted in further increases in energy costs for us and our suppliers, which were already high as a result of the existing inflationary environment. We have taken steps to mitigate the impact of any potential energy shortages by preparing contingency plans. While we have not had to effect any such contingency plans to date, we cannot guarantee that such plans, if implemented in the future, will be sufficient to mitigate any such shortages. In addition, rising energy costs have resulted in additional pricing negotiations with our suppliers, put upward pressure on our costs of materials and increased the risk that we may be unable to acquire the materials and services we need to continue to make certain products at acceptable prices, if at all. While we have not experienced material supply chain disruptions to date, we are unable to predict how the conflict between Russia and Ukraine will develop or guarantee that we will not experience material supply chain disruptions in the future.

 

40


Table of Contents

Risks Related to Our Sales and Distribution Channels

Our sales and distribution channels are dependent on cooperation with third parties.

We rely on our ability to work together with third parties in our B2B channel to ensure that our products are sold in environments and in a manner consistent with our brand image. For the fiscal year ended September 30, 2022, sales through third parties in our B2B channel accounted for 62% of revenues. In the event of a dispute with a wholesaler or distributor, we may not have adequate contractual recourse, and insurance, if any, may not be sufficient to cover the cost of a potential claim. If we cannot replace or engage such third parties that meet our specifications in a short period of time, that could increase our expenses and cause shortages of our products. In addition, actions by these third-party sales and distribution channels that do not comply with our policies, such as presenting our products in a manner inconsistent with our preferred positioning or offering our products alongside “lookalike” products, could damage our brand and reputation. If our third-party partners do not maintain the standards of quality, brand positioning and exclusivity we require, or if they otherwise misuse the BIRKENSTOCK brand, there is a risk that our reputation and the integrity of the brand may be damaged. This may in turn have a material adverse effect on our business, financial condition and results of operations.

We face risks arising from the transformation of our operations through the conversion of wholesale distribution markets to owned and operated markets, as well as any productivity or efficiency initiatives we undertake in the future.

We continuously assess opportunities to streamline operations, achieve cost savings and fuel long-term profitable growth. For example, we have evolved our global distribution strategy from primarily wholesale distribution to operating through owned individual offices and local entities, with a view to having further distribution control as well as driving revenue. The implementation of our transformation strategy presents a number of significant risks, including: actual or perceived disruption of service or reduction in service levels to customers and consumers; actual or perceived disruption to suppliers, distribution networks and other important operational relationships and the inability to resolve potential conflicts in a timely manner; difficulty in obtaining timely delivery of products of acceptable quality from suppliers; diversion of management attention from ongoing business activities and strategic objectives; disruption to our culture; failure to maintain employee morale and retain key employees; and actual or threatened claims and law suits from current and/or former distributors.

In addition, relationships with certain of our distributors, particularly in markets outside of Europe, including in the APMA region, are not governed by written contracts, and disputes have arisen and may in the future arise with respect to such relationships, with such disputes potentially resulting in litigation or settlement proceedings. Such disputes may have a negative impact on our brand. Furthermore, if we experience adverse changes to our business, restructuring or reorganization activities may be required in the future. Due to these and other factors, we cannot predict whether we will fully realize the purpose and anticipated benefits or cost savings of any restructuring, productivity or efficiency initiatives, including the conversion of distributor markets to owned and operated markets, and, if we do not, this could have a material adverse effect on our business, financial condition and results of operations.

If we encounter operational challenges relating to the distribution of our products, our business could be adversely affected.

We rely on both our own and third-party logistics centers to warehouse and ship products to our e-commerce customers, retail stores, wholesale partners and distributors throughout the world. These centers are subject to operational risks, including, among other things, mechanical and IT system failure, work stoppages or increases in transportation costs and the impact of pandemics (including the COVID-19 pandemic), diminished vessel capacity, port congestion, cross border trade barriers (e.g., as a result of Brexit), natural disasters, political crises, civil unrest and other catastrophic events. Such disruption could have an adverse effect on the availability of our in-store and warehoused inventory and would divert financial and management resources. In addition, distribution capacity is dependent on the timely performance of services by third parties, including the transportation of products to and from their

 

41


Table of Contents

distribution facilities. If we encounter problems with our distribution systems, whether our own or those of third parties, our ability to meet customer and consumer expectations, manage inventory, complete sales and achieve operating efficiencies could be adversely affected. Additionally, the success of our e-commerce business and the satisfaction of consumers depend on their timely receipt of products. The efficient flow of our products requires that our own and third-party operated distribution facilities have adequate capacity to support the current level of e-commerce sales and any anticipated increased levels that may follow from the planned growth of that part of our DTC channel. To the extent that any of these risks were to materialize, we could incur significantly higher costs and longer lead times associated with distributing our products to consumers and experience dissatisfaction from consumers, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, we use independent distributors and wholesalers to sell our products in certain of our markets. Failure by our distributors or wholesalers to meet planned annual revenues goals or to make timely payments on amounts owed to us due to, for example, economic difficulties faced by such distributors could have an adverse effect on our business, financial condition and results of operations, and it may be difficult and costly to locate an acceptable substitute distributor or wholesaler. If a change in distributor or wholesaler becomes necessary, we may experience increased costs, as well as substantial disruption and a resulting loss of revenues and brand equity in the market where such distributor or wholesaler operates, which could have a material adverse effect on our business, financial condition and results of operations.

If our relationship with one or more major wholesale partners deteriorates or terminates, our business could be adversely affected.

While our strategy is to continue to grow our DTC channel, and in particular our e-commerce business, our ability to attract and retain strategic wholesale partners remains critical to our continued success and growth.

Our wholesale partners purchases generally occur on an order by-order basis, under a variety of framework agreements. If any major wholesale partner decreases or ceases purchasing from us, cancels its orders, reduces the floor space, assortments, fixtures or advertising for our products or changes the manner of doing business with us for any reason, such actions could adversely affect our business. In addition, a decline in the performance or financial condition of a major wholesale partner, including bankruptcy or liquidation, could result in a material loss of revenues to us and cause us to limit or discontinue business with that partner, require us to assume more credit risk relating to our receivables from that partner or limit our ability to collect amounts related to previous purchases by that partner. For example, as a precautionary matter in light of the COVID-19 pandemic, we requested certain wholesale partners pay deposits for their orders. These measures and other measures we may adopt to mitigate credit risk, however, may not be successful. In addition, retail consolidation could lead to fewer wholesale partners, wholesale partners seeking more favorable price, payment or other terms from us and a decrease in the number of stores that carry our products. While we seek to insure credit risk, there can be no assurance that in the future we will be able to obtain credit risk insurance at commercially attractive terms or at all.

If our relationship with one or more major wholesale partners deteriorates or terminates, or if other changes occur in the wholesale channel that adversely impact our relationships with such third parties, this could lead to a material adverse effect on our business, financial condition and results of operations.

Our reliance on services arrangements with third-party service providers exposes us to a range of potential operational risks.

We have entered into a number of services arrangements with third-party service providers for the operation of distribution centers. In addition, we have entered into service agreements with third-party providers in Portugal, primarily for the outsourcing of closed-toe silhouette production. In the event the services of these service providers are disrupted or terminated and we do not engage suitable

 

42


Table of Contents

replacements on commercially acceptable terms or in a timely manner, we may not be able to effectively deliver our products to consumers and our wholesale partners, which may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Supply Chain

Our business is affected by seasonality and weather conditions, which could result in fluctuations in our operating results.

Our products, particularly our Core Silhouettes, were traditionally suited for warm weather. As a result, if the weather conditions varied significantly from typical conditions in our key markets, such as an unusually cold summer, consumer demand for our products could be adversely affected. In recent years, we have increased our sales of closed-toe silhouettes suited for cold weather to reduce the seasonal peaks that our business is subject to. Nevertheless, our business remains affected by seasonality, and demand in our channels varies by time of year.

While we manufacture our footwear year-round, we build inventory between October and January to prepare for increased demand during the summer season of the subsequent year. Starting in May and during the warmer months of the year, demand for our products from our DTC channel increases. Demand for our products from our B2B channel increases from December through March. We incur significant additional expenses in advance of and during this period in anticipation of higher sales during that period, including the cost of additional inventory, which is stored on palettes in our warehouses until shipped, fixed cost such as rent and lease agreement for retail shops and outlets as well as depreciation and amortization of production plants.

Lower demand may result in excess inventory, which may require us to sell these products at discounted prices or to build up more finished goods inventory than expected incurring additional costs, which could, in turn, adversely affect our results of operations. At the same time, if we are unable to procure certain raw materials due to supply chain disruptions or fail to manufacture a sufficient quantity of merchandise, we may not have an adequate supply of products to meet consumer demand or if weather conditions permit us to sell seasonal products early in the season, this may reduce inventory levels needed to meet customers’ needs later in that same season, which could have a negative impact on our revenues during our busiest season. Any inability to effectively manage seasonality and weather conditions could have a material adverse effect on our business, financial condition and results of operations.

Any adverse events influencing either the sustainability of the supply chain or our relationship with any major supplier or any increases in the costs of raw materials or labor, or any scarcity thereof, could adversely affect our business.

Our ability to competitively price our products depends on the cost of components, services, labor, equipment and raw materials, including leather and other materials used in the production of our products. The cost of services and materials is subject to change based on availability and market conditions that are difficult to predict. Various conditions, such as changes in food consumption patterns affecting the availability of leather, as well as changes in climate conditions impacting the availability of cork, jute or latex, affect the cost of our footwear. However, very few are traded as commodities (e.g., latex). We use certain public price and market tracking information as references for price developments. Factors such as weather and climate conditions, demand of competing industries (e.g., leather for car manufacturers, furniture) and general economic factors, such as global supply chain flows, supply and demand and raw material price developments, will affect the cost of our materials.

We source components and other raw materials (including leather, EVA, cork, adhesives, natural latex, jute, copper, wool felt and brass buckles) from over 190 suppliers located mainly in Europe, but also in Turkey, the Americas and Asia. For the fiscal year ended September 30, 2022, our top 10 suppliers accounted for approximately 44% of our supply costs of raw materials, semi-finished goods, auxiliary and packing. Generally, we aim to source our materials from multiple suppliers and have policies to prevent dependence on any single supplier. However, for certain materials, we may rely on specific suppliers that

 

43


Table of Contents

are able to meet the level of quality and supply we require. For example, although our leathers are sourced from different tanneries, our requirement for materials of high quality may result in reducing the pool of available tanneries that can meet such requirements. In addition, some of our products use materials of high technical complexity and high-quality standards, such as EVA, or that require specific IP rights, such as the EVA buckles. We also have some regional dependencies. For example, while we do have multiple cork suppliers, they are all based in Portugal, thus creating a specific geographical dependency, and we have similar regional dependencies for other raw materials. Such geographic dependencies expose us to risks in the case of, for example, extreme weather events affecting such areas. Our relationships with suppliers are either based on individual purchase orders, on purchase orders governed by a framework agreement or on separate agreements governing the conditions for the supply of specific materials. Although our contracts with these suppliers contain provisions that ensure the suppliers are not able to terminate the contract on short notice, if one or more of these suppliers is unable to supply or decides to cease supplying us with raw materials and components, or decides to increase prices significantly due to price increases, shortages or for other reasons that may be beyond our control, we may be unable to identify alternative suppliers of such materials at a reasonable cost or at all and, in any event, it may take a significant period of time to receive any materials from alternative suppliers. Moreover, if we expand beyond the production capacity of our current suppliers as we continue to grow, we may not be able to find new suppliers with an appropriate level of expertise and capacity in a timely manner.

In addition, with some exceptions, our arrangements with our suppliers generally are not exclusive. As a result, our suppliers could provide similar products for our competitors, some of which could potentially purchase products in significantly greater volume. Further, while certain of our long-term contracts stipulate contractual exclusivity, those suppliers could choose to breach our agreements and work with our competitors. Our competitors could enter into restrictive or exclusive arrangements with our suppliers that could impair or eliminate our access to supplies. Our suppliers could also be acquired by our competitors, and may become our direct competitors, thus limiting or eliminating our access to supplies.

Our supply chain could also be materially adversely affected by a number of other factors, including, among other things, increasing costs of labor, scarcity of labor at our production sites or at our office locations, potential economic and political instability in countries where our suppliers are located, increases in shipping or other transportation costs, manufacturing and transportation delays and interruptions, whether as a result of natural disasters or force majeure events (including, without limitation, unrest, civil disorder, war, terrorist attacks, subversive activities or sabotage, fires, floods, explosions, other catastrophes, epidemics or pandemics, such as the COVID-19 pandemic), industrial action in the supply chain or other factors, supplier compliance with applicable laws and regulations, adverse fluctuations in currency exchange rates and changes in laws affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws. We may also be subject to potential reputational damage if one or more of our suppliers violates or is alleged to have violated applicable laws or regulations including improper labor conditions or human rights abuses, fails to meet our requirements or does not meet industry standards and safety specifications.

Any of these risks, in isolation or in combination, could restrict the availability of merchandise or significantly increase the cost of such merchandise, require us to divert financial and management resources and subject us to reputational damage, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our operating results depend on effectively managing inventory levels, and any excess inventories or inventory shortages could harm our business.

Efficient inventory management is a key component of our business success and profitability, and our ability to manage our inventories effectively is an important factor in our operations. Inventory shortages can impede our ability to meet demand, adversely affect the timing of shipments to customers and, consequently, diminish brand loyalty and decrease revenues. Conversely, excess inventories can result in

 

44


Table of Contents

lower gross profit margins if we lower prices in order to liquidate excess inventories. In addition, inventory may become obsolete as a result of changes in consumer preferences or otherwise. In most of our markets and channels, we forecast demand and pre-produce products based on such forecasts. However, our forecasts may not accurately predict consumer trends or purchasing actions and therefore may not match actual demand. If we have insufficient inventory, then we may experience longer lead times and delays in delivering products to customers. Conversely, if we have excess inventory, we may have to take unanticipated markdowns to dispose of such excess inventory. Any inability to effectively manage our inventory could have a material adverse effect on our business, financial condition and results of operations.

Unforeseen business interruptions at our production facilities or other operational problems may lead to production bottlenecks or project delays.

Our success depends in part on the uninterrupted and reliable operation of our manufacturing operations. Unforeseen disruption of a production facility could be caused by a number of events, including a maintenance outage, power or equipment failure, fires, floods, earthquakes or other natural disasters, social unrest or terrorist activity, work stoppages, public health concerns (including pandemics), regulatory measures or other operational problems. For instance, four of our manufacturing facilities experienced temporary shutdowns due to COVID-19 in 2020.

A prolonged disruption at a manufacturing facility could result in production downtimes or temporary operation at reduced capacity preventing us from completing production in a timely manner, leading to loss of business volume and reduced productivity or profitability at a particular production site. Less severe problems involving our production facilities, such as missed shipment dates, split shipments, defective software or materials or logistics problems, could lead to delays. Any unplanned production downtime, stoppage at our facilities or project sites, serious accidents or other operational problems and delays, if significant, could have a material adverse effect on our business, financial condition and results of operations.

Shipping and delivery are critical parts of our business and any changes in, or disruptions to, our shipping and delivery arrangements could adversely affect our business, financial condition and results of operations.

We rely on several ocean, air parcel and “less than truckload” carriers to deliver the products we sell. If we are not able to negotiate acceptable pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers, it could negatively impact our customers’ experience as well as our business, financial condition and results of operations. For example, changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing may adversely impact our margins and profitability. In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by factors beyond our and these providers’ control, including pandemic, weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events specifically impacting other shipping partners, such as labor disputes, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely. We have in the past experienced, and may in the future experience, shipping delays for reasons outside of our control. We are also subject to risks of damage or loss during delivery by our shipping vendors. If the products ordered by our customers are not delivered in a timely fashion, including to international customers, or are damaged or lost during the delivery process, our customers could become dissatisfied and cease buying products from us, which would adversely affect our business, financial condition and results of operations.

Fluctuations in product costs and availability due to fuel price uncertainty could negatively impact our business, financial condition and results of operations.

We rely upon various means of third-party transportation to deliver products from our manufacturing facilities to our distribution centers, from our distribution centers to our stores and directly to our

 

45


Table of Contents

customers. Consequently, our results may be affected by those factors affecting transportation, including the price of fuel and the availability of aircraft, ships, trucks and drivers. The price of fuel and demand for transportation services has fluctuated significantly in recent years and has resulted in increased costs for us. In addition, changes in regulations may result in higher fuel costs through taxation, transportation restrictions or other means. Fluctuations in transportation costs and availability could adversely affect our business, financial condition and results of operations.

Risks Related to Our Employees and Operations

Our success depends substantially on our ability to attract, hire, train and retain experienced management and personnel.

Our management team has substantial expertise and industry experience and the loss of key members of management could adversely affect our ability to implement our strategic objectives. Further, we are also dependent on personnel that are highly skilled and qualified in the consumer goods industry as well as in design, merchandising and digital activities.

Our success in attracting and retaining such personnel depends on a variety of factors, including the supply of qualified candidates in the relevant market, as well as our compensation and benefit programs, work environment, career development opportunities, commitment to diversity and public image. Competition for qualified personnel is increasing. Attracting new personnel also depends on the good brand image and the reputation of our Company. If our brand image is adversely impacted as a result of employee relations issues, such as issues related to discrimination, harassment or a lack of, or perceived lack of, support for diversity initiatives, our ability to hire and retain experienced personnel may be reduced. There can be no assurance that we will be successful in attracting and retaining experienced management and key technical personnel and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

We are highly dependent on the services and reputation of Oliver Reichert, our Chief Executive Officer.

We are highly dependent on the services and reputation of Oliver Reichert, our Chief Executive Officer. Mr. Reichert is a significant influence on and driver of our business plan. If Mr. Reichert were to discontinue his service due to death, disability or any other reason, or if his reputation is adversely impacted by personal actions or omissions or other events within or outside his control, we may be significantly disadvantaged and we may have difficulty finding a successor. Further, we do not maintain key-person insurance for our senior management. Mr. Reichert’s departure from the Company could have a material adverse effect on our business, financial condition and results of operations.

Mr. Reichert may also have significant responsibilities, and may devote a substantial amount of time serving, as managing director for the investment office of Christian Birkenstock as well as the former Birkenstock GmbH & Co. KG (now Ockenfels Group GmbH & Co. KG and its subsidiaries). A number of our properties are leased or subleased to our subsidiaries from such entities. We believe these arrangements are on an arm’s length basis; however, a conflict may arise that could adversely affect the interests of our shareholders, including conflicts involving compliance with payment and performance obligations under existing leases or negotiation of the terms of and performance under additional leases we may enter into with these entities managed by Mr. Reichert. Such positions may generally give rise to fiduciary or other duties in conflict with the duties Mr. Reichert owes to us and may compete with his ability to devote a sufficient amount of attention toward his obligations to us, or to day-to-day activities of our business, leading to a material adverse effect on our business, financial condition and results of operations.

