Allbirds shares dropped on Wednesday afternoon after the retailer announced a weak outlook for the fourth quarter.
In the third quarter, the San Francisco-based footwear company reported that revenues dropped 21.2 percent to $57.2 million, largely driven by decreases in average selling price, promotional activity and fewer units sold. Allbirds posted a net loss of $31.6 million, or 21 cents per basic and diluted share, which was slightly better than the 22 cent loss expected by analysts surveyed by Yahoo.
Revenues were within, but on the low end of, Allbirds’ guidance from the prior quarter. Adjusted EBITDA loss was $19 million, better than the expected loss between $23 million and $20 million.
Allbirds’ shares were down more than 15 percent as of 4:45 p.m. on Wednesday.
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Allbirds co-founder and CEO Joey Zwillinger said the company’s third quarter results represented progress on the company’s transformation strategy it outlined in March meant to jumpstart growth and improve capital efficiency and profitability.
“We ripped the band-aid off and went through a big transformation program in March,” Zwillinger told FN in an interview ahead of the earnings release. “We laid out that we need to do the yeoman’s work of ripping out a bunch of costs from both corporate as well as our manufacturing base and then worked down inventory significantly as we recalibrate the product assortment.”
Inventory in Q3 was down 37 percent year-over-year to $79.9 million.
After some product missteps in 2022, Allbirds’ transformation plan has largely hinged on doubling down on core products, like the Wool Runner, and shifting away from newer styles that have not resonated as strongly with consumers. This strategy most recently came to life with the launch of the Wool Runner 2 earlier this month. Allbirds’ update to the original model that launched in 2016 featured 15 new innovations, including upgrades to comfort, durability, design and fit.
“When we enter 2024, we’ll have that recalibrated product assortment, less discounted product driving higher full price sell through and we’ll put marketing in a more prominent position to then enjoy the benefits of all the cost reduction that we did in 2023,” Zwillinger said.
Allbirds also announced that it entered into letters of intent with distributor partners in Japan and Australia and New Zealand as part of its plan to shift its international direct go-to-market model to a third-party distributor model.
In the fourth quarter, Allbirds expects net revenue to decline between 22 percent and 15 percent, to land between $66 million and $72 million. Adjusted EBITDA loss is expected between $26 million and $23 million. These results take into account the negative impact of Allbirds’ transition to a distributor model in Canada and South Korea and expected promotional activity during the holidays.
