Markets

Allbirds sales plummet as runner brand replaces CFO, halts store openings

Company’s shares have slumped 80 per cent since its IPO

Joseph Zwillinger, co-founder and co-chief executive officer of Allbirds. Photograph: Bryan van der Beek/Bloomberg

Fri Mar 10 2023 - 14:03

Allbirds, the shoe firm popular with technology workers, sold investors on a growth story when the runner brand went public less than 18 months ago. Those sales gains disappeared in the fourth quarter, tanking its stock.

Revenue in the three months through December sank 13% to $84.2 million, trailing the average analyst of $96.7 million. Joey Zwillinger, the company’s co-chief executive officer and co-founder, said Allbirds, which makes shoes from wool and eucalyptus, tried to win over more younger consumers and runners, but those products missed expectations.

“We just didn’t see the sell-through on those franchises that we would’ve hoped for, and that came at the expense of that core franchise,” Zwillinger said in an interview. “We took our eye off the ball a little bit.”

The shares fell 20% in early trading in New York. The stock had already fallen more than 80% since an initial public offering in November 2021 to a market value of less than $350 million.

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The company’s forecast for the current quarter also missed. Sales will be as much as $50 million – the average analyst estimate is $67 million. And the company could report a loss as wide as $29 million before interest, taxes, depreciation and amortisation during the period – almost triple Wall Street’s expectations.

The results and forecast indicate that the “business has deteriorated quickly,” said William Blair analyst Dylan Carden. To put the company back on the right track, it looks like there will be “a prolonged period of restructuring, revenue declines and cash burn,” Carden said in a research note.

Allbirds announced a cost-cutting plan that includes pausing store openings – one of the pillars of the growth strategy it pitched to investors. Chief Financial Officer Mike Bufano will also step down, effective April 24. He’ll be succeeded by Annie Mitchell, who comes from athletic-wear brand Gymshark and previously worked at Adidas.

“We know we disappointed in 2022,” the company said to begin an investor presentation. “Decisive action” is being taken in what Allbirds described as a “transition” year.

Allbirds was part of a surge in direct-to-consumer brands that both make goods and retail them through their own websites and stores. Venture capital firms jumped on the model because they viewed it as potentially more profitable and flooded start-ups selling everything from beds to underwear with cash.

Years later, the DTC era is increasingly looking like a dud. Many of the biggest brands, such as Casper and Warby Parker, have struggled as public companies. Others remain private, but face slowing growth and few potential buyers. Firms are also abandoning the go-it-alone approach and selling through retailers, including Allbirds getting into REI and Nordstrom.

In many cases, the profits haven’t materialised yet. Allbirds had a net loss of $101.4 million last year. Warby, which is often held up as the best-positioned DTC company, posted a similar net loss.

To get closer to profitability, Allbirds won’t expand beyond its 50 or so stores for now and will streamline its sourcing. The company expects savings of as much as $45 million by 2025, primarily due to consolidating production to factories in Vietnam, as well as optimising materials, Zwillinger said.

Outside of the US, the company is evaluating distributor partners that will help grow the brand at a lower cost than opening brick-and-mortar stores. – Bloomberg

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