We are dependent on good relationships with our employees and employee representative bodies and stakeholders.

We are dependent on good relationships with our employees, employee representative bodies such as works councils (Betriebsräte), group work council (Konzernbetriebsrat) and other stakeholders to successfully operate our business. Personnel expenses make up a significant portion of our costs and we

 

46


Table of Contents

are obliged to comply with various works council and other agreements that are in place with works councils and other employee representative bodies. In addition, we have a collective bargaining agreement in one of our facilities in Germany. Employees at our German locations have traditionally been heavily unionized and we regularly conduct, or are involved in, negotiations with the relevant employee representative bodies. Any deterioration of these relationships could adversely impact our business, financial condition and results of operations.

While we believe that we have good relations with unions and employees generally today, there can be no assurance that such relations will not deteriorate and that we will not experience labor disputes in the future. We have faced strikes or similar types of conflicts with trade unions and our employees in the past and may face them again in the future. In particular, these could arise when current collective agreements expire or are to be negotiated. Any such strikes, conflicts, work stoppages or other industrial actions may disrupt our production and sales activities, damage our reputation and adversely affect our customer relations, which could in turn have a material adverse effect on our business, financial condition and results of operations.

Works council and collective agreements may impose obligations and restrictions on us that may adversely affect our flexibility to undertake adjustments to our workforce, restructurings, reorganizations and similar corporate actions. In addition, certain measures we undertake are generally subject to works councils’ codetermination rights, in particular in relation to occupational pension schemes, the implementation and use of IT systems, variable remuneration schemes and working time systems. Potentially extensive exercise of codetermination rights by the works councils may result in operational difficulties and in us being prevented from implementing planned policy or IT system changes, among other things.

Risks Related to Intellectual Property, Information Technology and Data Security and Privacy

If we are unable to adequately protect, maintain and enforce our trademarks and other IP rights, our business could be materially adversely affected.

Our business is dependent on our ability to protect, maintain and enforce our trademarks and other IP rights. We own a portfolio of United States and international IP rights for our brands and certain of our product designs. Patent, trademark and other IP laws vary significantly throughout the world. A number of foreign countries do not protect IP rights to the same extent as they are protected in the United States. Therefore, our IP rights may not be as strong or as easily enforced outside of the United States. The BIRKENSTOCK brand is our most material IP asset. We endeavor to enforce our IP rights against any third parties that we believe are infringing, misappropriating or otherwise violating such rights. We cannot be sure that the actions we take to establish and protect our trademarks and other IP rights will be adequate, and we may not be able to prevent imitation of our products by others. Third parties have in the past and may in the future create counterfeit products using our brand and trademarks, or otherwise infringe, misappropriate or otherwise violate our IP rights. Monitoring unauthorized use of our IP is difficult and costly, and we may not always be able to secure protection for, become aware of or stop infringement, misappropriation or other violations of, our IP rights. From time to time, we may need to resort to litigation to enforce our IP rights, which could result in substantial costs and diversion of our resources. In addition, third parties may seek to challenge the validity or enforceability of our trademarks or other IP rights, and we cannot assure you that we will be successful in defending against all such claims.

Some our footwear designs, including in several of our core products, are not protected by design patents or other design rights. This may mean that we cannot legally prevent third parties from creating “lookalike” products or products that otherwise use our designs. Beginning in 2018, we modified our approach to IP protection and enforcement and began to more consistently seek to register our design rights and seek to obtain patents on new products and to consistently enforce our IP rights against infringement. However, our ability to enforce our IP rights with respect to counterfeit or infringing products

 

47


Table of Contents

on the market may in some cases be challenged by defendants as barred in certain jurisdictions based on allegations that we failed to timely enforce our IP rights.

Any failure to protect or enforce our IP rights could diminish the value of our brands and could cause customer or consumer confusion. As a result of any of the foregoing, there could be a material adverse effect on our business, financial condition and results of operations.

We may be subject to liability and other material adverse impacts on our business if we face claims that we infringe the trademarks, copyrights or other IP rights of third parties.

We cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate the IP rights of others. While we try to avoid infringing IP rights, we may do so unknowingly. Any action to prosecute, enforce or defend any IP claim that is brought against us, regardless of merit or resolution, could be costly and may divert the efforts and attention of our management and design and technical personnel. We may not prevail in such proceedings given the complex design and technical issues and inherent uncertainties in IP litigation. If we are found to have infringed, misappropriated or otherwise violated IP rights of third parties, we could be required to pay substantial damages, seek to obtain licenses (which may not be available on commercially reasonable terms or at all), or cease making or selling certain products. Additionally, we may be required to redesign, reengineer or rebrand our products or packaging, if feasible. In the event of a successful claim of infringement against us, our business, financial condition and results of operations could be materially adversely affected.

We may be unsuccessful in preventing a member of the Birkenstock family from using their surname as a company or product name.

Our brand is named after the Birkenstock family that originally founded the business. We own and control the Birkenstock trademark as applied to goods and services of the Company, and to the extent rights have otherwise inured to the Company under applicable law. Under German trademark law, individuals with the “Birkenstock” surname are permitted to use their surname within a company name, provided the respective individual takes measures (i.e., such as adding their first name or other deviating features) to eliminate or at least reduce the risk of confusion with existing competing businesses that use “Birkenstock” in their company name, but this might not always prevent confusion. Although in the past German courts have imposed sanctions for infringement of prominent brand names through the licensing of surnames, the entitlement to use one’s surname may include allowing a third-party to use the name “Birkenstock” as part of a company name, including potentially in a competing business, so long as it is not done in a misleading manner. While we have entered into an agreement with certain members of the Birkenstock family through which they have consented to our use of the “Birkenstock” surname in our corporate name and trademarks in perpetuity, if such agreement were to be terminated in accordance with its terms, challenged or otherwise held invalid, or if, in the future, we had any material unresolved disputes with the Birkenstock family, we may not be able to adequately protect our Company name and trademarks or may be prevented from using the “Birkenstock” surname for our legal entities and trademarks in the future. In other jurisdictions, there may be similar laws that could permit individuals with the “Birkenstock” surname to use such surname within a company name or trademark. Such uses are typically subject to local statutory restrictions, including applicable trademark laws. At least one member of the Birkenstock family has used the Birkenstock name in connection with an independent business unrelated to ours in the past. Any or all of these circumstances could have a material adverse effect on our business, financial condition and results of operations. See also “— Risks Related to Our Business, Brand, Products and Industry — Our success is dependent on the strength of our premium brand; if we are unable to maintain and enhance the value and reputation of our brand and/or counter any negative publicity, we may be unable to sell our products, which would harm our business and could materially adversely affect our business, financial condition and results of operations.”

 

48


Table of Contents

We are subject to various Privacy Laws and regulations governing the use and processing of personal data and any failure to protect this data and/or sensitive/confidential information could harm our reputation and expose us to litigation.

We collect, process, transmit and store personal, sensitive and confidential information, including our proprietary business information and that of customers (including users of our websites) and our wholesale partners, distributors, employees, suppliers and business partners. The protection of customer, employee and company data is critical to us. Customers have a high expectation that we will adequately protect their personal information from cyber-attack or other security breaches and only use such personal information as permitted by law. A significant breach of customer, employee or company data could damage our reputation and result in lost revenues, fines or lawsuits. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our IT and infrastructure have in the past been, and may in the future be, vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. Any such breach or attack could compromise, and have compromised, our networks and the information stored thereon or transmitted thereby could be accessed, publicly disclosed, lost or stolen. Because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate these methods or promptly implement preventative measures. Any unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under Privacy Laws (as defined below), disrupt our operations and the services we provide to customers and damage our reputation, which could adversely affect our business, financial condition and results of operations. See also “—Our operations, products, systems and services rely on complex IT systems and networks that are subject to the risk of disruption and security breaches.

We are subject to a number of laws relating to information security, privacy and data protection, which includes such laws and regulations as enacted, implemented and amended in the United States, the EU and its member states and the UK (regardless of where we have establishments) from time to time, including the Privacy Laws. Compliance with Privacy Laws requires adhering to stringent legal and operational obligations and therefore the dedication of substantial time and financial resources, which may increase over time (in particular in relation to any transfers of relevant personal data to third parties located in certain jurisdictions). Failure to comply with the Privacy Laws may result in us incurring fines and/or facing other enforcement action or reputational damage. For example, failure to comply with the GDPR or the UK GDPR, depending on the nature and severity of the breach, could attract regulatory penalties under both regimes for the same breach of up to the greater of: (i) 20 million / £17.5 million; and (ii) 4% of an entire group’s total annual worldwide turnover, as well as the possibility of other enforcement actions (such as suspension of processing activities and audits) and liabilities from third-party claims.

We are also subject to the GDPR and/or UK GDPR rules with respect to any cross-border transfers of personal data we make out of the EEA and/or UK. Recent legal developments in the EU and the UK have created complexity regarding transfers of personal data from the EEA and/or UK (as applicable) to the United States. We rely on various transfer mechanisms in order to be compliant with applicable Privacy Laws including the SCCs, the UKIDTA or the UK Addendum as approved by the European Commission or the government of the UK (as applicable). On March 21, 2022 the UKIDTA and UK Addendum came into force, which may require us to expend significant resources to update our contractual arrangements that relied on the SCCs and to comply with the UK GDPR. Further, data protection authorities may require measures to be put in place in addition, or alternatively, to the SCCs for transfers to countries outside of the EEA, Switzerland and/or the UK. In addition to other impacts, we may experience additional costs to comply with these changes and we and our customers and service providers face the potential for regulators in the EEA, Switzerland and/or the UK to apply different standards to the transfer of personal data to the United States and other non-EEA and non-UK countries, and to block, or require ad hoc verification of measures taken with respect to certain data flows to the United States and other non-EEA and non-UK countries.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs, UKIDTA and/or UK Addendum cannot be used and/or take enforcement

 

49


Table of Contents

action and/or carry out investigations, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations and could adversely affect our business, financial condition and results of operations.

We are subject to payment-related risks.

We accept payments using credit cards and debit cards and, as such, are subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard, which is a security standard applicable to companies like ours that collect, store or transmit certain data regarding credit and debit cards, holders and transactions. We are also subject to rules governing electronic funds transfers. Such rules could change or be reinterpreted to make it difficult or impossible for us to comply. If we (or a third-party processing payment card transactions on our behalf) suffer a security breach affecting payment card information, we may have to pay onerous and significant fines, penalties and assessments arising out of the major card brands’ rules and regulations, contractual indemnifications or liability contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards for payment for our goods which could materially impact our business, financial condition and results of operations.

Our operations, products, systems and services rely on complex IT systems and networks that are subject to the risk of disruption and security breaches.

We heavily rely on multiple and, in certain cases, older IT systems and networks to support our e-commerce business and for research, procurement, manufacturing, sales, logistics, business and other processes, including, among others, inventory tracking and transaction recording and processing. The consistent, efficient and secure operation of our IT systems and networks is therefore critical to the successful performance of our operations and the products we sell.

We continue to utilize various legacy hardware, software and operating systems, which may be vulnerable to increased risks, including the risk of system failures and disruptions. If such systems are not successfully upgraded or replaced in a timely manner, system outages, disruptions or delays or other issues may arise. From time to time, we upgrade our IT systems and networks. Such efforts to update our IT systems and networks may also divert the efforts and attention of our management and personnel across the business. We must also successfully integrate the technology systems of any acquired companies into our existing and future technology systems, including those of our customers, vendors, suppliers and other third-party service providers. If a new system does not function properly or is not adequately supported by third-party service providers and processes, it could affect our ability to produce, process and deliver customer orders and process and receive payments for our products.

Despite IT maintenance and security measures, our IT systems and networks are exposed to the risk of malfunctions and interruptions from a variety of sources, including equipment damage, deficient database design, power outages, computer viruses and a range of other hardware, software and network problems. We have experienced temporary outages in our IT systems in the past. Although we have countermeasures in place to prevent malfunctions and interruptions, any such malfunctions or interruptions could compromise the operational integrity of these systems and networks should our countermeasures fail in the future.

In addition, we rely on systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our consumers, customers, suppliers, employees and others, including credit card information and personal information. We also store data in third-party data centers and use third-party servers or applications by means of cloud computing. As the importance of our e-commerce business continues to increase, the salience of this risk has increased.

 

50


Table of Contents

Our systems, websites, data (wherever stored), software or networks and those of third parties (including data centers), are vulnerable to security breaches, including unauthorized access (from within our organization or by third parties), computer viruses or other malicious code and other cyber threats that could have a security impact. We may not be able to anticipate evolving techniques used to effect security breaches (which change frequently and may not be known until launched), or prevent attacks by hackers, including phishing or other cyber-attacks, or prevent breaches due to employee error or malfeasance, in a timely manner or at all. Cyber-attacks have become far more prevalent in the past few years, potentially leading to the theft or manipulation of confidential and proprietary information or loss of access to, or destruction of, data on our or third-party systems, as well as interruptions or malfunctions in our or third parties’ operations.

In addition, our IT systems and networks and those of third parties with which we work have been in the past, and in the future may be, the target of cyber-attacks or other security breaches. For instance, we use order, fulfillment and customer relationship management systems as part of our e-commerce operations and other sales channels and human resource management systems as part of our employee services and payroll processes, and such systems may be subject to security breaches. We implement mitigation measures from time to time, as we identify new threats and risks. We cannot assure you that such measures will be effective or that breaches or other cyber-attacks, including industrial espionage or ransomware attacks will not occur in the future. Failure to effectively prevent, detect and remediate security breaches, including attacks on our IT infrastructure by hackers, viruses, employee error or misconduct or other disruptions could seriously harm our operations and the operations of our customers. Such breaches may result, among other things, in unauthorized access to trade secrets, confidential business information and personal information, data losses, business interruptions, non-compliance with legal requirements, legal claims or proceedings, deterioration in customer relationships and reputational harm. See also “We are subject to various Privacy Laws and regulations governing the use and processing of personal data, and any failure to protect this data and/or sensitive/confidential information could harm our reputation and expose us to litigation.” In addition, due to the constantly evolving nature of security threats, we cannot predict the form and impact of any future incident, and the cost and operational expense of implementing, maintaining and enhancing protective measures to guard against increasingly complex and sophisticated cyber threats could increase significantly. While we regularly review our network security, backup and disaster recovery, enhanced training and other security measures to protect our systems and data, security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every breach or disruption on a timely basis.

Furthermore, certain measures we may undertake to update our IT systems and networks may be subject to works councils’ codetermination rights. While works councils have been co-operative in the past, a potentially extensive exercise of these co-determination rights may result in operational difficulties and in us being prevented from implementing planned policy or IT system changes. See “Risks Related to Our Employees and OperationsWe are dependent on good relationships with our employees and employee representative bodies and stakeholders.”

Finally, although risk management is primarily the responsibility of the Company’s management, our board of directors is responsible for overseeing management’s identification, monitoring and management of risk. In particular, at this time, we expect that our board of directors, with or potentially through its audit committee, will be responsible for oversight of cybersecurity risks and that our management will be responsible for day-to-day risk management processes. Our board of directors has tasked management with the responsibility to manage our cybersecurity initiatives, including with respect to the Company’s supply chain, suppliers and service providers. Our board of directors, with or potentially through its audit committee, expects to receive regular reports from management on material cybersecurity risks and the degree of the Company’s exposure to those risks. Management has worked, and expects to continue to work, with third-party service providers, as appropriate, to monitor and, as appropriate, respond to

 

51


Table of Contents

cybersecurity risks. However, we cannot guarantee that these risk management processes will be effective at mitigating the risk to our IT systems and networks described above.

Any disruptions of our IT systems, including as a result of cyber-attacks and industrial espionage, may disrupt operations, or result in legal liability. The materialization of any of the above risks could have a material adverse effect on our business, financial condition and results of operations.

Use of social media, cookies and other tracking technologies, emails, push notifications and text messages in ways that do not comply with applicable laws and regulations, lead to the loss or infringement of IP or result in unintended disclosure may harm our reputation or subject us to fines, lawsuits or other penalties.

We use social media, cookies and other tracking technologies, emails and text messages as part of our omni-channel approach to marketing. As laws and regulations evolve to govern the use of these channels, the failure by us, our employees or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines, lawsuits (including class action) or other penalties. Any changes to marketing laws and regulations, their interpretation or enforcement by the government or private parties that further restrict the way we contact and communicate with our customers or potential customers could adversely affect our ability to attract customers and could harm our business, financial condition and results of operations. In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of IP, as well as the public disclosure of proprietary, confidential or sensitive personal information of our business, employees, learners, partners or others. Information concerning us or our customers, whether accurate or not, may be posted on social media platforms at any time and may have an adverse impact on our brand, reputation or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, financial condition and results of operations.

Evolving government regulation of the internet and e-commerce, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and e-commerce. Existing and future regulations and laws could impede the growth of the internet, e-commerce or mobile commerce, which could in turn adversely affect our growth. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, customer protection and internet neutrality. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and customer privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities, customers, suppliers or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business and decrease the use of our website by customers and suppliers and may result in the imposition of monetary liabilities. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of our own non-compliance with any such laws or regulations. As a result, adverse developments with respect to these laws and regulations could substantially harm our business, financial condition and results of operations.

 

52


Table of Contents

Risks Related to Economic, Market and Political Matters

Inflation could adversely impact our business, financial condition and results of operations.

Inflation in the EU, the United States and other jurisdictions in which we operate began to rise significantly in late 2021 and has continued to remain at high levels through 2022 and 2023 to date. This is primarily believed to be the result of the economic impacts from the COVID-19 pandemic, including the global supply chain disruptions, government stimulus packages, strong economic recovery and associated widespread demand for goods, among other factors. For instance, global supply chain disruptions have resulted in shortages in materials, which has resulted in inflationary cost increases for materials, and could continue to cause costs to increase as well as scarcity of certain products. We are experiencing inflationary pressures in certain areas of our business, including with respect to employee wages and the cost of materials, although, to date, we have been able to mitigate such pressures through price increases and other measures. We cannot, however, predict any future trends in the rate of inflation or associated increases in our operating costs and how that may impact our business. To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our business, our revenues and gross profit margins could decrease and our business, financial condition and results of operations could be adversely affected.

Tariffs and other changes in international trade policy could adversely affect our business, financial condition and results of operations in the future.

Materials and products imported into the EU, the United States and other countries are subject to import duties. While we have implemented internal measures to comply with applicable customs regulations and to properly calculate the import duties applicable to imported products, customs authorities may disagree with our claimed tariff treatment for certain products, resulting in unexpected costs that may not have been factored into the sales price of such products and our expected margins. In addition, we cannot predict whether future domestic and international laws, regulations or specific or broad trade remedy actions or international agreements may impose additional duties or other restrictions on the importation of products from one or more of our sourcing venues. Any such changes in legislation and government policy may have a material adverse effect on our business, including the imposition of tariffs on certain materials which could increase our product costs. For example, in recent periods, the U.S. government has announced various import tariffs on goods imported from certain trade partners, such as the EU and China, which have resulted and may continue to result in reciprocal tariffs on goods exported from the United States to such trade partners. Trade barriers and other governmental action related to tariffs or international trade agreements around the world have the potential to decrease demand for our products, negatively impact suppliers and adversely impact the economies in which we operate. Trade barriers and other governmental action related to tariffs or international trade agreements could increase the cost of raw materials and components used in certain of our products, which could in turn increase our cost of goods sold, which could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to currency exchange rate fluctuations.

