Allbirds unveils sunset-hued leggings amid successive financial losses expanding
Allbirds, the direct-to-consumer footwear and apparel company, reported a net loss of $29.4 million for the second quarter, a rise of 287% compared to the same period last year. This loss marks a significant increase over the company's net loss for the first six months of the year, which has already surpassed its full-year loss in 2021 by more than $5 million.
Despite the steep loss, revenue increased by 15% to $78.2 million, with U.S. sales rising by 21%. Store sales surged by almost 120% as the brand opened new locations during this period.
In an effort to focus on essential products, Allbirds announced that it will simplify its apparel strategy, focusing on basic items and ceasing production in the leggings category, as co-founder and co-CEO Tim Brown revealed during a meeting with analysts.
The economic downturn has posed challenges for direct-to-consumer brands, which were already struggling with profitability. Allbirds, Glossier, and Warby Parker are among the companies that have recently laid off staff to cut costs.
Neil Saunders, Managing Director of GlobalData, stated that despite the market-beating sales growth, Allbirds' sales are still "well below the young firm's average run rate over the past year." Saunders suggests that the company may need to take further action to keep investor satisfaction high and curb losses.
As it grapples with inflation and mounting losses, Allbirds is making adjustments across its business. The brand's apparel line, launched less than two years ago, is undergoing updates to better align with customer preferences. Allbirds plans to focus on classic, seasonless items, such as tees, while moving away from more specific apparel categories. This shift should simplify the company's buying process, according to Brown.
The company expanded its footwear line by introducing a permanent children's collection. Allbirds also signed a deal to sell through Selfridges in the United Kingdom, which should boost brand awareness at a potentially reduced cost compared to stand-alone stores. Despite this expansion, Allbirds plans to continue opening stores and does not currently intend to close any locations.
Wedbush analysts acknowledge that Allbirds is currently an unprofitable company with a declining top line and margin pressure. However, they expressed optimism about the brand's long-term prospects, citing its potential to carve a niche in the market through a blend of comfort and sustainability, the expected benefits of diversifying distribution, and the management's focus on achieving profitability within a reasonable timeframe.
- Amidst the challenging economic climate, Allbirds, along with companies like Glossier and Warby Parker, are making cost-cutting measures, such as staff layoffs.
- In an effort to streamline its operations and focus on essential products, Allbirds is simplifying its apparel strategy, ceasing production in the leggings category and shifting towards classic, seasonless items.
- As part of its strategic adjustments, Allbirds announced the introduction of a permanent children's footwear collection and signed a deal to sell through Selfridges in the UK, aiming to boost brand visibility at a potentially lower cost.
- Despite facing inflation and rising losses, Allbirds' apparel line is undergoing updates to reflect customer preferences and better align with market trends.
- Financial analysts, while acknowledging Allbirds' current unprofitability and declining top line, remain optimistic about the brand's long-term prospects, emphasizing its potential for market differentiation through comfort, sustainability, and diversified distribution channels.
