Dive Brief:
- Allbirds’ third-quarter net revenue dropped 21.2% year over year to $57.2 million, according to a Wednesday press release. The decrease was primarily due to a decline in average selling price driven by promotional activity, along with other factors.
- The lifestyle brand’s net loss grew by about 25% to $31.6 million and gross profit decreased by about 23% to $24.9 million. Marketing expenses dropped by about 20% to $10.2 million while SG&A expenses declined 2% to $43.5 million. Allbirds’ inventory decreased 37% to $79.9 million.
- Painting a picture of its holiday expectations, the brand predicts fourth-quarter net revenue to drop between 15% and 22%, bringing in between $66 million and $72 million. Allbirds attributes this projection to a negative impact from its transition to a distributor model in Canada and South Korea as well as plans for heightened promotional activity.
Dive Insight:
Despite a selection of negative results during the quarter, Allbirds co-founder and CEO Joey Zwillinger remained positive about the brand’s turnaround.
“Our third quarter results reflect another quarter of solid execution under our Strategic Transformation Plan,” Zwillinger said in a statement. “We made important progress on our key benchmarks of inventory reduction, operating cash use, and cost control, resulting in adjusted EBITDA ahead of our expectations. We also meaningfully advanced our strategy to transition from a direct distribution model to third-party distributors in key international markets. Nearing the end of our first year of transformation, our path remains clear and we are operating with discipline to deliver profitable growth and build shareholder value over the long term.”
On a call with analysts on Wednesday, Zwillinger touted the launch of its Courier shoe and an updated version of its classic Wool Runner. The executive noted that given consumer caution around spending, Allbirds is prepared for an “early and highly promotional” holiday period. For the year ahead, the company will focus on launching more innovative assortments with a focus on its core franchises and updates to existing silhouettes.
Not everyone shares Zwillinger’s mostly upbeat attitude about the brand, though.
“With sales slumping by almost a fifth, this was nothing short of a disastrous quarter for Allbirds,” GlobalData Managing Director Neil Saunders said in emailed comments. “The only real excuse Allbirds can hide behind is this was a quarter during which the business was being reset. ... Fortunately, Allbirds is trying to be more disciplined around cost management and cash flow. This will buy it time. It won’t buy a solution for the brand’s woes.”
The benefit of the company’s latest product launches and future releases seems unclear as well.
“There's not a lot of visibility in the business right now, and while management seems optimistic on the upcoming product pipeline ... it remains to be seen whether the newly-developed products can right the ship,” Wedbush analysts led by Tom Nikic said in emailed comments.
Additionally, competition in the footwear space has strained Allbirds’ reach, according to Telsey Advisory Group analysts led by Dana Telsey.
“Overall, Allbirds is making progress reducing inventories and realigning its cost structure to ultimately emerge as a profitable company,” the analysts said in emailed comments. “However, we have not seen any improvement in sales and see momentum having shifted to other footwear brands like Hoka and On.”
