Macro Environment Impacts Allbirds’ Business in First Quarter
Losses continued to mount at Allbirds Inc. in the first quarter despite solid sales gains in the U.S. as the brand’s international business was impacted by the war in Ukraine and the lockdowns in China. As a result of these headwinds, which it expects to continue, the company lowered its projections for the second quarter and year.
In the period ended March 31, the San Francisco-based sustainable footwear and apparel brand said its GAAP net loss was $21.9 million, or 15 cents a share, compared to a net loss of $13.5 million, or 25 cents a share, in the first quarter of 2021. Adjusted earnings before interest, taxes, depreciation and amortization in the first quarter were a loss of $12.2 million, compared to a loss of $6.9 million in the first quarter of 2021.
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Sales overall were strong, with the company reporting net revenue increased 26 percent to $62.8 million against the first quarter of 2021 and 49 percent ahead of the first quarter of 2020.
In the U.S., sales rose 35 percent to $48.9 million compared to the same period in 2021. And at its 39 physical locations around the world, sales jumped 129 percent compared to the first quarter of last year. International sales were weak, however, increasing only 3 percent to $13.8 million in the period from $13.4 million in the year-ago quarter.
In after-market trading on Tuesday, the company’s stock slid below $4 a share, dropping more than 15 percent after the earnings were announced.
Mike Bufano, chief financial officer, said: “We delivered a strong first-quarter performance with net revenue growth of 26 percent, exceeding our guidance targets, gross profit increasing 26 percent year-over-year despite higher supply chain costs, and adjusted EBITDA coming in within our guidance target range. Looking at the second quarter and remainder of 2022, we anticipate that external headwinds will continue to impact our international business, and as such, we are reflecting a more cautious outlook in our updated 2022 guidance targets.”
Bufano said the company believes these “external headwinds are transitory” and the company is “confident in our ability to achieve our medium-term financial targets, including 20 percent to 30 percent net revenue growth, gross margin of 60 percent-plus and mid- to high-teens adjusted EBITDA margin.”
As a result, the company updated its guidance for the second quarter and full year and said it is expecting net revenue of $75 million to $79 million in the second quarter, an increase of 10 to 16 percent, and adjusted EBITDA of negative $14 million to negative $11 million. Analysts had been expecting sales of $88.2 million in the second quarter
For the year, projections are that sales will hit $335 million to $345 million, an increase of 21 to 25 percent, and adjusted EBITDA will be negative $25 million to negative $21 million. However, the company had previously said it expected sales of $355 million to $365 million.
Joey Zwillinger, cofounder and co-chief executive officer, said the “tumult around the world since our last earnings report, including Russia’s invasion of Ukraine and China’s COVID-19 restrictions, impacted the performance of our international business in Q1 and is expected to persist for the remainder of 2022. These factors were more than offset by excellent performance in our U.S. business, which delivered net revenue growth of 35 percent in the first quarter. Net revenue growth for the total business again accelerated on both a one- and two-year basis in the quarter, up 26 percent and 49 percent, respectively.”
He said despite the challenging macro environment and “external headwinds,” Allbirds will continue to focus on driving sales through delivering product innovation, growing its store portfolio and expanding internationally, “with those growth pillars highlighted in 2022 by what we believe is the most exciting new product roadmap in the history of the company. While we are adopting a more conservative near-term outlook in light of the transitory external headwinds affecting our international business, we expect to deliver strong full-year revenue growth of 21 percent to 24 percent in 2022. Importantly, we remain confident that our digital-savvy, omnichannel operating model will support continued growth and enable us to create meaningful value for our shareholders in the years ahead.”
Tim Brown, cofounder, singled out a few product highlights in the period, including its latest lightweight running shoe collaboration with Adidas, 90 percent of which sold out in three days. Zwillinger also said Allbirds’ “core lifestyle offering” has seen increased demand as the COVID-19 pandemic retreats.
The brand’s first foray into wholesale hit in the quarter at Public Lands, a division of Dick’s Sporting Goods, and Zalando, the German online retailer, and early indicators are “positive,” indicating that selling through third parties is a successful way to further build sales, Zwillinger said.
Allbirds stock has been in a slide for a while now, falling more than 67 percent since the end of 2021 and is now trading at around $4 a share. When the company went public last November, its stock traded at $21.21. But Zwillinger said in the second quarter, the company will pass $1 billion in lifetime sales since its founding six years ago.
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