We operate and sell products globally, and, as a result, we generate a significant portion of our revenues and incur a significant portion of our expenses in currencies other than our functional currency, the Euro, including the U.S. Dollar, the Canadian Dollar, the British Pound and, to a lesser extent, various other currencies. We are particularly exposed to fluctuations in the exchange rate of the U.S. Dollar to the Euro as a result of our significant presence in the United States, and a large portion of our indebtedness is denominated in U.S. Dollars. In the fiscal year ended September 30, 2022, 60% of our revenues were in currencies other than Euro. Accordingly, movements in exchange rates between any of these currencies and the Euro could have a negative effect on our results of operations and financial condition to the extent there is a mismatch between our earnings in any foreign currency and our costs that are denominated in that currency.

 

53


Table of Contents

Where possible, we manage foreign currency risk by matching same currency revenues to same currency expenses. However, we are exposed to risk as a result of the increasing amount of invoicing being done in local currency, particularly by our subsidiaries in the United States. Such currency risks are monitored by our senior management in the context of annual budgeting and the hedging strategy is adjusted from time to time during the course of the year. There is no guarantee that our hedging strategy will be successful.

In addition, while we report our results in Euro, we have revenues, expenses, assets and liabilities in other currencies, primarily as the result of our ownership of our subsidiaries located in other countries. Our subsidiaries’ assets and liabilities are converted based on the exchange rate on the balance sheet date, and income statement items are converted based on the average exchange rate during the relevant financial period. Exchange rates have seen significant fluctuation in recent years, and significant increases in the value of the Euro relative to such currencies could have a material adverse effect on our reported financial results. As a result, any fluctuations in currency exchange rates could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Legal, Regulatory and Taxation Matters

We are subject to risks associated with international markets.

As we market, sell and manufacture our products in many countries, we face a variety of risks generally associated with doing business in international markets and importing merchandise from these regions, including, among others, changes in the rate of economic growth, political instability resulting in the disruption of trade, trade disputes, expropriation or other governmental action, quotas and other trade regulations, export license requirements, delays associated with customs procedures, including increased security requirements applicable to foreign goods and measures related to COVID-19, Brexit, social unrest, war, terrorist activities or other armed conflict, imposition of confiscatory taxation or adverse taxes, other charges and restrictions on imports, currency and exchange rate risks, changes in double tax treaties, risks related to labor practices increasing minimum wages and inflationary pressures, national and regional labor strikes, bribery and corruption, environmental matters or other issues in the foreign countries or factories in which our products are manufactured, risk of loss at sea or other delays in the delivery of products caused by transportation problems and increased costs of transportation.

We also sell our products and have operations in emerging markets, including Brazil, India and certain countries in Africa. Our operations in countries with less developed or less predictable legal systems present several risks, including legal uncertainty, bribery and corruption, civil disturbances, economic and governmental instability, differing business and operating practices, differing consumer behaviors and preferences and the imposition of exchange controls. The uncertainty of the legal environment in these countries, in particular with respect to the enforcement of IP rights, could limit our ability to enforce our rights and grow our business. In addition, we or any of our distributors or wholesale partners may be subject to legal proceedings regarding bribery and corruption in these countries, and we are unable to monitor the lawful conduct of our distributors and wholesale partners’ operations.

Any of these risks could have a material adverse effect on our business, financial condition and results of operations.

Compliance with existing laws and regulations or changes in any such laws and regulations could affect our business.

We operate in a range of international markets and are subject to a variety of laws and regulations, and we routinely incur costs in complying with these laws and regulations. New laws or regulations or changes in existing laws and regulations, particularly those governing the sale of products or in other regulatory areas such as consumer credit, labor and employment (including whistleblowing), tax, competition, health and safety or environmental protection, may conceivably require extensive system and operating changes that may be difficult to implement and could increase our cost of doing business.

 

54


Table of Contents

For example, we are subject to laws and regulations relating to the use of hazardous materials in our footwear production processes. If we fail to comply with these laws and regulations, we may face fines, lawsuits (including civil compensation claims), penalties or other sanctions, as well as damage to our image and brand. In addition, we could incur future expenditures to remediate past compliance failures that could have a material adverse effect on our business, financial condition and results of operations. Further, new laws and regulations are under discussion, including in Germany, that may result in significantly higher sanctions for any of our subsidiaries compared to the current law on administrative offences if management or other company personnel commit offences on behalf of any such subsidiary.

In addition, regulatory authorities may impose mandatory disclosure requirements with respect to ESG matters, including climate change. For example, in March 2022, the SEC issued a proposed rule that would require companies to make certain climate-related disclosures, including information about climate-related risks, greenhouse gas emissions and certain climate-related financial statement metrics. Compliance with this proposed rule may require us to invest substantial resources and require substantial oversight from our management and board of directors. In addition, there is a global trend towards climate-related financial disclosure. A number of countries have established mandatory disclosure regimes and/or set timelines for the implementation of legislation regarding mandatory climate-related disclosure requirements.

ESG matters have also been the subject of increased focus by regulators, including in the EU and the U.S. For example, the European Commission has established a number of sustainability-related reporting and compliance regimes, including the Non-Financial Reporting Directive and the Corporate Sustainability Reporting Directive, which will enhance the scope and reporting requirements under the Non-Financial Reporting Directive, as well as proposals for new regulatory regimes that are aimed at, for example, prohibiting corporates from placing or making available on the EU market or exporting from the EU market products made with forced labor; requiring companies to identify, prevent, bring to an end, mitigate and account for adverse human rights and environmental impacts in operations, subsidiaries and value chains; and enhancing gender pay reporting requirements. Our EU-based business, as well as any global product sales into the EU, may bring us in scope of these requirements. Germany has also developed legislation requiring certain large companies to conduct human rights and environmental due diligence on their own and direct suppliers’ operations.

In addition, changes in, alternative interpretations of or more stringent enforcement of existing laws and regulations in jurisdictions in which we currently operate can change the legal and regulatory environment, making compliance with all applicable laws and regulations more challenging. Changes in laws and regulations in the future could have an adverse economic impact on us by tightening restrictions, reducing our freedom to do business, increasing our costs of doing business, or reducing our profitability. In addition, the compliance costs associated with such evolving laws and regulations may be significant. Failure to comply with applicable laws or regulations can lead to civil, administrative or criminal penalties, including but not limited to fines or the revocation of permits and licenses that may be necessary for our business activities. We could also be required to pay damages or civil judgments in respect of third-party claims. Any actual or alleged failure to comply with applicable laws or regulations could also lead to adverse publicity and have a material adverse impact on our brand and reputation.

Any of these developments, alone or in combination, could have a material adverse effect on our business, financial condition and results of operations.

We rely on our suppliers, agents and distributors to comply with employment, environmental and other laws and regulations.

We are in the process of implementing policies and procedures, including our Supplier Code of Conduct and audit procedures for assessing our suppliers’ compliance with our Supplier Code of Conduct, to help ensure that our suppliers are in material compliance with our business terms, as well as

 

55


Table of Contents

employment, environmental, social and other relevant laws and regulations generally. We include the Supplier Code of Conduct as a mandatory component of all new and extended procurement agreements and we also implement similar procedures as part of new distribution and wholesale agreements. However, we can give no assurance that our suppliers, agents and distributors are or will remain in compliance with such contractual terms, laws or regulations, or that our audits will be sufficient in scope or frequency for us to become aware of any such non-compliance on a timely basis or at all. A violation, or allegations of a violation, of such laws or regulations, or failure to achieve particular standards, by any of these individuals or entities could lead to financial penalties, adverse publicity or a decline in public demand for our products, which could have a material adverse impact on our brand or reputation. Furthermore, any non-compliance could require us to incur expenditures or make changes to our supply chain and other business arrangements to ensure compliance. Any such events could have a material adverse effect on our business, financial condition and results of operations.

We rely on a compliance system to prevent irregularities in business activities. Failure to comply with anti-corruption regulations and economic sanctions programs could result in fines, criminal penalties and an adverse effect on our business.

We operate and sell products in, and source materials from, a number of countries throughout the world, including countries known to have a reputation for corruption. We are subject to the risk that we, our affiliated entities or our or their respective officers, managers, directors, employees and agents may take action determined to be in violation of anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010 and others. Our employees may be tempted to win business using illegal practices, in particular corruption, certain sales incentives or violation of antitrust laws. In some of the countries in which we operate, such practices may be the custom or expected, and our competitors may undertake such practices, increasing the pressure on us and our employees. In addition, we are required to comply with various economic sanctions programs, including those administered by the United Nations Security Council and the United States, including its Office of Foreign Assets Control, U.S. Department of the Treasury. These programs restrict us from conducting certain transactions or dealings involving certain sanctioned countries or persons.

Although we are currently developing our internal policies and procedures, which are designed to ensure compliance with applicable anti-corruption laws and sanctions regulations, we are continuing to develop our compliance strategy and there can be no assurance that such policies and procedures will be sufficient or that our employees, directors, managers, officers, partners, agents and service providers will not take actions in violation of our policies and procedures (or otherwise in violation of the relevant anti-corruption laws and sanctions regulations) for which they or we may ultimately be held responsible. Violations of anti-corruption laws and sanctions regulations could lead to criminal or financial penalties being imposed on us, limits being placed on our activities, authorizations or licenses being revoked, damage to our reputation and other consequences that could have a material adverse effect on our business, financial condition and results of operations. Furthermore, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management. Litigation or investigations relating to alleged or suspected violations of anti-corruption laws or sanctions regulations could also be costly. We cannot guarantee that our compliance and internal controls will protect us against actions taken by our officers, managers, directors, employees and agents that might be determined to be in violation of law.

Increasing focus on corporate responsibility, specifically related to ESG matters, may impose additional costs, expose us to new risks and subject us to increasing scrutiny.

Investors, shareholders, capital providers, customers and other stakeholder groups are increasingly focused on the ESG and sustainability practices of companies, including with respect to climate change, human rights and diversity, equity and inclusion. While we do not currently publicly disclose any quantifiable ESG or sustainability-related metrics or targets, if our ESG practices or the speed at which we

 

56


Table of Contents

adopt and implement them do not meet investor, customer or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones on which we choose to focus), then our brand, reputation and employee relationships may be negatively impacted. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG frameworks and regulations and to implement our ESG initiatives. We depend on key raw material by-products such as leather which could be subject to price volatility and increased costs in the future due to potential broader market shifts stemming from the climate impact of beef production. Our commitment to largely using natural material from transparent sources in Europe and processing materials to high environmental and social standards could decrease our ability to compete with the prices of competitors who do not implement such ESG practices. Also, our failure, or perceived failure, to manage reputational threats and meet expectations with respect to socially responsible activities and sustainability commitments could negatively impact our brand credibility, employee relationships and the willingness of our customers and suppliers to do business with us.

Climate change and related regulatory responses may adversely impact our business.

There is increasing concern that climate change is occurring around the world as a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere is causing significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Changes in weather patterns and an increased frequency, intensity and duration of extreme weather conditions in the areas in which our retail stores, suppliers, manufacturers, customers, distribution centers, headquarters and vendors are located could, among other things, disrupt the operation of our supply chain, disrupt our data management and communications systems, increase our product costs and negatively impact consumer spending and/or demand for our products. For example, as a result of rising sea levels associated with climate change, certain of our retail locations in Europe and the United Arab Emirates could fall below the flood line in the next twenty years. As a result, the effects of climate change could have a long-term adverse impact on our business, financial condition and results of operations.

The physical changes prompted by climate change could result in changes in regulations or consumer preferences, which could in turn affect our business, financial condition and results of operations. In many of the countries in which we operate, governmental bodies are increasingly enacting legislation and regulations in response to the potential impacts of climate change. For example, in EU Member States, we are required to undergo energy audits every four years. In addition, the German government has set broader long-term carbon-reduction targets as well, and pursuant to such regulations, our business falls under the broad “industry” sector, a category that will need to reduce greenhouse gas emissions by 50.7% (from 1990 levels) by 2030. These laws and regulations, which may become mandatory, have the potential to impact our operations directly or indirectly as a result of required compliance by us, as well as by our suppliers, wholesale partners and distributors. In addition, our manufacturing processes may be affected by new regulations in response to climate change. If we are perceived as not taking appropriate steps to mitigate our impact on the environment, this could result in damage to our image and brand, which is particularly focused on socially conscious individuals.

In addition, we have taken, and may continue to take, voluntary steps to mitigate our impact on climate change. As a result, we may experience increases in energy, production, transportation and raw material costs, capital expenditure or insurance premiums and deductibles.

Any of these events could have a material adverse effect on our business, financial condition and results of operations.

 

57


Table of Contents

We are subject to the risk of litigation and other claims.

In the ordinary course of our business we are, or may from time to time become, involved in various litigation matters and governmental or regulatory investigations, prosecutions or similar matters arising out of our current or future business, including personal injury, wrongful death claims, property damages and product safety, stewardship and liability claims, warranty obligations claims, alleged violations of environmental, health and safety laws criminal proceedings (such as those relating to injuries suffered by our employees, which could result in criminal liabilities of our legal representatives and administrative penalties against us), labor law related claims by employees, temporary workers or other external workers, claims by distributors, advisors and others. In addition, third-party litigation, including, but not limited to, litigation related to competition law, antitrust law, tax law, distribution law, intellectual property law and consumer protection and marketing laws, could have a materially adverse impact on us and the market environment in which we operate. When we determine that a significant risk of a future claim against us exists, we record provisions in an amount equal to our estimated liability. Our insurance or indemnities or amounts we have provisioned may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation.

As of the date of this prospectus and generally in the ordinary course of business, we are involved in several litigation claims, as described in “Business — Legal Proceedings.” As a result of the proceedings described therein, the amount of total provisions for disputes in our financial statements for future periods could increase. There can be no assurance that we will be successful in defending ourselves in pending or future litigation claims or similar matters under various laws or that product specific provisions will be sufficient to cover litigation costs. Moreover, it may be difficult for us to obtain and enforce claims related to existing litigation under the laws of certain countries in which we operate at affordable costs and without any materially adverse effects on our business in such country. In the aftermath of public health measures implemented in the jurisdictions in which we operate as well as our temporary personnel initiatives due to the impact of COVID-19, we could be subject to an increase in litigation, in particular in relation to our suppliers and our employees, including with respect to health and safety measures.

Any of these risks could result in considerable costs, including damages, legal fees and temporary or permanent bans on the marketing and sale of certain products and this could have a material adverse effect on our business, financial condition and results of operations.

Our insurance coverage may not be sufficient and insurance premiums may increase.

We maintain insurance coverage in relation to a number of risks associated with our business activities, including third-party (product) liability, property damage and business interruption, environmental damage, directors and officers liability and transport and vehicle insurance. These insurance policies may not cover all losses or damages resulting from the materialization of any of the risks discussed herein. There can be no assurance that our insurance providers will continue to grant coverage on commercially acceptable terms or at all. In addition, there are risks intentionally left uninsured (such as, but not limited to, customer or supplier insolvency, industrial disputes or specific natural hazards), and we therefore have no coverage against these events. Further, agreed limits and other restrictions (for example, exclusions) within the insurance coverage may prove to be too low or inadequate for compensating potential damages or losses, ultimately resulting in a gap in the insurance coverage. If we sustain damages for which there is no or insufficient insurance coverage, or if we have to pay higher insurance premiums or encounter restrictions on insurance coverage, this may have a material adverse effect on our business, financial condition and results of operations.

Incidents at our production sites or finishing and distribution centers may cause environmental or other third-party damages.

We directly operate five production facilities and two distribution warehouses in Germany as well as a production facility in Portugal, and rely on three warehouses managed by external partners in Germany, in

 

58


Table of Contents

addition to a distribution network managed by third parties with warehouses throughout the world, including in the United States, Canada, China, India, Japan and the United Arab Emirates. Incidents at our production facilities and warehouses could result in injury to our employees or third parties or environmental damage, such as damage resulting from the accidental discharge of hazardous materials used in our production process.

Our product development and manufacturing processes involve the use of chemicals and other hazardous materials. These programs and processes expose us to risks of accidental contamination, events of non-compliance with environmental, health and safety laws and regulatory enforcement, personal injury, property damage and claims and litigation. If an accident occurs, or if contamination is discovered, we could be liable for clean-up obligations, damages or fines and could incur significant capital expenditures, which could have an adverse effect on our business, financial condition and results of operations.

In addition, the environmental laws of the jurisdictions in which we operate may impose obligations to clean up contaminated sites. These obligations may relate to sites that we acquire, own, occupy or operate, that we formerly owned, occupied or operated, or for which we may otherwise have retained liability or where waste from our operations was disposed. Were such environmental clean-up obligations to arise, they could significantly reduce our profitability. In particular, any financial accruals which we may make for these obligations might be insufficient if the assumptions underlying the accruals prove to be incorrect, or if we are held responsible for additional contamination.

We are also subject to various national and local laws and regulations pertaining to occupational health and safety that require us to maintain a safe workplace environment, maintain documentation of work-related injuries, illnesses and fatalities, complete workers’ compensation loss reports, review the status of outstanding workers’ compensation claims and complete certain annual filings and postings. Failure to comply with these and other applicable occupational health and safety requirements could result in fines and penalties and could require us to undertake certain remedial actions or be subject to suspension of certain operations. From time to time, our employees are involved in health and safety-related incidents at our production facilities. These incidents have resulted and could result in the future in regulatory investigations and penalties, as well as regulatory and private claims.

Stricter environmental, health and safety laws and enforcement policies could result in substantial costs and liabilities for us, and could result in the handling, manufacture, use, reuse or disposal of substances or pollutants being subject to greater scrutiny by relevant regulatory authorities than is currently the case. Compliance with these laws could result in significant capital expenditures, as well as other costs, thereby potentially having a material adverse effect on our business, financial condition and results of operations.

The UK City Code on Takeovers and Mergers, or the Takeover Code, may apply to the Company.

The Takeover Code applies, among other things, to an offer for a public company whose registered office is in the UK (or the Channel Islands or the Isle of Man) and whose securities are not admitted to trading on a regulated market in the UK (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the “Takeover Panel”) to have its place of central management and control in the UK (or the Channel Islands or the Isle of Man). This is known as the “residency test.” Under the Takeover Code, the Takeover Panel will determine whether the BIRKENSTOCK Group’s place of central management and control is in the UK by looking at various factors, including the structure of the Company’s board of directors, the functions of the directors of our board of directors and where they are resident.

