\u201cAt the same time, we are taking definitive steps to further reduce costs, enhance liquidity, and pursue value-creating opportunities.\u201d<\/p>\n
\u2018Unable to address issues\u2019<\/p>\n
\u201cAllbirds\u2019 latest financials indicate it hasn\u2019t been able to address underlying financial issues with quarterly sales down 55% compared to September 2022,\u201d Clare Capital partner Alex Gordon told the Herald.<\/p>\n
\u201cAllbirds typically sees a bump in sales in the December quarter, but losses have continued since it listed, with losses significantly higher than pre-Covid,\u201d Gordon said.<\/p>\n
Trade-sale?<\/p>\n
A high-profile brand with a depressed stock price: is that a recipe for a private equity buyout or a trade sale to a larger shoe maker or apparel firm?<\/p>\n
\u201cA potential acquirer would be taking on a company whose revenues are falling and which continues to lose money,\u201d Gordon told the Herald.<\/p>\n
\u201cWhile a strategic acquirer might be able to leverage the Allbirds brand and bring its own infrastructure and support with it, the current financials make this a challenge.\u201d<\/p>\n
Clare Capital managing partner Mark Clare added: \u201cA trade sale looks hard, but other options don\u2019t look easier either. <\/p>\n
\u201cManagement has been doing what you would expect, trying to improve sales \u2013 or reduce sales declines \u2013 and reducing costs. <\/p>\n
\u201cUnfortunately, that doesn\u2019t appear to be turning things around fast enough and there isn\u2019t an unlimited runway.\u201d<\/p>\n
Allbirds finished the quarter with net cash of US$23.7m (or $11.3m net of debt) from the year-ago US$66m (debt-free).<\/p>\n
\u201cSo, they will face some hard decisions,\u201d Clare said. <\/p>\n
\u201cOptions broadly look like selling part or all the business \u2013 but at what price? \u2013 or raising more capital \u2013 if they can, and at what price? Raising more capital requires having a credible long-term story to tell investors.\u201d<\/p>\n
What\u2019s gone wrong?<\/p>\n
In an investor presentation, Allbirds said its year-on-year fall in third quarter revenue was \u201dprimarily attributable to structural changes, including impacts from international distributor transitions and planned retail store closures\u201d.<\/p>\n
Allbirds now has 23 stores, down from 60 in September 2023 near the start of its restructure.<\/p>\n
The firm suffered supply chain challenges during the pandemic. More recently, US President Donald Trump\u2019s tariffs have been a challenge. Nearly all of Allbirds\u2019 factories are in Vietnam, which was initially hit by a 48% tariff, moderated to 20% after an October trade deal.<\/p>\n
More broadly, there\u2019s been the more intangible problem of the brand – once appearing on the feet of everyone from Barack Obama to Leonardo DiCaprio – losing its cool.<\/p>\n
Allbirds director Tim Brown chats to Northburn Station manager and merino grower Bevan McKnight. Photo \/ Vaughan Brookfield<\/p>\n
A January 2023 Wall Street Journal feature was headlined, \u201cAllbirds Were the Tech Bro \u2018It\u2019 Shoe. Then the Tech Bros Moved On\u201d.<\/p>\n
The influential paper quoted a stylist who said hipster Silicon Valley clients had moved on to other brands \u2013 adding that her clients think Allbirds\u2019 flagship Wool Runners don\u2019t offer enough support if you\u2019re on your feet for long periods, and that the Wool Runners and Tree Runners \u201cflounder in wet weather\u201d. Allbirds disputed those claims.<\/p>\n
The Journal quoted social media posts that called Allbirds\u2019 shoes \u201cpass\u00e9\u201d, \u201cCrocs for tech bros\u201d and \u201csweatpants for your feet\u201d.<\/p>\n
There was an earlier headache when Amazon \u2013 which sold Allbirds \u2013 started offering a cheaper dupe<\/a> under a house brand.<\/p>\n And Brown also acknowledged the challenges of an \u201canti-woke\u201d backlash among some investors \u2013 but also said<\/a> he welcomed the opportunity it provided to argue the case for his firm\u2019s ESG approach.<\/p>\n \u2018Allbirdus deflatus\u2019<\/p>\n There was more brand grief this week when US retail analyst Neil Saunders, who has more than 70,000 followers on LinkedIn, took to the platform this week to mock Allbirds after its third-quarter numbers (delivered on November 7), with a satirical post on \u201cAllbirdus deflatus\u201d.<\/p>\n \u201cThe species is also known to shed vast amounts of cash when stressed, and its attempts to migrate into new habitats have mostly failed.\u201d<\/p>\n In a separate, more conventional post, Saunders said: \u201cBack in 2022, Allbirds was having its moment in the sun. Annual revenue was approaching US$300m and, while the brand was somewhat niche, it had strong novelty appeal with its core audience.\u201d<\/p>\n