A lady walks past an Allbirds store within the Georgetown neighborhood of Washington, D.C., on Tuesday, Feb. 16, 2021.
Al Drago | Bloomberg | Getty Images
Footwear retailer Allbirds on Thursday unveiled a broad overhaul of its strategy and an executive shakeup after failing to post year-over-year quarterly sales growth for the primary time in its history.
Shares of Allbirds plummeted during off-hours trading. As of Thursday’s close, shares of the corporate have fallen 3.5% thus far this yr to $2.36, giving it a market value of $352.5 million.
The retailer, which has been within the means of a broad brick-and-mortar expansion that it’s now winding down, was candid about its failures. The corporate is betting its latest strategy will reignite growth, improve capital efficiency and drive profitability in the approaching years.Â
“While we made vital progress, the yr got here to a difficult close, with results below our expectations because of each execution and macro challenges,” Joey Zwillinger, Allbirds’ co-founder and co-CEO, said in an announcement. “We want to enhance performance.”Â
The corporate said its most recent quarter was hurt by a “disappointing” holiday season. Results fell in need of Wall Street’s expectations on the highest and bottom lines.
Here’s how Allbirds did in its fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Loss per share: 17 cents, adjusted, vs. 12 cents expected
- Revenue: $84.18 million vs. $96.8 million expected
The corporate’s reported net loss for the three-month period that ended Dec. 31 was $24.87 million, compared with a lack of $10.44 million a yr earlier. Sales were $84.18 million, down greater than 13% from $97.22 million a yr earlier.Â
While full yr net revenue increased by 7% to $297.77 million, Allbirds’ net losses in its first full yr as a public company ballooned to $101.35 million, greater than double the $45.37 million in losses it recorded in 2021.Â
Gross margins within the quarter decreased to 43.1% in comparison with 50.2% within the yr ago period as selling, general and administrative expenses jumped to $41.6 million, in comparison with $36.7 million within the fourth quarter of 2021.Â
What went unsuitable?
The shoe maker said its poor performance will be attributed to a series of missteps, including its decision to shift away from its core consumer by introducing products that deviated form that base, including technical performance running products geared for elite athletes.Â
Following the successful launch of its Dasher running shoe, the corporate decided to penetrate deeper into the high performance category with products just like the Flyer. But Allbirds’ customers just weren’t “ready for us to serve them in that area,” Zwillinger told CNBC in an interview Thursday.Â
“As we made those adjoining product development decisions, we unfortunately lost a little bit of sight of what our core consumer fell in love with us for in the primary place and what they proceed to want from us,” Zwillinger said.Â
“And unfortunately, as you could have limited resources, we expended our marketing dollars and our product development resources on those adjacencies and didn’t do as much work on embellishments of the core franchise and revitalizing those franchises to maintain them extremely relevant with the core consumer.”Â
Those missteps coupled with a “very promotional” holiday season led the corporate to miss expectations, Zwillinger said.Â
“We just saw those culminating in a way that just got here together and put a compound effect and had us miss expectations, which was really disappointing for us,” he said.Â
Transformation strategy
The corporate also made a series of changes to its executive leadership and board of directors.Â
Chief Financial Officer Mike Bufano will probably be stepping down. Annie Mitchell, who previously worked at Gymshark and Adidas, will probably be taking his place.Â
Allbirds also hired a latest head of stores for North America, eliminated its chief business officer position and appointed former Nike executive Ann Freeman to its board. Eric Sprunk, the previous COO of Nike, has also been appointed as a board advisor.
Allbirds outlined several focus areas it plans to drill down on in 2023. It also hired a chief transformation officer – former Juul Labs executive Jared Fix – to guide the charge.Â
The corporate plans to reconnect with its core consumer by focusing specifically on the products those customers want and offering a more curated seasonal color offering that is gender specific.Â
It can also slow the pace of Allbirds store openings in the USA and proceed to partner with wholesalers – equivalent to REI, Nordstrom and Dick’s Sporting Goods – to reinforce brand awareness and boost sales.Â
In 2022, the corporate opened 19 latest stores within the U.S. As of the tip of December, Allbirds had 58 total stores – 42 within the U.S. and 16 abroad. In 2023, it plans to open just three latest stores within the U.S. in locations for which it signed leases in early 2022.Â
The corporate can be revisiting its go-to-market strategy in certain international markets and is considering moving towards a distributor model to scale back operating expenses and overall complexity.Â
Its final area of focus will probably be enhancing gross and operating margins by transitioning to a single manufacturing partner in Vietnam.Â
Read the complete earnings release here.