If at the time of a takeover offer, the Takeover Panel determines that the BIRKENSTOCK Group’s place of central management and control is in the UK, the Company would be subject to a number of rules and

 

59


Table of Contents

restrictions, including but not limited to the following: (i) the Company’s ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) the Company might not, without the approval of shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) the Company would be obliged to provide equality of information to all bona fide competing bidders.

Upon completion of the offering, the Company expects a majority of its board of directors to reside outside of the UK, the Channel Islands and the Isle of Man. Accordingly, based upon the Company’s current board and management structure and its intended plans for its directors and management and the directors and management of the rest of the BIRKENSTOCK Group, for the purposes of the Takeover Code, the BIRKENSTOCK Group is considered to have its place of central management and control outside the UK, the Channel Islands or the Isle of Man. The Takeover Code is not expected to apply to the Company. It is possible that, in the future, circumstances, in particular the composition of our board of directors, could change, which may cause the Takeover Code to apply to us.

We may be exposed to transfer price risks in connection with our operating activities.

We take advantage of our international network and centralize our strategic functions. In particular, we transfer and provide goods and services among our corporate group and have adopted a corporate tax transfer pricing model for the billing of intercompany services. There is a risk that tax authorities in individual countries will assess the relevant transfer prices differently from our tax transfer pricing model and address retroactive tax claims against our subsidiaries. Our tax transfer pricing model has not yet been agreed between the competent authorities and there can be no assurance that our transfer prices will be accepted by all the relevant authorities. If they fail to be accepted, this could have a material adverse effect on our business, financial condition and results of operations.

We are subject to complex tax laws, and challenges to our tax position could adversely affect our business, financial condition and results of operations.

We are subject to complex tax laws and regulations. We rely on generally available interpretations of applicable tax laws and regulations. We cannot be certain that the relevant tax authorities are in agreement with our interpretation of these laws and regulations. If our tax positions are challenged by relevant tax authorities, the imposition of additional taxes could require us to pay taxes that we currently do not collect or increase the costs of our products to track and collect such taxes. We also face increasingly burdensome compliance and reporting requirements relating to such tax laws and regulations. Any of the foregoing could increase our costs of operations and have a negative effect on our reputation, business, financial condition and results of operations.

Tax legislation may be enacted in the future that could negatively impact our current or future tax structure and effective tax rates.

Long-standing international tax initiatives that determine each country’s jurisdiction to tax cross-border international trade and profits are evolving as a result of, among other things, initiatives such as the Anti-Tax Avoidance Directives, as well as the Base Erosion and Profit Shifting reporting requirements, mandated and/or recommended by the EU, G8, G20 and Organization for Economic Cooperation and Development, including the imposition of a minimum global effective tax rate for multinational businesses regardless of the jurisdiction of operation and where profits are generated (Pillar Two). As these and other tax laws and related regulations change (including changes in the interpretation, approach and guidance of tax authorities), our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely affect our financial results.

 

60


Table of Contents

We are exposed to tax risks, which could arise in particular as a result of tax audits or past measures.

Due to the global nature of our business, we are subject to income and other taxes in multiple jurisdictions. Significant judgment and estimation are required in determining our calculation and provision for income, sales, value-add and other taxes, including withholding taxes. In the ordinary course of our business, there are various transactions, including, for example, intercompany transactions based on cross-jurisdictional transfer pricing and transactions with specific documentation requirements, for which the ultimate tax assessment or the timing of the tax effect is uncertain and for which we have not received rulings from governmental authorities. We are audited regularly by tax authorities in Germany and from time to time by tax authorities in other jurisdictions. During such audits, our tax calculations and our interpretation of laws are reviewed by the applicable tax authorities, which may disagree with our tax estimates or judgments. Although we believe our tax estimates are reasonable, the final determination of any such tax audits or reviews could differ from our tax provisions and accruals and any additional tax liabilities resulting from such final determination or any interest or any penalties or any regulatory, administrative or other sanctions relating thereto could have a material adverse effect on our business, financial condition and results of operations.

While we attempt to assess in advance the likelihood of any adverse judgments or outcomes to these proceedings or claims, it is difficult to predict final outcomes with any degree of certainty. The final determination of any tax investigation, tax audit, tax review, tax litigation and appeal of a tax authority’s decision or similar proceedings may differ materially from any estimate that may be reflected in our financial statements. An adverse outcome could have a material adverse effect on our business, financial condition and results of operations. In addition, changes in tax legislation or guidance could result in additional taxes and/or affect our tax rate, the carrying value of deferred tax assets or our deferred tax liabilities. Any tax audit, tax proceeding or changes in tax legislation or guidance could, as a result of the realization of any of the above risks, have a material adverse effect on our business, financial condition and results of operations.

In addition, certain Company entities were in the past or are currently part of fiscal unities, tax groups and other tax consolidation schemes. We cannot ensure that these entities will not be held liable for unpaid taxes of the members of such tax consolidation schemes (including members outside of our group) under statutory law or the contracts which formed or form the basis for the tax consolidation schemes. Furthermore, should such tax consolidation schemes not be accepted by the tax authorities and/or a tax court, taxes, interest and penalties may be imposed against entities of our group. Such liabilities may be substantial and could have a material adverse effect on our business, financial condition and results of operations.

The anticipated benefits of the conversion (by way of re-domiciliation) of our Company from a Luxembourg private limited company to a Jersey public limited company may not be realized.

We may not realize the benefits we anticipate from having converted (by way of re-domiciliation) the legal form of our Company from a Luxembourg private limited company to a Jersey private company and, prior to the consummation of this offering, to a Jersey public limited company. Such conversions may result in greater than expected costs or encounter other difficulties. Our failure to realize the anticipated benefits could have an adverse effect on our business, financial condition and results of operations.

Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on our business and financial performance.

Many of the laws, rules or regulations imposing taxes and other similar obligations were established before the growth of the internet and e-commerce. Tax authorities in non-U.S. jurisdictions and at the U.S. federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in

 

61


Table of Contents

e-commerce and considering changes to existing tax or other laws that could regulate our transmissions and/or levy sales, income, consumption, use or other taxes relating to our activities, and/or impose obligations on us to collect such taxes. For example, in March 2018, the European Commission proposed new rules for taxing digital business activities in the EU. In addition, state and local taxing authorities in the United States and taxing authorities in other countries have identified e-commerce platforms as a means to calculate, collect and remit indirect taxes for transactions taking place over the internet. Multiple U.S. states have enacted related legislation and other states are now considering such legislation. Furthermore, the U.S. Supreme Court recently held in South Dakota v. Wayfair that a U.S. state may require an online retailer to collect sales taxes imposed by that state, even if the retailer has no physical presence in that state, thus permitting a wider enforcement of such sales tax collection requirements. Such legislation could require us or our retailers and brands to incur substantial costs in order to comply, including costs associated with legal advice, tax calculation, collection, remittance and audit requirements, which could make selling in such markets less attractive and could adversely affect our business.

We cannot predict the effect of current attempts to impose taxes on commerce over the internet. If such tax or other laws, rules or regulations were amended, or if new unfavorable laws, rules or regulations were enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our products if we pass on such costs to the consumer, result in increased costs to update or expand our technical or administrative infrastructure or effectively limit the scope of our business activities if we decided not to conduct business in particular jurisdictions. As a result, these changes may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Tax Receivable Agreement

We expect to enter into a tax receivable agreement that will require us to make payments in relation to certain tax attributes of Birkenstock and its subsidiaries to our pre-IPO owner (or certain transferees or successors), and such payments are expected to be substantial.

We expect to enter into a tax receivable agreement with our pre-IPO owner, MidCo, that will require us to make payments to the TRA Participants (who initially shall be solely MidCo) equal to 85% of certain tax savings (or expected tax savings) in respect of the TRA Tax Attributes (as defined below) that were created by MidCo’s acquisition of the BIRKENSTOCK Group in 2021 or that are otherwise available to the Company as of the date of this offering. Under the TRA, generally, we will retain the benefit of the remaining 15% of the applicable tax savings. See Related Party Transactions—Tax Receivable Agreement. The timing of payments under the TRA will vary depending upon a number of factors, including the amount, character and timing of our and our subsidiaries’ taxable income in the future. These payments are expected to be substantial and will be made only to the TRA Participants, rather than to all of our shareholders. These payments could have a material adverse effect on our business, financial condition and results of operations. To the extent that we are unable to make payments under the TRA as a result of the terms of our debt agreements, such payments will be deferred and will accrue interest at a rate of SOFR plus 3.00% until paid.

The TRA will contain provisions that require, in certain cases, the acceleration of payments under the TRA to the TRA Participants, or payments which may significantly exceed the actual tax benefits we realize in respect of the TRA Tax Attributes.

The terms of the TRA will, in certain circumstances, including an early termination, certain changes of control, or breaches of any of our material obligations under it (such as a failure to make any payment when due, subject to a specified cure period), provide for our obligations under the TRA to accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have at such time sufficient taxable income to fully utilize the TRA Tax Attributes. Additionally, if we or any of our subsidiaries transfer any asset to a corporation with which we do not file a consolidated or combined tax return for applicable tax purposes, we will be treated as having sold that asset in a taxable transaction for purposes of determining

 

62


Table of Contents

certain amounts payable under the TRA. Similarly, in the event of a divestiture of any of our subsidiaries directly or indirectly resulting in a transfer of TRA Tax Attributes, the terms of the TRA will provide for obligations under the TRA in respect of such transferred TRA Tax Attributes to accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits with respect to such TRA Tax Attributes calculated based on the same assumptions applicable to the calculation of accelerated payment obligations in the circumstances described above (e.g., in the case of an early termination, certain changes of control, or breaches of any of our material obligations under the TRA). Further, although we do not believe that payments to MidCo under the TRA are subject to withholding tax, in case any such withholding tax were determined to apply, the Company could be liable for the taxes which should have been withheld, plus any applicable interest and penalties. As a result of the foregoing, (a) we could be required to make payments under the TRA that are greater than the specified percentage of the actual tax savings we realize in respect of the TRA Tax Attributes and (b) we may be required to make an immediate lump sum payment equal to the present value of the anticipated future tax savings, which payment may be required to be made years in advance of the actual realization of such future benefits, if any such benefits are ever realized. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of adversely affecting our working capital and growth, and of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. If we were to elect to terminate the TRA immediately after this offering, we estimate that we would be required to pay under the TRA an amount equal to the present value of the gross amount of approximately $550 million.

In addition, payments under the TRA will be based on the tax reporting positions that we determine, consistent with the terms of the TRA. No TRA Participant will be required under any circumstances to make a payment or return a payment to us in respect of any portion of any payment previously made to such TRA Participant under the TRA if a tax reporting position relating to the TRA Tax Attributes is challenged. If it is determined that excess payments have been made under the TRA, certain future payments, if any, otherwise to be made will be reduced. As a result, in certain circumstances, including, for example, if a previously claimed deduction is subsequently disallowed, payments could be made under the TRA in amounts that exceed the specified percentage of the actual tax savings we realize in respect of the TRA Tax Attributes.

Risks Related to Our Indebtedness

We have a substantial amount of debt, and our substantial leverage and debt service obligations could materially adversely affect our business, financial position and results of operations and preclude us from satisfying our debt obligations.

As of June 30, 2023, after giving effect to this offering and the use of proceeds therefrom, we had total indebtedness in the amount of 1,413.5 million (equivalent), primarily comprised of the Senior Term Facilities, the ABL Facility, the Notes, the Vendor Loan and certain existing real estate facilities. We anticipate that our high leverage will continue to exist for the foreseeable future. Our substantial indebtedness may: make it more difficult for us to satisfy our debt obligations and liabilities we may incur; increase our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions; require the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures, product research and development or for other general corporate purposes; restrict us from pursuing acquisitions or exploiting business opportunities; limit our flexibility in planning for, or reacting to, changes in our business, the competitive environment and the industry in which we operate; negatively impact credit terms with our suppliers and other creditors; increase our exposure to interest rate increases because some of our indebtedness bears a floating rate of interest; place us at a competitive disadvantage compared to our competitors that are not as highly leveraged; limit our ability to obtain additional financing to fund future operations, capital expenditures, business opportunities, acquisitions and other general corporate purposes and increasing the cost of any future

 

63


Table of Contents

borrowings; and limit our ability to obtain additional capacity for issuance of bid, advance payment, performance and warranty guarantees for operative business purposes and increasing the cost of any future guarantee issuances.

Any of these or other consequences or events could have a material adverse effect on our business, financial condition and results of operations.

We may incur more debt in the future, which may make it difficult for us to service our debt and impair our ability to operate our businesses.

Despite our substantial leverage, we may incur additional debt in the future. Although the Senior Term Facilities Agreement and the Indenture contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our existing debt levels, the related risks that we now face would increase. In addition, the Senior Term Facilities Agreement and the Indenture do not prevent us from incurring obligations that do not constitute indebtedness under those agreements. Our inability to service our debt could have a material adverse effect on our business, financial condition and results of operations.

We are subject to restrictive covenants that limit our operating and financial flexibility.

The Senior Term Facilities Agreement and the Indenture contain covenants which impose significant operating and financial restrictions on us. These agreements limit our ability to, among other things: incur or guarantee additional indebtedness or issue certain preferred stock; make certain restricted payments and investments; transfer or sell assets; enter into transactions with affiliates; create or incur certain liens; make certain loans, investments or acquisitions; issue or sell share capital of certain of our subsidiaries; create or incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us; take certain actions that would impair the security interests in the collateral granted for the benefit of the holders of the Notes; merge, consolidate or transfer all or substantially all of our assets and pay or redeem subordinated debt or equity. See “Description of Material Indebtedness.”

All of these limitations are subject to significant exceptions and qualifications. Nevertheless, the covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest. Failure to comply with such covenants could result in an event of default and, as a result, our lenders could accelerate all of the amounts due.

We require a significant amount of cash to service our debt and sustain our operations, which we may not be able to generate or raise.

Our ability to make principal or interest payments when due on our indebtedness and to fund our ongoing operations and future capital expenditures depends on our future performance and ability to generate cash, which, to a certain extent, is subject to the success of our business strategy as well as general economic, financial, competitive, legislative, legal, regulatory and other factors, as well as other factors discussed in these “Risk Factors,” many of which are beyond our control.

We cannot assure you that our business will generate sufficient cash flows from operations, that currently anticipated growth, cost savings or efficiencies will be realized or that future debt financing will be available to us in an amount sufficient to enable us to pay our debts when due or to fund our other liquidity needs including the repayment of our debt at maturity. At the respective maturities of the Senior Term Facilities, the Notes or any other debt that we may incur, if we do not have sufficient cash flows from operations and other capital resources to pay our debt obligations, or to fund our other liquidity needs, we may be required to refinance or restructure our indebtedness.

 

64


Table of Contents

If our future cash flows from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt on or before maturity.

The type, timing and terms of any future financing, restructuring, asset sales or other capital raising transactions will depend on our cash needs and the prevailing conditions in the financial markets. We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In such an event, we may not have sufficient assets to repay any portion or all of our debt.

We are a holding company and depend upon our subsidiaries for our cash flows.

We are a holding company. All of our operations are conducted, and almost all of our assets are owned, by our subsidiaries. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiaries and the payment of funds by our subsidiaries to us in the form of dividends, distributions or otherwise. The ability of our subsidiaries to make any payments to us depends on its earnings, the terms of its indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiaries when needed could have a material adverse effect on our business, financial condition and results of operations.

Some of our indebtedness, including the Senior Term Facilities, bears interest at floating rates that could rise significantly, thereby increasing our costs and reducing our cash flow.

Debt under the Senior Term Facilities bears interest at a variable rate based on EURIBOR for Euro loans (subject to a zero floor if less than zero) and the forward-looking term rate based on SOFR plus the applicable credit adjustment spread (subject to a 0.5% floor if less than 0.5%) for U.S. Dollar loans in each case, plus an applicable margin. These interest rates have risen significantly recently and could continue to rise in the future, increasing our interest expense associated with these obligations, reducing cash flow available for capital expenditures and hindering our ability to make payments on our debt. Neither the Senior Term Facilities Agreement nor the Indenture contain a covenant requiring us to hedge all or any portion of our floating rate debt. However, hedging measures have been taken in the form of a limited interest rate cap for the floating-rate EUR debt.

Although we may continue to enter into, extend or maintain certain hedging arrangements designed to fix a portion of these rates, there can be no assurance that hedging will continue to be available on commercially reasonable terms. Hedging itself carries certain risks, including that we may need to pay a significant amount (including costs) to terminate any hedging arrangements. To the extent interest rates were to rise significantly, our interest expense would correspondingly increase, thus reducing cash flow.

Risks Related to Our Ordinary Shares and the Offering

Our Principal Shareholder controls us, and their interests may conflict with ours or yours in the future.

Immediately following this offering, our Principal Shareholder will beneficially own approximately 82.8% of our ordinary shares (or 80.2% if the underwriters exercise in full their option to purchase additional ordinary shares), with each ordinary share entitling the holder to one vote on all matters submitted to a vote of our shareholders. Moreover, we will agree to nominate to our board of directors individuals designated by MidCo, which is controlled by our Principal Shareholder, in accordance with our shareholders’ agreement. For so long as MidCo beneficially owns at least a majority of our ordinary shares, it will be entitled to designate for nomination a majority of our board of directors and effectively control the composition of our board of directors and the approval of actions requiring shareholder approval through their voting power. Even when MidCo ceases to own a majority of our ordinary shares, for so long as MidCo continues to own at least 5% of our ordinary

 

65


Table of Contents

shares, it will be entitled to designate for nomination a number of directors in proportion to its ownership of our ordinary shares, rounded up to the nearest whole person. In addition, at any time that our Principal Shareholder owns at least 40% of the Company’s voting power, shareholders are permitted to take action by written consent if approved by a majority of the voting power of the Company, or two-thirds of the voting power of the Company, when required by Jersey law, and directors may be removed with or without cause by a majority of the voting power of the Company. See “Related Party Transactions — Shareholders’ Agreement” and “Description of Share Capital and Articles of Association — Ordinary Shares.” Accordingly, for such periods of time, our Principal Shareholder will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. In particular, for so long as our Principal Shareholder continue to own a significant percentage of our ordinary shares, our Principal Shareholder will be able to cause or prevent a change of control of our Company or a change in the composition of our board of directors, and could preclude any unsolicited acquisition of our Company. The concentration of ownership could deprive you of an opportunity to receive a premium for your ordinary shares as part of a sale of our Company and ultimately might affect the market price of our ordinary shares.

Our Articles of Association contain provisions that could delay, discourage or prevent a takeover attempt even if a takeover attempt might be beneficial to our shareholders, and such provisions may adversely affect the market price of our ordinary shares.

