Dive Brief:
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Allbirds Q4 net revenue plunged over 22% year over year to $55.9 million as store closures took a toll. The footwear brand shuttered 15 locations last year; that plus distribution changes abroad siphoned some $22 million from the topline, Chief Financial Officer Annie Mitchell told analysts Tuesday.
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Gross margin in the period shrank by 670 basis points to 31.3%. But net loss also declined significantly, falling 55% to $25.7 million.
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For the year, net revenue fell more than 25% to $189.8 million, gross margin expanded by about 170 basis points to 42.7%, and net loss declined more than 39% to $93.3 million.
Dive Insight:
The painful turnaround at Allbirds serves as an indictment of sorts of the direct-to-consumer model that once seemed destined to disrupt retail. That disruption has been tempered as several brands, including Allbirds, have realized that wholesale, rather than a drag on operations and results, is a worthy distribution channel.
The brand has converted to a distribution model abroad in its targeted markets, CEO Joe Vernachio told analysts on Tuesday.
“With this shift, our international business is now set up for profitable, scalable growth,” he said.
In the U.S. the brand closed another five stores since the start of the year and continues to evaluate its fleet, Mitchell said.
Those evaluations so far seem fruitful, as the brand appears to be “funneling visitors to its most successful stores,” according to research from Placer.ai. From Q1 to Q3 last year, Allbirds shrank its footprint by about a third, and, while visits overall fell, average visits per store rose, Placer.ai found. In California, visits per store in January this year were up more than 28%.
The brand has also scrambled to improve its merchandise and introduce new assortments, which Vernachio said will hit the market in the fall and fuel a return to top-line growth in the holiday quarter.
“We have had the pleasure of viewing this product and think it is much better aligned with underlying brand DNA and offering newness that the Allbirds customer has been without for two years,” William Blair analysts Dylan Carden and Anna Linscott said in a Wednesday research note.
“The tone here has clearly shifted to offense after two years of restructuring efforts,” they also said. “It is worth looking back to appreciate all that has happened and how that supports the future.”
The company expects its recovery to show up in the second half of the year, including that return to sales growth in Q4, Mitchell said. But the trajectory could be complicated by a wave of uncertainty that is dragging down consumer confidence.
“There is still a lot riding on back-half launches ... with the largest risks being macro in nature as any more significant downturn in consumer spending could be an unfavorable environment for new product,” the William Blair analysts said.
