Allbirds reported a 9.8% decrease in net revenue to $70.5m for the second quarter ended 30 June 2023, in comparison to the same period last year.
The brand says this year-over-year decrease is primarily attributed to a decrease in average selling price, driven by promotional activity, and an estimated $0.7m negative impact from foreign exchange (FX).
The loss from operations accounted for $29.6m compared to $29.3m in the previous year. While the net loss was $28.9m as opposed to $29.4m in the second quarter of 2022.
Highlights from Q2 results
- Net revenue decreased 9.8% to $70.5m
- Adjusted EBITDA loss of $18.3m
- Net loss was $28.9m compared to 29.4m in the same period the year before.
Market demand versus company priorities
GlobalData's retail analyst Neil Saunders believes Allbirds performance is is a classic example of when the market and demands are not aligned with the passions and priorities of those that run the business. As a result, he suggests the company is losing out.
He adds that Allbirds' struggle to even remain flat is a consequence of two things - a tougher consumer environment and fatigue with the brand.
Saunders says the bigger impact comes from the second trend and that Allbirds is both losing current customers and failing to pick up new ones like it once did. Although, he says the market has become competitive with brands like Hoka and On picking up a lot of new customers in the sports and sports-casual space, but the company's perpetual focus on sustainability neither excites nor entices consumers to make repeat purchases in a way that is required to drive superior growth.
In fact, he highlights: "This is not to say that sustainability is unimportant, but it is a secondary or tertiary factor for most consumers and needs to be accompanied by other clear and compelling messages. Although today’s results from Allbirds are not good, they are not quite as bad as the past couple of quarters. This is progress of a sort, but the company still has a lot of work to do in making its business work financially and to demonstrate it can generate growth which is both profitable and sustainable."
Allbirds remains optimistic despite lower Q3 2023 financial guidance targets
Allbirds says the retailer has significantly reduced operating cash use in Q2 and generated a positive operating cash flow of $0.8m compared to a negative operating cash flow of $24.1m a year ago.
Joey Zwillinger, co-founder and CEO of Allbirds, is pleased with the brand's progress against the strategic transformation plan.
He explains: "Most notably, we gained traction across key benchmarks, including reducing inventory levels, lowering operating cash use and exercising cost control. Our teams are laser focused on the four key pillars under our plan, which has us on track to reignite growth, and improve capital efficiency with the goal of driving improved profitability."
Allbirds financial guidance targets for Q2 2023 are said to reflect the ongoing work under the company's strategic transformation plan. It predicts net revenue of $56m to $61m (a decrease of 23% to 16% versus Q3 2022) and adjusted EBITDA loss of $23m to $20m.
Subsequent to the close of the second quarter, Allbirds entered into a non-binding letter of intent with a distributor partner in Canada and a non-binding letter of intent with a distributor partner in South Korea. The distribution arrangements contemplated by these letters of intent are expected to be finalised during the second half of 2023.
In addition to this, the retailer has introduced the SuperLight collection which Allbirds highlights features an innovative midsole made of the most lightweight and low-carbon foam to date.
Allbirds made some management changes in May following job cuts after the brand reported a 13.4% decline in first-quarter revenues. As part of this change, Tim Brown, co-founder and co-CEO, transitioned from his role of co-CEO to chief innovation officer.