Provisions contained in our Articles of Association (as defined herein) could make it more difficult for a third party to acquire us. For example, our Articles of Association authorize our board of directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred shares without any vote or action by our shareholders. Thus, our board of directors can authorize and issue preferred shares with voting or conversion rights that could adversely affect the voting or other rights of holders of our ordinary shares. These rights may have the effect of delaying, discouraging or preventing a takeover attempt of our Company even if a takeover attempt might be beneficial to our shareholders. Additionally, our Articles of Association impose various procedural and other requirements that could make it more difficult for shareholders to effect certain corporate actions. For example, our Articles of Association include advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at shareholder meetings. Any of these provisions could also limit the price that certain investors might be willing to pay in the future for our ordinary shares. See “Description of Share Capital and Articles of Association” and “Comparison of Delaware Corporate Law and Jersey Corporate Law.”

Our Articles of Association will not limit the ability of our Principal Shareholder to compete with us, and they and certain of our directors may have investments in businesses whose interests conflict with ours.

Our Principal Shareholder and their respective affiliates engage in a broad spectrum of activities, including investments in businesses that may compete with us. In the ordinary course of their business activities, our Principal Shareholder and their respective affiliates may engage in activities in which their interests conflict with our interests or those of our shareholders. Our Articles of Association provide that none of our Principal Shareholder or any of their respective affiliates or any of our directors who are not employed by us (including any non-employee director who serves as one of our officers in both his or her director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. See “Description of Share Capital and Articles of Association — Conflicts of Interest.” Our Principal Shareholder and their respective affiliates also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, our Principal Shareholder may have an interest in our pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to us and our shareholders.

 

66


Table of Contents

As a foreign private issuer and “controlled company” within the meaning of the NYSE corporate governance rules, we are permitted to, and we will, rely on exemptions from certain of the NYSE corporate governance standards. Our reliance on such exemptions may afford less protection to holders of our ordinary shares.

The corporate governance rules of the NYSE require listed companies to have, among other things, a majority of independent directors and independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, we are permitted to, and we will, follow home country practice in lieu of the above requirements. As long as we rely on the foreign private issuer exemption to certain of the NYSE corporate governance standards, a majority of the directors on our board of directors are not required to be independent directors, we are not required to have a compensation committee composed entirely of independent directors and director nominations are not required to be made, or recommended to our full board of directors, by our independent directors or by a nominations committee that consists entirely of independent directors. Therefore, our board of directors’ approach to governance may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, the management oversight of our Company may be more limited than if we were subject to all of the NYSE corporate governance standards. We are also subject to certain reduced disclosure obligations as a result of being a foreign private issuer. As such, investors will not have access to the same information as for similar companies that are not foreign private issuers.

In the event we no longer qualify as a foreign private issuer, if then applicable, we may rely on the “controlled company” exemption under the NYSE corporate governance rules. A “controlled company” under the NYSE corporate governance rules is a company of which more than 50% of the voting power is held by an individual, group or another company. Following this offering, our Principal Shareholder will control a majority of the combined voting power of our outstanding shares, making us a “controlled company” within the meaning of the NYSE corporate governance rules. As a controlled company, we are eligible to, and, in the event we no longer qualify as a foreign private issuer, we may, elect not to comply with certain requirements of the NYSE corporate governance standards, including (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that we have a compensation committee that is composed entirely of independent directors and (iii) the requirement that our director nominations be made, or recommended to our full board of directors, by our independent directors or by a nominations committee that consists entirely of independent directors.

Accordingly, our shareholders will not have the same protection afforded to shareholders of companies that are subject to all of the NYSE corporate governance standards, and the ability of our independent directors to influence our business policies and affairs may be reduced.

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We qualify as a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as soon as March 31, 2024 (the end of our second fiscal quarter in the fiscal year after this offering), which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers as of October 1, 2024. In order to maintain our current status as a foreign private issuer, either (i) a majority of our outstanding voting securities must be either directly or indirectly owned of record by nonresidents of the United States or (ii)(a) a majority of our executive officers or directors may not be United States citizens or residents, (b) more than 50% of our assets cannot be located in the United States and (c) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers, and would require us to present our financial statements in accordance with U.S. GAAP, which could be time consuming and costly.

 

67


Table of Contents

We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it may be more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.

We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, our ultimate use may vary substantially from our currently intended use. Investors will need to rely upon the judgment of our management with respect to the use of proceeds. Pending use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and sovereign debt that may not generate a high yield for our shareholders. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition and results of operations could be harmed and the market price of our ordinary shares could decline.

Future sales of our ordinary shares in the public market could cause the market price of our ordinary shares to decline.

Sales of a substantial number of our ordinary shares in the public market following the completion of this offering, or the perception that these sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities. Many of our existing equity holders have substantial unrecognized gains on the value of the equity they hold based upon the price of this offering, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our ordinary shares. All of the ordinary shares sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.

We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, or file with, the SEC a registration statement under the Securities Act relating to, any of our ordinary shares or securities convertible into or exercisable or exchangeable for any of our ordinary shares, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any ordinary shares or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of ordinary shares or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC (together, the “Representatives”) for a period of 180 days after the date of this prospectus, other than our ordinary shares to be sold in this offering. The lock-up agreement is subject to specified exceptions. These agreements are further described in the sections titled “Ordinary Shares Eligible for Future Sale” and “Underwriting.”

 

68


Table of Contents

Notwithstanding the foregoing, such restricted period may be terminated earlier under certain circumstances.

After the expiration of such lock-up agreements or market stand-off provisions, or if such restrictions are waived, if these shareholders sell substantial amounts of ordinary shares in the public market or if the market perceives that such sales may occur, the market price of our ordinary shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected.

You will experience immediate and substantial dilution in the net tangible book value of the ordinary shares you purchase in this offering.

The initial public offering price of our ordinary shares will be substantially higher than the as adjusted net tangible book value per share immediately after this offering. If you purchase ordinary shares in this offering, you will suffer immediate dilution of $49.30 per share (45.19 per share), representing the difference between our as adjusted net tangible book value per share as of June 30, 2023 after giving effect to the capital reorganization and the sale of ordinary shares in this offering and the assumed public offering price of $46.50 per share (42.63 per share), the midpoint of the price range set forth on the cover page of this prospectus. See “Dilution.”

We do not intend to pay cash dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares.

We have never declared or paid any cash dividends on our share capital, and we do not intend to pay any cash dividends in the foreseeable future. Any future proposals at our shareholders’ meeting or decisions of our board of directors to pay dividends in the future will be at the discretion of our board of directors after taking into account various factors, including our cash requirements, financial performance and new product development and subject to approval by the general meeting of shareholders. In addition, payment of future dividends is subject to certain limitations pursuant to Jersey law. See “Description of Share Capital and Articles of Association — Ordinary Shares — Dividend and Liquidation Rights.” Accordingly, you may need to rely on sales of our ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.

We are incorporated under Jersey law. The rights of holders of ordinary shares are governed by Jersey law, including the Jersey Companies Law, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See “Comparison of Delaware Corporate Law and Jersey Corporate Law” in this prospectus for a description of the principal differences between the provisions of the Jersey Companies Law applicable to us and the Delaware General Corporation Law relating to shareholders’ rights and protections.

Jersey is a British crown dependency and an island located off the coast of Normandy, France. Jersey is not a member of the EU. Jersey legislation regarding companies is largely based on English corporate law principles. However, there can be no assurance that Jersey law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.

U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or our board of directors.

We are a corporation organized and incorporated under the laws of Jersey with our registered office and domicile in Jersey and the majority of our assets are located outside of the United States. Moreover, a number of our directors and executive officers are not residents of the United States, and all or a

 

69


Table of Contents

substantial portion of the assets of such persons are or may be located outside the United States. As a result, investors may not be able to effect service of process within the United States upon the Company or upon such persons, or to enforce judgments obtained against the Company or such persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. It is uncertain as to whether the courts of Jersey would entertain original actions based on U.S. federal or state securities laws, or enforce judgments from U.S. courts against us or our officers and directors which originated from actions alleging civil liability under U.S. federal or state securities laws.

The United States and Jersey do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, may not be enforceable in Jersey, as applicable. See “Enforcement of Judgments.”

General Risk Factors

Natural disasters, public health crises, political crises and instability, civil unrest and other catastrophic events or events outside of our control may adversely affect our business.

Natural disasters, such as fires, earthquakes, power shortages or outages, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, civil unrest, political instability or other conflict, or other events outside of our control have in the past, and may in the future, adversely impact our revenues. In particular, our business may be materially adversely affected by events that could generally deter consumers from shopping in store, both in relation to retail stores directly managed by us as well as in relation to stores or outlets supplied by us or our wholesale partners. Such events could also disrupt the internet or mobile networks and may also prevent or deter consumers from shopping through our e-commerce business, which could materially adversely affect our revenues.

In addition, if any of our facilities, including our distribution facilities, our own retail stores, the facilities or stores of our wholesale partners or the facilities of our suppliers, distributors or any of our other third-party service providers are affected by any such natural disasters, catastrophic events or other events outside of our control, our business, financial condition and results of operations could be materially adversely affected. Moreover, these types of events could negatively impact consumer spending in the impacted regions or, depending upon the severity, globally, which could have a material adverse effect on our business, financial condition and results of operations.

There is no existing market for our ordinary shares, and we do not know whether one will develop to provide you with adequate liquidity. If our share price fluctuates after this offering, you could lose a significant part of your investment.

Prior to this offering, there has not been a public market for our ordinary shares. If an active trading market does not develop, you may have difficulty selling any of our ordinary shares that you buy. We cannot predict the extent to which investor interest in our Company will lead to the development of an active trading market on the NYSE or otherwise or how liquid that market might become. The initial public offering price for the ordinary shares will be determined by negotiations between us, the selling shareholders and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our ordinary shares at prices equal to or greater than the price paid by you in this offering. In addition to the risks described above, the market price of our ordinary shares may be influenced by many factors, some of which are beyond our control, including actual or anticipated variations in our operating results; the failure of financial analysts to cover our ordinary shares after this offering or changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates or changes in the recommendations of any financial analysts that elect to follow our ordinary shares or the shares of our competitors; announcements by us or our competitors of significant contracts or acquisitions; technological innovations by us or our competitors; future sales of our shares; and investor perceptions of us and the industries in which we operate.

 

70


Table of Contents

In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies’ securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations. If a market for our ordinary shares does not develop or is not maintained, the liquidity and price of our ordinary shares could be seriously adversely affected.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our ordinary shares, the price of our ordinary shares could decline.

The trading market for our ordinary shares will rely in part on the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or securities analysts. If no or few analysts commence coverage of us, the trading price of our ordinary shares would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our ordinary shares, the price of our ordinary shares could decline. If one or more of these analysts cease to cover our ordinary shares, we could lose visibility in the market for our stock, which in turn could cause the price of our ordinary shares to decline.

We will incur significant expenses and devote other significant resources and management time as a result of being a public company, which may negatively impact our financial performance and could cause our results of operations and financial condition to suffer.

We will incur significant legal, accounting, insurance and other expenses as a result of being a public company. The rules implemented by the SEC, the NYSE and the securities regulators in Jersey have required changes in corporate governance practices of public companies. We expect that compliance with these laws, rules and regulations and the move from a private to a public company will substantially increase our expenses, including our legal, accounting and information technology costs and expenses, and make some activities more time consuming and costly, and these new obligations will require attention from our senior management and could divert their attention away from the day-to-day management of our business. We also expect these laws, rules and regulations and the move from a private to a public company to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Due to increased risks and exposure it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as officers. As a result of the foregoing, we expect a substantial increase in legal, accounting, insurance and certain other expenses in the future, which will negatively impact our financial performance and could cause our results of operations and financial condition to suffer. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our ordinary shares, fines, sanctions and other regulatory action and potentially civil litigation, which could adversely impact our business, financial condition and results of operations.

We have identified material weaknesses in our internal control over financial reporting in connection with the preparation of our IFRS financial statements. If we fail to remediate our material weaknesses or if we fail to establish and maintain an effective system of internal control over financial reporting when we are subject to compliance with the Sarbanes-Oxley Act of 2002, we may not be able to report our financial results accurately, meet our reporting obligations or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our business and adversely impact the trading price of our securities.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of

 

71


Table of Contents

a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

Prior to this offering, we have had limited accounting personnel with adequate knowledge of IFRS and other resources with which to address our internal controls and procedures. In addition, we have historically prepared our books and records in accordance with German GAAP. Our books and records were then converted to IFRS, with the assistance from outside advisors, for purposes of this offering, by accounting personnel who have limited experience in maintaining books and records and preparing financial statements under IFRS.

In connection with the preparation of our IFRS financial statements, we identified two material weaknesses, related to (i) a lack of sufficient accounting and supervisory personnel with the appropriate level of technical accounting experience and training and (ii) a lack of internal controls and processes, including a lack of segregation of duties and oversight of advisors, related to our financial statement close process, income taxes and cash flow statement presentation. These deficiencies represent material weaknesses in our internal control over financial reporting in both design and operation.

We have identified the measures required to remediate the material weaknesses. We have initiated the hiring of additional staff that will address these needs. These individuals will be required to have sufficient experience in maintaining books and records and preparing financial statements in accordance with IFRS. Additionally, we will expand our accounting policies and procedures as well as provide additional training to our accounting and finance staff to remediate the second material weakness. Further, we plan to formalize existing and implement additional internal control procedures to improve the financial reporting process.

While we are working to remediate these material weaknesses as quickly and efficiently as possible, at this time we cannot provide an estimate of costs expected to be incurred in connection with implementing this remediation plan. These remediation measures may be time consuming, costly and might place significant demands on our financial and operational resources. If we are unable to successfully remediate these material weaknesses, and if we are unable to produce accurate and timely financial statements, our financial statements could contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our securities to decline.

Upon completion of this offering, we will be subject to Section 404 of the Sarbanes-Oxley Act of 2002 which requires that we include a report of management on our internal control over financial reporting in our second annual report on Form 20-F. In addition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting in our second annual report on Form 20-F. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions.

The value of goodwill, brand names or other intangible assets reported in our financial statements may need to be partially or fully impaired as a result of revaluations.

As of June 30, 2023, our carrying amount of intangible assets, including goodwill, recorded on our consolidated statement of financial position was 3,267.2 million. Due to any potential adjustments, future financial statements for the Company could be materially different and may not be comparable to our financial statements included elsewhere in this prospectus, including, but not limited to, risk of impairment

 

72


Table of Contents

of goodwill and intangible and tangible assets, increased depreciation and amortization expenses over the remaining lives of acquired assets and recognition of temporary differences at an acquisition date. This could in turn have a material adverse effect on our business, financial condition and results of operations. See “Presentation of Financial and Other Information — Financial Statements.”

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with IFRS accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances at the time of the estimate, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenues and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, trade receivables allowance, leases, intangible assets, share-based compensation, employee benefits, provisions and taxes. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our ordinary shares.

 

73


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this prospectus can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. Forward-looking statements provide our current expectations, intentions or forecasts of future events. Forward-looking statements include statements about expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not statements of historical fact. Words or phrases such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those expected in our forward-looking statements for many reasons, including the factors described in “Risk Factors.” In addition, even if our actual results are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. For example, factors that could cause our actual results to vary from projected future results include, but are not limited to:

 

   

our dependence on the image and reputation of the BIRKENSTOCK brand;

 

   

the continued effects of the COVID-19 pandemic;

 

   

the intense competition we face from both established companies and newer entrants into the market;

 

   

our ability to execute our DTC growth strategy and risks associated with our e-commerce platforms;

 

   

our ability to adapt to changes in consumer preferences and attract new customers;

 

   

harm to our brand and market share due to counterfeit products;

 

   

our ability to successfully operate and expand retail stores;

 

   

losses and liabilities arising from leased and owned real estate;

 

   

risks relating to our non-footwear products;

 

   

failure to realize expected returns from our investments in our businesses and operations;

 

   

our ability to adequately manage our acquisitions, investments or other strategic initiatives;

 

   

our ability to manage our operations at our current size or manage future growth effectively;

 

   

our dependence on third parties for our sales and distribution channels;

 

   

risks related to the conversion of wholesale distribution markets to owned and operated markets and risks related to productivity or efficiency initiatives;

 

   

operational challenges relating to the distribution of our products;

 

   

deterioration or termination of relationships with major wholesale partners;

 

   

seasonality, weather conditions and climate change;

 

   

adverse events influencing the sustainability of our supply chain or our relationships with major suppliers or increases in raw materials or labor costs;

 

   

our ability to effectively manage inventory;

 

74


Table of Contents
   

unforeseen business interruptions and other operational problems at our production facilities;

 

   

disruptions to our shipping and delivery arrangements;

 

   

failure to attract and retain key employees and deterioration of relationships with employees, employee representative bodies and stakeholders;

 

   

risks relating to our intellectual property rights;

 

   

risks relating to regulations governing the use and processing of personal data;

 

   

disruption and security breaches affecting information technology systems;

 

   

natural disasters, public health crises, political crises, civil unrest and other catastrophic events beyond control;

 

   

economic conditions impacting consumer spending, such as inflation;

 

   

currency exchange rate fluctuations;

 

   

risks related to litigation, compliance and regulatory matters;

 

   

risks and costs related to corporate responsibility and ESG matters;

 

   

inadequate insurance coverage, or increased insurance costs;

 

   

tax-related risks;

 

   

risks related to our indebtedness;

 

   

risks related to our status as a foreign private issuer and a “controlled company”; and

 

   

other factors discussed under “Risk Factors.”

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

75


Table of Contents

USE OF PROCEEDS

We expect to receive total estimated net proceeds of approximately $450.2 million based on the midpoint of the range set forth on the cover page of this prospectus after deducting estimated underwriting discounts and commissions and expenses of the offering that are payable by us. We will not receive any proceeds from the sale of shares by the selling shareholder.

Each $1.00 increase (decrease) in the public offering price per ordinary share would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions, by $10.3 million. Similarly, each increase (decrease) of 1,000,000 ordinary shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $44.4 million, assuming the assumed initial public offering price of $46.50 per share remains the same, and after deducting estimated underwriting discounts and commissions.

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our ordinary shares and facilitate our future access to the capital markets. We currently intend to use the net proceeds we receive from this offering to repay approximately 100 million of the Vendor Loan and approximately 313 million in aggregate principal amount of borrowings outstanding under the Senior Term Facilities.

As of June 30, 2023, we had 375.0 million and 720.8 million in aggregate principal amount of borrowings outstanding under our EUR TLB Facility and USD TLB Facility, respectively, and 275.0 million in aggregate principal amount outstanding under our Vendor Loan. Our EUR TLB Facility and USD TLB Facility will mature on April 30, 2028 and April 28, 2028, respectively. Interest accrues on our loans under (a) the USD TLB Facility at rates per annum equal to SOFR plus the applicable credit adjustment spread; and (b) the EUR TLB Facility at rates per annum equal to EURIBOR, in each case, plus an applicable margin, which in each case is subject to a decreasing margin ratchet based on the ratio of consolidated senior secured net debt to consolidated pro forma EBITDA. The Vendor Loan accrues interest at 4.37% per annum and matures on October 30, 2029, subject to up to three six-month extensions, at the Company’s option. See “Description of Material IndebtednessSenior Credit Facilities.”

