- A couple of weeks after laying off 8% of its global corporate workforce, Allbirds reported a second quarter net loss of $29.4 million, up 287% over the prior year. The company’s net loss for the first six months of the year is more than double that of the same period last year and has already exceeded its loss for the full year in 2021 by more than $5 million.
- Revenue increased by 15% and reached $78.2 million, while U.S. revenue grew 21%, according to a company press release. Stores surged by almost 120% as the brand opened new locations.
- The company is “simplifying” its apparel strategy to focus on basics and will sunset its leggings category, co-founder and co-CEO Tim Brown said on a call with analysts Monday.
The economic downturn has not been kind to DTC brands, which were already struggling with profitability before and have now turned to layoffs to stem losses. In the past few weeks alone, Glossier, Allbirds and Warby Parker have all laid off staff. And according to GlobalData Managing Director Neil Saunders, that still may not be enough for Allbirds.
“[W]ith external conditions becoming less favorable Allbirds needs to look at how it can shift its business model to maximize sales and minimize costs,” Saunders wrote in emailed comments. “Some layoffs have already been made, but we suspect more action is needed on the sales front to both keep investors satisfied and the bottom line from plunging any further into the red.”
The company’s sales growth is “market-beating,” Saunders said, but it is also “well below the young firm’s average run rate over the past year.” That suggests that some of the macro trends hurting Allbirds are not as transitory as the brand thought, leading to a 10 percentage point cut to the company’s full-year outlook, Saunders added.
As it battles inflation and widening losses, Allbirds is making shifts across the business. The company’s nascent apparel business — launched just under two years ago — is seeing an update as the brand adjusts to consumer demand. Allbirds will focus on “classic, seasonless items such as tees,” which Brown said its customers prefer, and shift away from apparel with a more narrow scope. Focusing on evergreen items will also simplify the company’s buying process, according to Brown. Its first collection of apparel was less than half evergreen and will now be mostly evergreen.
As for exiting the leggings space, Brown said Allbirds “went too deep on leggings, an incredibly competitive category.” The company entered activewear just last year. In footwear, however, the company is expanding, adding its “Smallbirds” kids collection as a permanent feature.
Allbirds continues to expand its wholesale distribution, signing a deal to sell through Selfridges in the United Kingdom, co-founder and co-CEO Joey Zwillinger said. That should help with brand awareness, according to Saunders, which is more expensive to pursue through stand-alone stores. Nevertheless, Allbirds leadership is planning to continue opening stores, and in response to a question about possible closures, said there are “no stores we would exit today.”
In emailed comments, Wedbush analysts conceded that Allbirds is “an unprofitable company with a decelerating top line and near-term margin pressure,” but expressed faith in the brand’s long-term prospects.
“[W]e think the brand will be able to carve a niche for itself (blend of comfort and sustainability), we think the strategy to diversify distribution beyond the company’s website will bear fruit (stores + wholesale should drive better brand awareness and improve margins), and we think management understands the importance of getting to profitability in a reasonable time frame,” they wrote.