Allbirds convinced investors of a growth story when the sneaker brand launched less than 18 months ago. Those sales gains disappeared in the fourth quarter, driving inventories higher.
Revenue fell 13% to $84.2 million in the three months ended December, which was less than the median analyst estimate of $96.7 million. Joey Zwillinger, co-CEO and co-founder of the company, said Allbirds, which makes shoes from wool and eucalyptus, has tried to attract younger consumers and runners, but those products have fallen short of expectations.
“We just haven’t seen the sales we were hoping for from these franchises, and that came at the expense of this core franchise,” Zwillinger said in an interview. “We lost track of the ball a bit.”
The company also replaced its chief financial officer, reported a larger-than-expected loss and announced a cost-cutting plan that includes halting store openings — one of the pillars of the growth strategy it was proposing to investors.
“We know we disappointed in 2022,” the company said at the start of an investor presentation. In what Allbirds calls a “transition year,” “decisive steps” are being taken.
The company’s forecast for the current quarter was also not met. Sales will reach $50 million — the average analyst estimate is $67 million. And the company could report a loss before interest, taxes, depreciation and amortization of as much as $29 million for that period — nearly triple Wall Street’s expectations.
Prior to Thursday’s announcement, investors had penalized the company’s stock as it was down more than 80% since an IPO in November 2021. Shares continued to fall in aftermarket trading, down 17% as of 4:41 p.m. New York. dropped
Allbirds is part of a boom in direct-to-consumer brands that both make and sell goods through their own websites and stores. Venture capital firms jumped on the model, seeing it as potentially more profitable, swamping startups selling everything from beds to underwear for cash.
Years later, the direct-to-consumer era is looking more and more like a dud. Many of the biggest brands, such as Casper and Warby Parker, have struggled as public companies. Others remain private, but face slower growth and few potential buyers. Companies are also moving away from the standalone approach and selling through retailers, including Allbirds, which is moving into REI and Nordstrom.
In many cases, the profit has not yet been realized. Allbirds posted a net loss of $101.4 million last year. Warby, often touted as the best-positioned direct-to-consumer company, posted a similar net loss.
To move closer to profitability, Allbirds will not expand beyond 50 stores and will streamline its acquisitions. The company expects up to $45 million in savings by 2025, primarily through production consolidation at factories in Vietnam and materials optimization, Zwillinger said.
Outside the US, the company is evaluating channel partners that can support brand growth at a lower cost than opening physical stores.
The company said CFO Mike Bufano will step down effective April 24. He is succeeded by Annie Mitchell, who comes from sportswear brand Gymshark and previously worked for Adidas AG.
Source: LA Times
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