Pending the use of the proceeds from this offering, we intend to invest the net proceeds in short-term, interest-bearing, investment grade securities, certificates of deposit or governmental securities.

 

76


Table of Contents

DIVIDEND POLICY

We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future decisions regarding the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, results of operation, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

77


Table of Contents

CAPITALIZATION

The table below sets forth our cash and cash equivalents, capitalization and indebtedness as of June 30, 2023:

 

   

on an actual basis; and

 

   

on an as adjusted basis to give effect to (i) the capital reorganization and (ii) our sale of the ordinary shares by us in the offering, the receipt of approximately $450.2 million in estimated net proceeds, assuming an offering price of $46.50 per share (the midpoint of the range set forth on the cover of this prospectus), after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, and the application of such estimated net proceeds as described in “Use of Proceeds.

Investors should read this table in conjunction with the sections of this prospectus entitled “Summary Consolidated Financial Information,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Material Indebtedness,” as well as our consolidated financial statements included in this prospectus.

 

     As of June 30, 2023  

(in thousands, unaudited)

   Actual      As Adjusted  

Cash and cash equivalents

     289,609        289,609  
  

 

 

    

 

 

 

Indebtedness(1)

     

Non-current loans and borrowings

     1,798,806        1,386,088  

Current loans and borrowings

     27,374        27,374  

Total indebtedness

     1,826,180        1,413,462  

Equity

     

Ordinary shares

     

Ordinary shares, 1 par value per share, 182,721,369 shares authorized, issued and outstanding, actual; no par value, unlimited shares authorized, 187,825,592 shares issued and outstanding, as adjusted

     182,721        —   

Share premium

     1,894,384        2,730,591  

Treasury stock

     —         (240,768)  

Other capital reserve

     18,085        18,085  

Retained earnings

     254,264        254,264  

Accumulated other comprehensive income

     23,196        23,196  

Total shareholders’ equity

     2,372,651        2,785,368  
  

 

 

    

 

 

 

Total shareholders’ equity and indebtedness

     4,198,831        4,488,439  
  

 

 

    

 

 

 

 

(1)

Our indebtedness consists primarily of our Euro-denominated term loans, our USD-denominated term loans, borrowings under our ABL Facility, our Vendor Loan and our Notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness,” “Description of Material Indebtedness”, Note 11: “Loans and Borrowings” to our unaudited interim condensed consolidated financial statements and Note 17: “Loans and Borrowings” to our audited consolidated financial statements included in this prospectus.

 

78


Table of Contents

The selling shareholder identified herein will receive all net proceeds from the secondary offering of the ordinary shares held by it. Therefore, we will not receive any net proceeds from its secondary offering and our total capitalization will not be impacted by such net proceeds received by the selling shareholder.

 

79


Table of Contents

DILUTION

If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per ordinary share and the as adjusted net tangible book value per ordinary share after this offering. At June 30, 2023, we had a total net tangible book value of $(975.87) million ((894.55) million), corresponding to a net tangible book value of $(5.34) ((4.90)) per ordinary share. Net tangible book value represents the amount of our total assets less our total liabilities, excluding goodwill and other intangible assets. Net tangible book value per ordinary share represents net tangible book value attributable to ordinary shares divided by 182,721,369, the total number of our ordinary shares outstanding at June 30, 2023.

After giving further effect to the sale by us of the 10,752,688 ordinary shares offered by us in the offering, and assuming an offering price of $46.50 (42.63) per ordinary share (the midpoint of the range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our total as adjusted net tangible book value estimated at June 30, 2023 would have been $(525.63) million ((481.84) million), representing $(2.80) ((2.57)) per ordinary share. This represents an immediate increase in net tangible book value of $2.54 (2.33) per ordinary share to existing shareholders and an immediate dilution in net tangible book value of $49.30 (45.19) per ordinary share to new investors purchasing ordinary shares in this offering. Dilution for this purpose represents the difference between the price per ordinary share paid by these purchasers and net tangible book value per ordinary share immediately after the completion of the offering.

The following table illustrates this dilution to new investors purchasing ordinary shares in the offering.

 

Assumed initial public offering price per ordinary share

         $ 46.50      42.63  

Net tangible book value per ordinary share at June 30, 2023

   $ (5.34)      (4.90)        

Increase in net tangible book value per ordinary share attributable to new investors

   $ 2.54      2.33        
  

 

 

    

 

 

       

As adjusted net tangible book value per ordinary share after the offering

           (2.80)        (2.57)  

Dilution per ordinary share to new investors

         $ 49.30      45.19  
        

 

 

    

 

 

 

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $46.50 per ordinary share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our as adjusted net tangible book value per ordinary share after this offering by $0.06 per ordinary share and increase (decrease) the immediate dilution to new investors by $0.94 per ordinary share, in each case assuming the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase of 1,000,000 shares in the number of ordinary shares offered by us would increase our as adjusted net tangible book value by approximately $0.26 per ordinary share and decrease the dilution to new investors by approximately $(0.26) per ordinary share, and each decrease of 1,000,000 shares in the number of ordinary shares offered by us would increase our as adjusted net tangible book value by approximately $(0.26) per ordinary share and decrease the dilution to new investors by approximately $0.26 per share, in each case assuming the assumed initial public offering price of $46.50 per ordinary share remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

80


Table of Contents

The following table summarizes, as of June 30, 2023, on an adjusted basis as described above, the number of our ordinary shares, the total consideration and the average price per share (1) paid to us by existing shareholders and (2) to be paid by new investors acquiring our ordinary shares in this offering at an assumed initial public offering price of $46.50 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

     Shares Purchased      Total Consideration     Average Price  
     Number      Percent     Amount      Percent     Per Share  

Existing shareholders

     177,072,904        94   $ 3,100,068,595        86   $ 17.51  

New investors

     10,752,688        6   $ 500,000,000        14   $ 46.50  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Totals

     187,825,592        100.0   $ 3,600,068,595        100.0   $ 19.17  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

*

The presentation in this table regarding ownership by existing shareholders does not give effect to any purchases that existing shareholders may make through our directed share program or otherwise in this offering.

Each $1.00 increase (decrease) in the assumed initial public offering price of $46.50 per ordinary share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors and total consideration paid by all shareholders by approximately $10.3 million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of ordinary shares offered by us would increase (decrease) the total consideration paid by new investors and total consideration paid by all shareholders by $44.4 million, assuming the assumed initial public offering price of $46.50 per ordinary share remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

81


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements as of June 30, 2023 and September 30, 2022 and for the nine months ended June 30, 2023 and June 30, 2022 and the related notes, our audited consolidated financial statements as of September 30, 2022 and for fiscal 2022 (Successor), as of September 30, 2021 and for the period from May 1, 2021 through September 30, 2021 (Successor), for the period from October 1, 2020 through April 30, 2021 (Predecessor) and as of September 30, 2020 and for fiscal 2020 (Predecessor) and the related notes and the other financial information included elsewhere in this prospectus. This discussion and analysis should also be read together with the sections of this prospectus entitled “Summary Consolidated Financial Information,” “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Overview

BIRKENSTOCK is a revered global brand rooted in function, quality and tradition dating back to 1774. We are guided by a simple, yet fundamental insight: human beings are intended to walk barefoot on natural, yielding ground, a concept we refer to as “Naturgewolltes Gehen.” Our purpose is to empower all people to walk as intended by nature. The legendary BIRKENSTOCK footbed represents the best alternative to walking barefoot, encouraging proper foot health by evenly distributing weight and reducing pressure points and friction. We believe our function-first approach is universally relevant; all humans — anywhere and everywhere — deserve to walk in our footbed.

We primarily generate revenues through the sale of footbed-based products from our broad portfolio of over 700 silhouettes, anchored by our iconic Core Silhouettes, the Madrid, Arizona, Boston, Gizeh and Mayari. We engineer and produce 100% of our products in the EU through our vertically integrated manufacturing operations, thereby ensuring each pair sold meets our rigorous quality standards. Our materials and components are primarily sourced from suppliers in Europe and processed under the highest environmental and social standards in the industry.

Our strongest, most developed segments are the Americas and Europe, which represented 54% and 36% of revenues in fiscal 2022, respectively. Our APMA segment has demonstrated considerable growth potential, which has not been fully realized historically due to the finite nature of our product supply as a result of limited production capacities, and our deliberate decisions to prioritize the Americas and Europe.

We optimize growth and profitability through a multi-channel DTC and B2B distribution strategy that we refer to as engineered distribution. We operate our channels synergistically, seeking to grow both simultaneously. We utilize 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. Across both channels, we execute a strategic allocation and product segmentation process, often down to the single door level, to ensure we sell the right product in the right channel at the right price point. This approach is centered on the strategic calibration of our ASP and employs key levers such as the expansion of our DTC channel, market conversions from third-party distributors, optimization of our wholesale partner network, increased overall share of premium products and strategic pricing. This process allows us to manage the finite nature of our production capacity with a rigorous focus on control of our brand image and profitability. As a result, we drive top-line growth and margins, prevent brand dilution and deepen our connection to consumers.

Our DTC footprint promotes direct consumer relationships and provides access to BIRKENSTOCK in its purest form. We have grown DTC revenues at a 42% CAGR between 2018 and 2022 as part of our deliberate strategy to increase DTC penetration. Our DTC channel enables us to express our brand identity, engage directly with our global fan base, capture real-time data on customer behavior and provide consumers with

 

82


Table of Contents

unique product access to our most distinctive styles. Additionally, our high levels of organic demand creation, together with higher ASPs, support consistently attractive profitability in the DTC channel, which reached a 38% share of revenues in fiscal 2022, up from 18% in fiscal 2018.

Since 2016, we have invested significantly in our online platform to support our DTC channel, establishing our own e-commerce sites in more than 30 countries with ongoing expansion into new markets. In fiscal 2022, e-commerce represented 89% of our DTC channel. In addition, as of June 30, 2023, we operate a network of approximately 45 owned retail stores, complementing our e-commerce channel with the live experience of our best product range. The largest concentration of our retail locations is in Germany, where we operate 20 locations. We have recently embarked on a disciplined strategy of opening new retail stores in attractive markets globally, including Soho and Brooklyn in New York City, Venice Beach in Los Angeles, Tokyo, London and Delhi.

Our wholesale strategy is defined by intentionality in partner selection and identifying the best partners in each segment and price point. We segment our wholesale product line availability into specific retailer quality tiers, ensuring we allocate the right product to the right channel for the right consumer. For example, we limit access to our premium 1774 and certain collaboration products to a curated group of brand partners.

For our wholesale partners, we are a “must carry” brand based on the enthusiasm with which our consumers pursue our products, as evidenced by our brand consistently being amongst the top performers in our core categories at most of our retail partners. We generate significantly more demand from existing and prospective wholesale customers than we can supply, putting us in an enviable position where we can create scarcity in the market and obtain favorable economic terms on wholesale distribution. The early placement of wholesale orders effectively determines sales to the end-consumer approximately six months in advance and aids in our production planning and allocation. In addition, sell-through transparency from important wholesalers provides real-time insight into the overall market and inventory dynamics.

During fiscal 2022, we worked with approximately 6,000 carefully selected wholesale partners in over 75 countries, ranging from orthopedic specialists to major department stores, to high end fashion boutiques. As of June 30, 2023, our strategic partners also operated approximately 270 mono-brand stores to provide our consumers a multi-channel experience in select markets.

Over a decade ago, the Birkenstock family brought in its first outside management team, commencing the present era of BIRKENSTOCK. Under the leadership and vision of Oliver Reichert, first as a General Manager in 2009 and then as the Chief Executive Officer beginning in 2013, we have transformed our business from a family-owned, production-oriented company into a global, professionally managed enterprise committed to growing our brand. In the current era, we have built on our legacy while continuing to revolutionize processes and strategies to unleash our global potential, growing revenues at a 20% CAGR from fiscal 2014 to fiscal 2022.

 

83


Table of Contents

LOGO

Note: See “Presentation of Financial and Other Information — Financial Statements.

Recent Financial Performance

Our powerful business model and consistent execution have delivered continuous top-line growth and an expanding margin profile. Our financial performance reflects the strong demand for our brand and the benefits of our engineered distribution model that delivers the right product for the right channel at the highest profit. This approach enables us to enjoy a rare combination of consistent, predictable growth, high levels of profitability and strong free cash flow generation, providing us with significant flexibility to invest in our operations and growth initiatives. This strategy has resulted in:

 

   

Revenues increasing from 727.9 million in fiscal 2020 to 1,242.8 million in fiscal 2022, a 31% two-year CAGR;

 

   

Number of units sold increasing at a 12% CAGR between fiscal 2020 and fiscal 2022;

 

   

ASP increasing at a 16% CAGR between fiscal 2020 and fiscal 2022;

 

   

DTC penetration increasing from 30% of revenues in fiscal 2020 to 38% of revenues in fiscal 2022;

 

   

Gross profit margin expanding from 55% in fiscal 2020 to 60% in fiscal 2022;

 

   

Adjusted gross profit margin expanding from 55% in fiscal 2020 to 62% in fiscal 2022;

 

   

Net profit increasing at a 36% two-year CAGR from 101.3 million in fiscal 2020 to 187.1 million in fiscal 2022, with net profit margin expanding by 1 percentage point from 14% in fiscal 2020 to 15% in fiscal 2022;

 

   

Adjusted net profit growing at a 22% two-year CAGR from 117.5 million in fiscal 2020 to 174.7 million in fiscal 2022, with Adjusted net profit margin contracting 2 percentage points from 16% in fiscal 2020 to 14% in fiscal 2022; and

 

   

Adjusted EBITDA growing at a 49% two-year CAGR from 194.8 million in fiscal 2020 to 434.6 million in fiscal 2022, with Adjusted EBITDA margin expanding 8 percentage points from 27% in fiscal 2020 to 35% in fiscal 2022.

 

84


Table of Contents

This strategy has also yielded strong results in the most recent nine months ended June 30, 2023, where we have observed:

 

   

Revenues increasing from 921.2 million for the nine months ended June 30, 2022 to 1,117.4 million for the nine months ended June 30, 2023, a 21% increase;

 

   

Number of units sold increasing by 5% from the nine months ended June 30, 2022 compared to the nine months ended June 30, 2023;

 

   

ASP increasing by 15% in the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022;

 

   

DTC penetration increasing from 34% of revenues for the nine months ended June 30, 2022 to 37% of revenues for the nine months ended June 30, 2023;

 

   

Gross profit margin expanding from 59% for the nine months ended June 30, 2022 to 61% for the nine months ended June 30, 2023;

 

   

Adjusted gross profit margin decreasing slightly from 62% for the nine months ended June 30, 2022 to 61% for the nine months ended June 30, 2023;

 

   

Net profit decreasing from 129.1 million for the nine months ended June 30, 2022 to 103.3 million for the nine months ended June 30, 2023, with net profit margin contracting by 5 percentage points from 14% for the nine months ended June 30, 2022 to 9% for the nine months ended June 30, 2023;

 

   

Adjusted net profit increasing by 47% from 124.2 million for the nine months ended June 30, 2022 to 182.0 million for the nine months ended June 30, 2023, with Adjusted net profit margin increasing by 3 percentage points from 13% for the nine months ended June 30, 2022 to 16% for the nine months ended June 30, 2023; and

 

   

Adjusted EBITDA growing by 16% from 332.5 million in the nine months ended June 30, 2022 to 387.0 million for the nine months ended June 30, 2023, with Adjusted EBITDA margin contracting 1 percentage point from 36% for the nine months ended June 30, 2022 to 35% for the nine months ended June 30, 2023.

Non-IFRS Financial Measures

We report our financial results in accordance with IFRS; however, management believes that certain non-IFRS financial measures provide useful information in measuring the operating performance and financial condition of the Company and are used by management to make decisions. Management believes this information presents helpful comparisons of financial performance between periods by excluding the effect of certain non-recurring items.

These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other companies, and they should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with IFRS.

For reconciliations to the most directly comparable IFRS measure, see “Summary Consolidated Financial Information—Non-IFRS Financial Measures.”

Constant currency revenue and Constant currency revenue growth

 

     Successor           Predecessor  
     Nine months ended June 30,      Year ended
September 30,
2022
    2021 Successor and
Predecessor Periods
    Year ended
September 30,
2020
 

(In thousands of Euros)

   2023
(unaudited)
    2022
(unaudited)
 

Revenues

     1,117,368       921,225        1,242,833       962,011       727,932  

Constant currency revenue

     1,098,208       N/A        1,178,643       993,935       N/A  

Constant currency revenue growth

     19     N/A        23     37     N/A  

 

85


Table of Contents

Our financial reporting currency is the Euro, and changes in foreign exchange rates can significantly affect our reported results and consolidated trends. The majority of non-Euro transactions are denominated in USD.

The effect of currency exchange rates on our business is an important factor in understanding period-to-period comparisons, which in turn are used in financial and operational decision-making. By viewing our results of operations on a constant currency basis, the effects of foreign currency volatility, which is not indicative of our actual results of operations, are eliminated, enhancing the ability to understand our operating performance.

Constant currency information compares results between periods as if exchange rates had remained constant. We define Constant currency revenue as total revenue excluding the effect of foreign exchange rate movements and use them to determine Constant currency revenue growth on a comparative basis. Constant currency revenue is calculated by translating the current period foreign currency revenues using the prior period exchange rate. Constant currency revenue growth is calculated by determining the increase in current period revenues over prior period revenues, where current period foreign currency revenues are translated using prior period exchange rates. For example, USD denominated Constant currency revenue for the nine months ended June 30, 2023, fiscal 2022 and the 2021 Successor and Predecessor Periods were calculated using the rate of exchange of $1.1106 to 1, $1.1975 to 1 and $1.1199 to 1, respectively.

Adjusted gross profit and Adjusted gross profit margin

 

     Successor      Predecessor  
     Nine months ended June 30,     Year ended
September 30,
2022
    Period May 1,
2021, through
September 30,
2021
     Period October 1,
2020, through
April 30, 2021
    Year ended
September 30,
2020
 

(In thousands of Euros, unaudited)

   2023     2022  

Adjusted gross profit

     680,836       568,322       774,169       261,871        286,150       399,634  

Adjusted gross profit margin

     61     62     62     57      57     55

We define Adjusted gross profit as gross profit, exclusive of the impact on inventory valuation of applying the acquisition method of accounting for the Transaction. Adjusted gross profit for the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor and Predecessor Periods reflect 24.4 million, 24.4 million and 110.9 million, respectively, of such impacts. Adjusted gross profit margin is defined as adjusted gross profit for the period divided by revenues for the same period.

Adjusted EBITDA and Adjusted EBITDA margin

 

     Successor      Predecessor  
     Nine months ended June 30,     Year ended
September 30,
2022
    Period May 1,
2021, through
September 30,
2021
     Period October 1,
2020, through
April 30, 2021
    Year ended
September 30,
2020
 

(In thousands of Euros, unaudited)

   2023     2022  

Adjusted EBITDA

     387,018       332,506       434,555       140,340        152,000       194,784  

Adjusted EBITDA margin

     35     36     35     30      30     27

Adjusted EBITDA and Adjusted EBITDA margin are key performance measures that management uses to assess our operating performance, generate future operating plans and make strategic decisions regarding allocation of capital. Adjusted EBITDA is defined as net profit (loss) for the period adjusted for income tax expense (benefit), finance cost (net), depreciation and amortization, further adjusted for the effect of events such as:

 

   

Effects of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on cost of sales (in the nine months ended June 30, 2022, fiscal 2022 and the 2021 Successor Period, cost of sales included inventory that had been measured at fair value as part of the Transaction);

 

86


Table of Contents
   

Transaction-related costs (which represent Transaction-related advisory costs and, in the 2021 Predecessor Period, included fees for the termination of interest rate swaps related to the predecessor syndicated loan);

 

   

Realized and unrealized foreign exchange gain (loss);

 

   

IPO-related costs consisting of consulting, legal as well as audit fees for the PCAOB re-audit of fiscal 2020 and 2021 Successor and Predecessor Periods;

 

   

Share-based compensation expenses relating to the management investment plan;

 

   

Other adjustments relating to non-recurring expenses that we do not consider representative of the operating performance of the business, primarily comprised of consulting fees for integration projects, restructuring expenses and relocation expenses, as further described in “Summary Consolidated Financial Information—Non-IFRS Financial Measures—Reconciliation of Net Profit to Adjusted EBITDA.”

Adjusted net profit and Adjusted net profit margin

 

     Successor      Predecessor  
     Nine months ended June 30,     Year ended
September 30,
2022
    Period May 1,
2021, through
September 30,
2021
     Period October 1,
2020, through
April 30, 2021
    Year ended
September 30,
2020
 

(In thousands of Euros, unaudited)

   2023     2022  

Adjusted net profit

     182,020       124,232       174,682       54,523        101,976       117,499  

Adjusted net profit margin

     16     13     14     12      20     16

We define Adjusted net profit as net profit (loss) for the period adjusted for the effects of applying the acquisition method of accounting for the Transaction, Transaction-related costs, IPO-related costs, realized and unrealized foreign exchange gain (loss), share-based payments, other adjustments relating to non-recurring items such as restructuring and the respective income tax effects as applicable. Adjusted net profit margin is defined as Adjusted net profit for the period divided by revenues for the same period.

Trends and Factors Affecting Our Results of Operations

Our business, results of operations and financial condition have been influenced and will continue to be influenced by the macroeconomic environment and the factors described below.

Ability to Increase Brand Awareness and Grow Consumer Base

Our ability to increase brand awareness and grow our consumer base has and will continue to contribute meaningfully to our performance. The function of our products and the power of our brand has enabled us to build our company largely through organic, unpaid sources, including word-of-mouth, repeat buying, earned media and high-profile influencer support, in addition to our 1774 collaborations office. These organic factors support a virtuous cycle of consumer consideration, trial, conversion and repeat purchase. According to the Consumer Survey, aided brand awareness, which we define as consumer awareness about the brand when specifically asked about the brand, in the United States is 68%. Future growth in our brand awareness will stem from a combination of organic, word-of-mouth marketing, brand collaborations, BIRKENSTOCK content production and disciplined investments in digital marketing.

Product Innovation and Expansion

The simultaneous innovation within and expansion of our product portfolio has contributed meaningfully to our performance. While we have a large product assortment comprised of over 700

 

87


Table of Contents

silhouettes, our five iconic Core Silhouettes, the Madrid, Arizona, Boston, Gizeh and Mayari, represent the majority of our revenues. Apart from the Mayari, each of these product silhouettes has been on the market for decades, providing us with a highly predictable and consistent revenue base. Historically, we have driven revenue growth for a silhouette through color and material innovation, as well as expansion of usage occasions, enabling us to introduce updated and refreshed styles to create trends and drive consumer excitement.

We intend to continue investing in innovation within our product portfolio, as well as the development and introduction of new silhouettes and product categories. Recently, we have focused on growing our closed-toe silhouette assortment, which represented 20% and 15% of our revenues for fiscal 2022 and 2021, respectively. We believe our strategic focus on closed-toe silhouettes, which have significant revenue growth potential given high ASPs and broad applicability across seasons and usage occasions, has been successful. We also continue to invest in the orthopedic heritage of our brand, including our recently formed biomechanics team focused on driving new technical innovations. We see significant opportunities to deepen our product reach in functionally-driven footwear categories by creating highly functional products across a variety of usage occasions, including professional, active and outdoor, kids, home and orthopedic. We believe that innovations in these product categories will enable the BIRKENSTOCK brand to reach new consumers, balance seasonality and broaden usage occasions.

Global Growth Through Engineered Distribution

Our engineered distribution is rooted in the local market intelligence of our sales and commercial organization. The successful execution of regionally tailored market development strategies has and will continue to be a key determinant of our performance. Strategic assessment of, and adaptation to regional channel dynamics, market maturity levels, existing distribution networks and consumer preferences and buying behavior is a hallmark characteristic of our engineered distribution approach. We pioneered this engineered distribution model in our U.S. market, ultimately helping drive a 32% revenue CAGR in the U.S. between fiscal 2014 and fiscal 2022. This transformative approach now serves as a blueprint for all of our regions, where we have enacted strategies to effect conversions from third-party distribution to owned distribution, accelerate DTC penetration, strategically expand our retail footprint and increase share of closed-toe and other high ASP products. Building on our success in the U.S., we have consciously taken back distribution in key markets, including the UK, France, Canada, Japan and South Korea, reducing the share of business in third party distribution from 32% of revenues in fiscal 2018 to 14% in fiscal 2022.

Our strongest, most developed regions are the Americas, which accounted for 54% of revenues in fiscal 2022, and Europe, which accounted for 36% of revenues, while APMA represented 10% of revenues. APMA has demonstrated considerable growth potential, which historically has not been fully realized because of deliberate decisions to prioritize the Americas and Europe due to finite supply. With increasing available production capacity, we plan to further leverage our engineered distribution strategy in APMA, strategically allocating the right product across the right channels to educate consumers about BIRKENSTOCK and drive brand awareness, which we believe is key to expanding our presence and driving sales in the segment. While doing so, we plan to invest in infrastructure, distribution networks and personnel and marketing.

In the future, we will continue to leverage our engineered distribution model to expand in existing geographies, enter new markets and convert remaining distributor markets, as appropriate. To do so, we will deploy disciplined, regionally tailored approaches, allocating our production capacity across channels, regions and categories in a manner that supports continued growth and profitability.

Ability to Manage Seasonality and Inventory

Revenues from the sale of our footwear products generally skew towards the warmer months of the calendar year in our key markets, falling in our third and fourth fiscal quarters, ending in June and

 

88


Table of Contents

September, respectively. As a result, we typically build inventory between October and January through a rigorous planning process designed to optimize product availability and mitigate any possible supply and demand mismatch. Furthermore, we continue to diversify the seasonal exposure of our product portfolio by increasing the mix of closed-toe silhouettes, enabling us to serve additional usage occasions year-round. Over time, we expect the share of sandals and closed-toe silhouettes to become more balanced, a trend which is already apparent in the product mix growth of closed-toe silhouettes, which has approximately doubled between fiscal 2020 and fiscal 2022 and accounted for 20% of revenues for fiscal 2022.

Sourcing and Supply Chain Management

Raw materials, other consumables and personnel costs, including temporary personnel services, are our largest cost components. Our primary raw materials include components used for manufacturing uppers and footbeds, such as leather, synthetic materials (such as Birko-Flor, felt and textiles), buckles, cork, rubber, jute, soling sheets for the production of outsoles, EVA and polyurethane. Our exposure to price fluctuations in materials costs and the availability of raw materials, particularly leather, jute and cork, impact our margins and affect our financial results. We manage exposure to price increases and volatility through long-term relationships with suppliers, entering into flexible contracts that range from 3 to 6 months. We forward purchase a portion of our raw materials and consumables to cover our manufacturing and production requirements, ensuring an uninterrupted supply of finished footwear products to our consumers. In addition, our breadth of suppliers allows us greater control of our cost base.

Effects of Foreign Currency Fluctuations

Transactional

As a result of the geographic diversity of our customers and operations, we generate a significant portion of our revenues and incur a significant portion of our expenses in currencies other than the Euro, including USD, CAD, GBP and, to a lesser extent, various other currencies. As a result of our significant presence in the United States, we are particularly exposed to fluctuations in the exchange rate of the Euro to USD, and a large portion of our current indebtedness is denominated in USDs. We are also exposed to currency exchange risks as a result of an increasing mix of revenues invoiced and expenses incurred in local currencies, particularly by our subsidiaries in the U.S. We generally seek to align costs with revenues denominated in the same currency, but we are not always able to do so, and our results of operations and financial condition will continue to be impacted by the volatility of the Euro against the USD. We manage our various currency exposures through economic hedging strategies. We annually evaluate the budgeted exchange rates for the following business year and consider the currency market outlook in determining our overall hedging strategy and activities for the next business year. We adjust our hedging strategies from time to time during the year as needed. Between FY 2020 and FY 2022, our hedging ratio was between 40% (minimum) and 60% (maximum) of our USD exposure on contracted forecasted sales to our subsidiary in the U.S. We use forward exchange contracts and forward exchange swaps and currency options to hedge our currency risks, most of which have a maturity date of less than one year from the date of initiation. Exchange rate fluctuations, particularly with respect to the exchange rate of the Euro to the USD, have had and are expected to have an impact on the results of our operations. In respect to other monetary assets and liabilities denominated in foreign currencies, we aim to manage our net exposure by buying or selling foreign currencies at spot rates.

Translational

We report our historical consolidated financial statements in Euro. When translating a subsidiary’s respective functional currency into our reporting currency, assets and liabilities of foreign operations, including goodwill, are translated using the exchange rates at the reporting date. Income and expense items are translated using the average exchange rates prevailing during the period. Equity is translated at

 

89


Table of Contents

historical exchange rates. All resulting foreign currency translation differences are recognized in other comprehensive income and accumulated in the foreign currency translation reserve. See Note 3: “Significant Accounting Polices” to our audited consolidated financial statements included elsewhere in this prospectus for further discussion on the translational impact of foreign currency.

Impact of the COVID-19 Pandemic

The outbreak and spread of COVID-19 and the resulting worldwide economic impact have affected, and may continue to affect, our business, financial condition and results of operations. The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created significant volatility in the financial markets. The outbreak led to the implementation of restrictive measures by federal, state and local government authorities in an effort to contain COVID-19. To serve our customers while also providing for the safety of our employees, we adapted numerous aspects of our manufacturing, logistics and infrastructure, transportation, supply chain, purchasing, corporate and third-party processes. We incurred incremental and idle costs for COVID-19-related training as well as additional costs associated with production and store shut-downs in fiscal 2020 and 2021.

Factors Affecting Comparability of Financial Information

The Transaction

Effective April 30, 2021, Birkenstock Holding Limited (formerly known as BK LC Lux Finco 2 S.à r.l.), which was incorporated on February 19, 2021, directly acquired the BIRKENSTOCK Group by way of the acquisition of shares and certain assets that comprised the BIRKENSTOCK Group (the “Transaction”). For additional information regarding the Transaction, including details of the consideration transferred and the fair values of assets acquired and liabilities assumed, refer to Note 6: “Business Combinations” to the audited consolidated financial statements appearing elsewhere in this prospectus. Prior to the Transaction, Birkenstock Holding Limited had no material assets or liabilities and is considered the “Successor” to the “Predecessor” BIRKENSTOCK Group. The Transaction was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of assets acquired and liabilities assumed as of the effective date of the Transaction. As a result of the application of the acquisition method of accounting, the financial statements for the Predecessor Periods and for the Successor Periods are presented on a different basis of accounting and are, therefore, not comparable, although they are all presented in accordance with IFRS.

The Company’s financial statement presentation distinguishes the Company’s presentations into two distinct periods, the Successor Periods and the Predecessor Periods. The Predecessor Periods and Successor Periods have been separated by a vertical black line on the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different cost bases of accounting.

In addition, management believes reviewing the Company’s operating results for fiscal 2021, by combining the results of the 2021 Predecessor Period and the 2021 Successor Period, which we refer to as the “2021 Successor and Predecessor Periods,” is more useful in discussing our overall operating performance when compared to fiscal 2022 and fiscal 2020.

For the purpose of performing a comparison, we have prepared supplemental unaudited pro forma combined financial information for fiscal 2021 and unaudited pro forma financial information for fiscal 2020, which gives effect to the Transaction as if it had occurred on October 1, 2019 and which we refer to as the “Unaudited Combined Pro Forma for fiscal 2021” and “Unaudited Pro Forma for fiscal 2020”. To provide a more meaningful comparison, we are supplementally presenting a comparison of fiscal 2022 with the Unaudited Combined Pro Forma for fiscal 2021 as well as a comparison of the Unaudited Combined Pro Forma for fiscal 2021 with the Unaudited Pro Forma for fiscal 2020.

 

90


Table of Contents

Except for the specific pro forma adjustments, outlined in the tables below, to arrive at the Unaudited Combined Pro Forma for fiscal 2021, the underlying drivers for the change in fiscal 2022 compared to fiscal 2021 as well as the change in fiscal 2022 compared to the Unaudited Combined Pro Forma for fiscal 2021, are the same.

Except for the specific pro forma adjustments, outlined in the tables below, to arrive at the Unaudited Combined Pro Forma for fiscal 2021 and Unaudited Pro Forma for fiscal 2020, the underlying drivers for the change in fiscal 2021 compared to fiscal 2020, as well as the change in Unaudited Combined Pro Forma for fiscal 2021 compared to Unaudited Pro Forma for fiscal 2020, are the same.

The unaudited pro forma combined financial information and unaudited pro forma financial information have been prepared in accordance with Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The Unaudited Combined Pro Forma for fiscal 2021 and the Unaudited Pro Forma for fiscal 2020 do not purport to represent what our actual consolidated results of operations would have been had the Transaction occurred on October 1, 2019, nor is it necessarily indicative of future consolidated results of operations. The Unaudited Combined Pro Forma for fiscal 2021 and the Unaudited Pro Forma for fiscal 2020 are being discussed herein for informational purposes only and do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of operations.

The pro forma adjustments made to give effect to the Transaction, as if it had occurred on October 1, 2019, are summarized in the tables below. The transaction accounting adjustments consist of those that were necessary to account for the Transaction. Separately, subsidiaries of the Company issued debt financing in the form of a variable rate Term Loan with a 375 million tranche and a $850 million tranche, a 4.37% fixed-rate Vendor Loan in the amount of 275 million and 5.25% fixed-rate Senior Notes in the amount of 430 million which were used to fund the Transaction. The adjustments related to the issuance of this debt are shown in a separate column as “Other transaction accounting adjustments.”

Unaudited Combined Pro Forma for fiscal 2021

 

     Predecessor            Successor                         

(in thousands of Euros)

   Period October 1,
2020 through
April 30, 2021
           Period May 1,
2021, through
September 30,
2021
    Transaction
accounting
adjustments
    Other
transaction
accounting
adjustments
    Note    Unaudited
Combined Pro
Forma Year ended
September 30, 2021
 

Revenues

     499,347            462,664       114       —      (a)      962,125  

Cost of sales

     (213,197          (311,693     108,412       —      (a), (b), (c)      (416,477
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     286,150            150,971       108,526       —           545,648  
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Operating expenses

                  

Selling and distribution expenses

     (111,808          (123,663     (16,460     —      (a), (c)      (251,930

General administration expenses

     (52,628          (31,039     1,567       —      (a), (d)      (82,100

Foreign exchange gain (loss)

     (1,523          20,585       (53     —      (a)      19,009  

Other income, net

     1,280            (1,673     12       —      (a)      (381
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Profit from operations

     121,471            15,181       93,593       —           230,247  
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Finance income (cost), net

     (1,753          (28,958     (11     (48,916   (a), (e)      (79,638
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Profit (loss) before tax

     119,718            (13,777     93,582       (48,916        150,609  
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Income tax (expense) benefit

     (20,694          (3,428     (20,471     10,418     (a), (f)      (34,172
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

Net profit (loss)

     99,024            (17,205     73,111       (38,498        116,437  
  

 

 

        

 

 

   

 

 

   

 

 

      

 

 

 

 

91


Table of Contents

Unaudited Pro Forma for fiscal 2020

 

     Predecessor                         

(in thousands of Euros)

   Year ended
September 30,
2020
    Transaction
accounting
adjustments
    Other
transaction
accounting
adjustments
    Note    Unaudited Pro
Forma
Year ended
September 30,
2020
 

Revenues

     727,932       616       —      (a)      728,548  

Cost of sales

     (328,298     (139,974     —      (a), (b), (c)      (468,272
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     399,634       (139,358     —           260,276  
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating expenses

           

Selling and distribution expenses

     (187,615     (28,503     —      (a), (c)      (216,118

General administration expenses

     (66,896     (4,176     —      (a), (d)      (71,071

Foreign exchange gain (loss)

     (15,984     (74     —      (a)      (16,058

Other income, net

     245       20       —      (a)      266  
  

 

 

   

 

 

   

 

 

      

 

 

 

Profit (loss) from operations

     129,384       (172,091     —           (42,706
  

 

 

   

 

 

   

 

 

      

 

 

 

Finance income (cost), net

     (3,950     (39     (83,179   (a), (e)      (87,169
  

 

 

   

 

 

   

 

 

      

 

 

 

Profit (loss) before tax

     125,434       (172,131     (83,179        (129,875
  

 

 

   

 

 

   

 

 

      

 

 

 

Income tax (expense) benefit

     (24,116     31,805       15,992     (a), (f)      23,680  
  

 

 

   

 

 

   

 

 

      

 

 

 

Net profit (loss)

     101,318       (140,326     (67,187        (106,195
  

 

 

   

 

 

   

 

 

      

 

 

 

 

(a)

Represents the adjustment to consolidate the business relating to Birkenstock Cosmetics GmbH & Co. KG (including its subsidiaries) and Birkenstock Immobilien GmbH & Co. KG, together referred to as the “Predecessor Unconsolidated Entities,” as this business is part of the successor consolidation group, but not the predecessor consolidation group. In the Unaudited Combined Pro Forma for fiscal 2021, this results in an increase in Corporate/Other Revenue of 0.1 million, an increase in cost of sales of 0.1 million, an increase in Selling and distribution expenses of 1.6 million, an increase in General administration expenses of 0.9 million, an increase in Foreign exchange loss of 0.1 million, and negligible increases in Other income, net, Finance cost, net and Income tax expense. In the Unaudited Pro Forma for fiscal 2020, this results in an increase in Corporate/Other Revenue of 0.6 million, an increase in cost of sales of 0.7 million, an increase in Selling and distribution expenses of 3.0 million, an increase in General administration expenses of 1.7 million, an increase in Foreign exchange loss of 0.1 million, negligible increases in Other income, net and Finance cost, net and an increase in Income tax expense of 0.4 million.

(b)

Represents the effect of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on costs of sales. In the 2021 Successor Period, cost of sales included inventory that had been measured at fair value as part of the Transaction. Therefore, this effect in the amount of 110.9 million for the 2021 Successor Period (estimated using the FIFO assumption) is reversed in the Unaudited Combined Pro Forma for fiscal 2021. The remaining effect of applying the acquisition method of accounting for the Transaction to inventory valuation and the subsequent impact on costs of sales in the amount of 24.4 million, was realized in the first quarter of fiscal 2022, on a FIFO basis. If the Transaction had occurred on October 1, 2019, then the full effect of 135.3 million would have been realized in cost of sales in fiscal 2020 therefore this amount is reflected in the Unaudited Pro Forma for fiscal 2020.

(c)

Represents additional depreciation and amortization expense for each full fiscal year related to intangible assets amortization and property, plant and equipment depreciation for the effect of applying the acquisition method of accounting. Additional property, plant and equipment depreciation of 2.4 million and 4.0 million for the Unaudited Combined Pro Forma for fiscal 2021 and Unaudited Pro Forma for fiscal 2020, respectively, are included in cost of sales, because the assets are predominantly used in production. Additional intangible assets amortization of 14.9 million and 25.5 million for the Unaudited Combined Pro Forma for fiscal 2021 and Unaudited Pro Forma for fiscal 2020, respectively, are included in Selling and distribution expenses because such amortization relates to the Customer relationship intangible asset.

(d)

Represents transaction costs which were incurred after the Transaction in the amount of 2.5 million. In the Unaudited Combined Pro Forma for fiscal 2021, these costs are derecognized, and such transaction costs are recognized in the Unaudited Pro Forma for fiscal 2020, reflecting the pro forma assumption of the timing of the

 

92


Table of Contents
 

Transaction. Prior to the Transaction date (from inception), the Successor incurred costs related to the Transaction and minimal expenses related to the formation of the entity totaling 25.1 million, see Note 2: “Basis of Presentation — Predecessor and successor periods” to the audited consolidated financial statements appearing elsewhere in this prospectus. Such amounts are not reflected in these pro forma financial statements as they would be reflected as incurred prior to October 1, 2019.

(e)

Represents recognition for a full fiscal year of the interest expense and amortization of the debt issuance costs in the amount of 48.9 million and 83.2 million for the Unaudited Combined Pro Forma for fiscal 2021 and the Unaudited Pro Forma for fiscal 2020, respectively, related to debt raised in accordance with the Transaction.

(f)

Represents tax impact of the pro forma adjustments calculated based on an estimated annual effective tax rate of 23% for the Unaudited Combined Pro Forma for fiscal 2021 and 19% for the Unaudited Pro Forma for fiscal 2020. The effective tax rate for the Unaudited Combined Pro Forma for fiscal 2021 was derived from the weighted actual effective tax rate for fiscal 2022 and the 2021 Predecessor Period, as the actual effective tax rate for the 2021 Successor Period is not representative due to the loss before tax incurred in that period. The effective tax rate for the Unaudited Pro Forma for fiscal 2020 was derived from the actual effective tax rate for the 2020 Predecessor Period.

Segments

Our three reportable segments align with our geographic operational hubs: the Americas, Europe, and APMA as described above, which contributed 54%, 36%, and 10% of revenues, respectively, in fiscal 2022. The Americas includes, among other markets, the United States, Brazil, Canada and Mexico. The United States is our largest and most important market in the Americas. Europe includes, among others, the key markets of Germany, France and the United Kingdom. Germany, the country of our primary operations and where the BIRKENSTOCK brand originated, accounts for the largest percentage of revenues in Europe. The largest markets in APMA include Japan, Australia, South Korea, United Arab Emirates and India.

Revenues and costs not directly managed nor allocated to the geographic operational hubs are recorded in Corporate/Other. Corporate/Other immaterially contributed to our revenues in fiscal 2022.

Components of our Results of Operations

Revenues

Revenues are primarily recognized from the sale of our products, including sandals, closed-toe silhouettes and other products, such as skincare and accessories.

We are currently distributed in more than 90 countries across three reporting segments: Americas, Europe and APMA. Within each segment, we manage a multi-channel distribution strategy, divided between our DTC and B2B channels. Both channels are important to our strategy and provide differentiated economic benefits and insights.

B2B revenues are recognized when control of the goods has transferred, depending on the agreement with the customer. Following the transfer of control, the customer has the responsibility to sell the goods and bears the risks of obsolescence and loss in relation to the goods.

DTC channel revenues are recognized when control of the goods has transferred, either upon delivery to e-commerce consumers or at the point of sale in retail stores. Payment of the transaction price is due immediately when the consumer purchases the goods. When the control of goods has transferred, a refund liability recorded in other current financial liabilities and a corresponding adjustment to revenues is recognized for those products expected to be returned. The Company has a right to recover the product when consumers exercise their right of return, and resultingly recognizes a right to return goods asset included in other current assets and a corresponding reduction to cost of sales.

Other revenues are comprised of revenues not directly allocated to the geographical operating segments, as well as revenues generated by non-product categories. These categories include skincare

 

93


Table of Contents

and license revenues from fees paid to us by our licensees in exchange for the use of our trademarks on their products (primarily our sleep systems business). In addition, other revenues consist of revenues from real estate rentals and the sale of recyclable scrap materials from the production process.

Cost of sales

Cost of sales is comprised primarily of four types of expenditures: (i) raw materials, (ii) consumables and supplies, (iii) purchased merchandise and (iv) personnel costs, including temporary personnel services. Additionally, it includes overhead costs for the production sites. Freight charges for transfer of work-in-progress inventory between production plants, logistical centers and warehouses as well as inbound freight for raw materials are also included in cost of sales. Cost of sales reflect the portion of costs which correspond to the units sold in a given period.

Gross profit and gross profit margin

Gross profit is revenues less cost of sales and gross profit margin measures our gross profit as a percentage of revenues.

Selling and distribution expenses

Selling and distribution expenses are comprised of our selling, marketing, product innovation and supply chain costs. These expenses are incurred to support and expand our wholesale partner relationships, grow brand awareness and deliver our products to B2B partners, e-commerce consumers and retail stores. These expenses include personnel expenses for sales representatives, processing fees in the DTC channel and depreciation and amortization expenses for store leases, customer relationships and other intangible assets.

Selling costs generally correlate with revenue recognition timing and, therefore, experience similar seasonal trends to revenues with the exception of retail store costs, which are primarily fixed and incurred evenly throughout the year. As a percentage of revenues, we expect these selling costs to increase modestly as our business evolves. This increase is expected to be driven primarily by the relative growth of our DTC channel, including the investment required to support additional e-commerce sites and retail stores.

Distribution expenses are largely variable in nature and primarily relate to leasing and third-party expenses for warehousing inventories and transportation costs associated with delivering products from distribution centers to B2B partners and end-consumers.

General administrative expenses

General administrative expenses consist of costs incurred in our corporate service functions, such as costs relating to the finance department, legal and consulting fees, HR and IT expenses and global strategic project costs. More specifically, the nature of these costs relates to corporate personnel costs (including salaries, variable incentive compensation and benefits), other professional service costs, rental and leasing expenses for corporate real estate, depreciation and amortization related to software, patents and other rights. General administrative expenses will increase as we grow and become a publicly traded company. We expect these expenses to decrease as a percentage of revenues as we grow due to economies of scale.

Foreign exchange gain/(loss)

The foreign currency exchange gain/(loss) consists primarily of differences in foreign exchange rates between the currencies in which our subsidiaries transact and their functional currencies as measured on the respective transaction date.

 

94


Table of Contents

Finance income/(cost), net

Finance income represents interest earned from third party providers and income from the potential revaluation of the embedded derivative of the Notes.

Finance costs are comprised of interest payable to third party providers for term loan financing arrangements, Notes, Vendor Loan, leases, employee benefits, as well as expenses from the potential revaluation of the embedded derivative of the Notes. Finance costs are recognized in the consolidated income statement based on the effective interest method.

Income tax (expense) benefit

Income tax includes current income tax and income tax credits from deferred tax. Income tax is recognized in profit and loss except to the extent that it relates to items recognized in equity or other comprehensive income in which case the income tax expense is also recognized in equity or other comprehensive income. We are subject to income taxes in the jurisdictions in which we operate and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. Our subsidiaries in Germany and the U.S. primarily determine the effective tax rate.

Results of Operations

Comparison of the nine months ended June 30, 2023 and June 30, 2022

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

Revenues

     1,117,368       921,225       196,143       21

Cost of sales

     (436,532     (377,270     (59,262     16
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     680,836       543,955       136,881       25
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Selling and distribution expenses

     (309,521     (237,787     (71,734     30

General administrative expenses

     (86,836     (57,714     (29,122     50

Foreign exchange gain (loss)

     (51,350     31,615       (82,965     (262 )% 

Other income (loss), net

     2,452       (2,691     5,143       (191 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Profit from operations

     235,581       277,378       (41,797     (15 )% 

Finance cost, net

     (81,358     (89,939     8,581       (10 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

     154,223       187,439       (33,216     (18 )% 

Income tax expense

     (50,914     (58,307     7,393       (13 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net profit

     103,310       129,132       (25,822     (20 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

Revenues for the nine months ended June 30, 2023 increased by 196.1 million, or 21%, to 1,117.4 million from 921.2 million for the nine months ended June 30, 2022 driven by broad-based growth across regions and channels. This increase was attributable to an increase in the number of units sold of 5% as well as an increase in ASP of 15%. The ASP increase was driven by higher DTC and closed-toe silhouette penetration, the effect of the retail price increase in December 2021 on the entirety of the interim period and the appreciation of the USD relative to the Euro. On a constant currency basis, revenues increased by 19%.

 

95


Table of Contents

Revenues by channel

 

     Nine months ended
June 30,
               

(In thousands of Euros, unaudited)

   2023      2022      Change      % Change  

B2B

     697,400        608,547        88,853        15

DTC

     416,138        310,263        105,875        34

Corporate/Other

     3,830        2,415        1,416        59
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

     1,117,368        921,225        196,143        21
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues generated by our B2B channel for the nine months ended June 30, 2023 increased by 88.9 million, or 15%, to 697.4 million from 608.5 million for the nine months ended June 30, 2022. The increase was primarily driven by strong growth across all regions, further supported by an overall increase in the number of units sold as well as a favorable category mix shift towards higher ASP product categories and the effect of the retail price increase implemented in December 2021 on the entirety of the interim period.

Revenues generated by our DTC channel for the nine months ended June 30, 2023 increased by 105.9 million, or 34%, to 416.1 million from 310.3 million for the nine months ended June 30, 2022. The increase was primarily attributable to growth in the number of units sold, increased traffic and higher average order values resulting from price increases and product mix, offset by the strategic consolidation of retail stores in Europe, whereby we have closed legacy stores to focus on premium full-price stores, that temporarily led to fewer stores. Outsized growth in strategic product categories with higher price points, such as closed-toe silhouettes, leather products and shearling products that are predominately sold in BIRKENSTOCK-owned channels positively contributed to an increased DTC penetration of 37% in the nine months ended June 30, 2023, up from 34% for the same period in 2022.

Other revenues for the nine months ended June 30, 2023 increased by 1.4 million, or 59%, to 3.8 million from 2.4 million for the nine months ended June 30, 2022. This increase was primarily attributable to increased sales of leather material to our supplier for footbed cuttings, as well as increased sales of recyclable scrap materials from the production process.

Cost of sales

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

Cost of sales

     (436,532     (377,270     (59,262     16
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales for the nine months ended June 30, 2023 increased by 59.3 million, or 16%, to 436.5 million from 377.3 million for the nine months ended June 30, 2022. The increase was impacted by the effect on inventory valuation of applying the acquisition method of accounting for the Transaction of 24.4 million for the nine months ended June 30, 2022. Excluding the effects of the acquisition method of accounting for the Transaction, cost of sales increased by 83.6 million, or 24%. The increase was primarily attributable to an increase in number of units sold, an increased share of higher cost products, higher material prices and higher personnel expenses due to salary increases in the production facilities as of October 2022, including as a result of a federally mandated minimum wage increase in Germany.

 

96


Table of Contents

Gross profit and gross profit margin

 

     Nine months ended June 30,               

(In thousands of Euros, unaudited)

   2023     2022     Change      % Change  

Gross profit

     680,836       543,955       136,881        25

Gross profit margin

     61     59     2pp     
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit for the nine months ended June 30, 2023 increased by 136.9 million, or 25%, to 680.8 million from 544.0 million for the nine months ended June 30, 2022. Gross profit margin for the nine months ended June 30, 2023 increased 2 percentage points to 61% from 59% for the nine months ended June 30, 2022. The increase in gross profit and gross profit margin reflects higher ASP resulting from price increases and an increased DTC share of 37% for the nine months ended June 30, 2023 compared to 34% in the prior year period. These factors more than offset the impact of inflationary pressure on cost of sales, primarily to material and labor costs. Additionally, the increase was partially attributable to the impact on inventory valuation of applying the acquisition method of accounting for the Transaction of 24.4 million for the nine months ended June 30, 2022.

Excluding the effect of the application of applying the acquisition method of accounting for the Transaction, gross profit for the nine months ended June 30, 2023 increased by 112.5 million, or 20%, while gross profit margin contracted by 1 percentage point.

Selling and distribution expenses

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

Selling and distribution expenses

     (309,521     (237,787     (71,734     30
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling and distribution expenses for the nine months ended June 30, 2023 increased by 71.7 million, or 30%, to 309.5 million from 237.8 million for the nine months ended June 30, 2022. The increase was primarily driven by higher fulfillment and variable online costs associated with increased DTC penetration of 37%. Additionally, personnel costs increased by 8.7 million driven primarily by salary increases, an increase in full-time equivalent staff and costs related to the management investment plan. Overall, selling and distribution expenses for the nine months ended June 30, 2023 increased at a higher rate than revenues, increasing to 28% of revenues compared to 26% of revenues for the nine months ended June 30, 2022.

General administrative expenses

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

General administrative expenses

     (86,836     (57,714     (29,122     50
  

 

 

   

 

 

   

 

 

   

 

 

 

General administrative expenses for the nine months ended June 30, 2023 increased by 29.1 million, or 50%, to 86.8 million from 57.7 million for the nine months ended June 30, 2022. As a percentage of revenue, general administrative expenses increased by 2 percentage points to 8% for the nine months ended June 30, 2023 from 6% for the nine months ended June 30, 2022. The increase in general administrative expenses was primarily driven by an increase in personnel costs of 27.6 million of which 16.1 million is due to costs related to the management investment plan, as well as to an increase in full-time equivalent staff and salary increases.

Foreign exchange gain (loss)

 

97


Table of Contents

Foreign exchange (loss), net for the nine months ended June 30, 2023 increased by (83.0) million to (51.4) million from a foreign exchange gain, net of 31.6 million for the nine months ended June 30, 2022. The overall increase in foreign exchange (loss) was primarily driven by a depreciation of the USD relative to the Euro in the nine months ended June 30, 2023 as compared to an appreciation of the USD relative to the Euro during the nine months ended June 30, 2022. This led to a positive effect on the foreign exchange result for the nine months ended June 30, 2022 compared to a negative impact for the comparable period in 2023.

Finance cost, net

Finance cost, net, for the nine months ended June 30, 2023 decreased by 8.6 million, or 10%, to 81.4 million from 89.9 million for the nine months ended June 30, 2022. The decrease was primarily attributable to a positive revaluation impact of embedded derivatives in relation to the Notes of 39.2 million and was partially offset by an increase in interest expense related to indebtedness of 28.7 million and interest expenses for leases by 2.5 million.

Income tax expense

Income tax expense for the nine months ended June 30, 2023 decreased by 7.4 million, or 13%, to 50.9 million from 58.3 million for the nine months ended June 30, 2022. For the nine months ended June 30, 2023, the effective tax rate was 33% compared to 31% for the nine months ended June 30, 2022.

The effective tax rate is impacted by decreased earnings before taxes in Europe and Americas in the nine months ended June 30, 2023.

Net profit

Net profit for the nine months ended June 30, 2023 decreased by 25.8 million, or 20%, to 103.3 million from 129.1 million for the nine months ended June 30, 2022. The decrease of net profit was primarily attributable to the increase in selling and distribution expenses and general administrative expense of 30% and 50%, respectively. Net profit margin for the nine months ended June 30, 2023 contracted by 5 percentage points, to 9% from 14% for the nine months ended June 30, 2022.

Adjusted EBITDA and Adjusted EBITDA margin for the Group

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

Adjusted EBITDA

     387,018       332,506       54,512       16

Adjusted EBITDA margin

     35     36     (1 )pp   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA for the nine months ended June 30, 2023 increased by 54.5 million, or 16%, to 387.0 million from 332.5 million for the nine months ended June 30, 2022, primarily due to revenue growth of 21%. Additionally, greater profitability was generated by an increased share of sales in our own DTC channels and through price increases. Adjusted EBITDA margin for the nine months ended June 30, 2023 decreased 1 percentage point to 35% from 36% for the nine months ended June 30, 2022, due primarily to increased cost of sales and sales and distribution expenses for the nine months ended June 30, 2023. This reflects the impact of inflationary pressure on the entire period of nine months ended June 30, 2023 as compared to only partially impacting the nine months ended June 30, 2022. Additionally, with sales price increases introduced in early fiscal 2022, prior to a corresponding increase in costs, temporary favorable sales growth relative to costs occurred in fiscal 2022. This resulted in a time lag between favorable and unfavorable inflationary impacts.

 

98


Table of Contents

Adjusted net profit and Adjusted net profit margin for the Group

 

     Nine months ended June 30,              

(In thousands of Euros, unaudited)

   2023     2022     Change     % Change  

Adjusted net profit

     182,020       124,232       57,788       47

Adjusted net profit margin

     16     13     3 pp   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net profit for the nine months ended June 30, 2023 increased by 57.8 million, or 47%, to 182.0 million from 124.2 million for the nine months ended June 30, 2022, primarily driven by revenue growth of 21%. Additionally, finance cost, net and income tax expense decreased by 10% and 1%, respectively, positively contributing to the net profit on an adjusted basis.

Revenues by segment

 

     Nine months ended June 30,                

(In thousands of Euros, unaudited)

   2023      2022      Change      % Change  

Americas

     617,452        523,147        94,305        18

Europe

     386,044        312,371        73,673        24

APMA

     110,042        83,292        26,750        32
  

 

 

    

 

 

    

 

 

    

 

 

 

Total reportable segment revenues

     1,113,538        918,810        194,728        21

Corporate/Other