Allbirds, Inc. reported a net loss in the fourth quarter ended December 31 as sales declined 13 percent. Earnings and sales missed guidance and the eco-friendly footwear announced a new transformation plan to reignite growth and improve its cost structure.
Adjusted net revenue of $84.2 million in the quarter was short of guidance in the range of $92 million to $102 million. The adjusted EBITDA loss of $12.5 million compared to guidance calling for an adjusted loss in the range of $8.5 million to $3.5 million.
Quarter and Full Year Highlights
- Full-year 2022 net revenue increased 7 percent to $297.8 million compared to 2021 and increased 36 percent compared to 2020;
- Fourth quarter 2022 net revenue, which included $1.5 million of revenue primarily associated with the previously announced discontinuation of certain first-generation apparel, decreased 13 percent to $84.2 million compared to fourth quarter 2021 and increased 6 percent compared to fourth quarter 2020;
- Full-year 2022 U.S. physical retail channel sales grew 60 percent compared to 2021; opened 19 stores in the U.S. during the year, ending the period with 42 locations in the U.S.;
- Full-year 2022 net loss of $101.4 million, or $.68 per basic and diluted share;
- Fourth quarter 2022 net loss of $24.9 million, or $0.17 per basic and diluted share;
- Full-year 2022 adjusted EBITDA loss of $60.4 million;
- Fourth quarter 2022 adjusted EBITDA loss of $12.5 million, including a $3.5 million loss primarily associated with the previously announced discontinuation of certain first-generation apparel;
- Reduced the carbon footprint of top 10 products by 22 percent in 2022 compared to 2021;
Joey Zwillinger, co-founder and co-CEO, said, “2022 marked the end of our first full year as a public company and while we made important progress, the year came to a challenging close, with results below our expectations due to both execution and macro challenges. We need to improve performance and are announcing a new transformation plan to reinvigorate the business with an emphasis on profitable growth. Our focus is on four key areas to help Allbirds reconnect with our core consumers and meet new customers in a more capital-efficient and profitable way.
“We founded Allbirds with a vision to create better products in a better way, and we are aligning our operational and financial execution with the strength of that vision. Our brand fundamentals remain strong, with best-in-class NPS and customers who look to us for our quality, comfort, design, and sustainability. I am extremely proud of every member of the Allbirds Flock knowing they have the discipline and focus to execute our new priorities and prove that together, we can create value for consumers and shareholders alike.”
Fourth Quarter Operating Results
Fourth quarter 2022 net revenue decreased 13.4 percent to $84.2 million1 compared to the fourth quarter of 2021 and increased 6 percent compared to the fourth quarter of 2020. This decrease is primarily attributable to a decrease in the number of orders, and an estimated $3.2 million negative impact from foreign exchange (FX).
Gross profit totaled $36.3 million1 compared to $48.8 million in the fourth quarter of 2021, and gross margin declined to 43.1 percent compared to 50.2 percent in the fourth quarter of 2021. The decrease in gross margin is primarily due to the previously announced discontinuation of certain first-generation apparel, an increase in promotions and the impact of unfavorable FX rates.
SG&A was $41.6 million, or 49.5 percent of net revenue, compared to $36.7 million, or 37.7 percent of net revenue, in the fourth quarter of 2021. The increase is primarily attributable to expenses for the opening of six new stores during the period and operational expenses for 23 additional stores opened since the fourth quarter of 2021, and increased headcount, which was partially offset by expense savings from simplification initiatives. Marketing expenses totaled $16.8 million, or 19.9 percent of net revenue, compared to $18.5 million, or 19.1 percent of net revenue, due to a reduction in marketing spend compared to the same period in 2021 in a highly promotional holiday environment.
Impairment expense totaled $3.3 million, related to the impairment of certain long-lived store assets in China that were impacted by COVID-related closures. No impairment expense was recorded in the fourth quarter of 2021.
Net loss was $24.9 million compared to $10.4 million in the fourth quarter of 2021, and the net loss margin was 29.5 percent compared to 10.7 percent in the fourth quarter of 2021.
Adjusted EBITDA was a loss of $12.5 million1, compared to earnings of $0.4 million in the fourth quarter of 2021, and adjusted EBITDA margin1 declined to (14.9) percent compared to 0.4 percent in the fourth quarter of 2021.
Full-Year Operating Results
Net revenue increased 7.3 percent to $297.8 million1 compared to $277.5 million in 2021 and increased 35.8 percent compared to 2020. The increase is attributable to an increase in the number of orders and an increase in third-party sales. This was partially offset by unfavorable FX rates that had an estimated $8.0 million negative impact on net revenue. In the U.S., where net revenue increased 9.5 percent from 2021 to $229.8 million, retail store sales were the primary driver. International net revenue was roughly flat compared to 2021 at $68.0 million, as the business was negatively impacted by external headwinds, including continuing COVID-19 restrictions in China, a decrease in discretionary consumer spending as a result of increasing inflation, the impact of the crisis in Ukraine in Europe, and unfavorable FX rates.
Gross profit totaled $129.6 million1 compared to $146.7 million for the same period in 2021, while gross margin declined to 43.5 percent versus 52.9 percent in 2021. The decrease in gross margin is primarily due to the previously announced discontinuation of certain first-generation apparel, the impact of promotions, higher logistics costs, a lower mix of international sales, and unfavorable foreign exchange rates, partially offset by a higher mix of margin accretive retail store sales.
SG&A was $166.7 million, or 56.0 percent of net revenue, compared to $122.2 million, or 44.0 percent of net revenue, in 2021, with the increase primarily driven by expenses from the opening of 23 new stores during the year, increased headcount, and recurring public company operating costs. Marketing expenses totaled $59.1 million versus $57.3 million compared to 2021 and improved as a percentage of net revenue to 19.9 percent from 20.7 percent a year ago, due to a reduction in marketing spend in the fourth quarter compared to the fourth quarter of 2021.
Impairment expense totaled $3.3 million, related to the impairment of certain long-lived store assets in China that were impacted by COVID-related closures. No impairment expense was recorded in 2021. Restructuring expenses totaled $0.8 million and consisted primarily of severance and related costs for terminated employees. No restructuring expense was recorded in 2021.
Net loss was $101.4 million compared to $45.4 million in 2021, and net loss margin was 34.0 percent compared to 16.4 percent in 2021.
Adjusted EBITDA loss was $60.4 million1 compared to a loss of $11.7 million in 2021, and the adjusted EBITDA margin declined to (20.3) percent compared to (4.2) percent for 2021.
Strategic Transformation To Drive Sustained And Profitable Growth
Allbirds announced a strategic transformation plan to reignite growth, improve capital efficiency and drive profitability. The plan focuses on four areas:
- Reignite product and brand focused on brand strategy to reconnect with core consumers
- Optimize U.S. stores and slow the pace of openings, driving traffic and conversion to U.S. stores and selectively expanding its third-party wholesale channel;
- Evaluate the transition of international go-to-market strategy, evaluating potential distributor partners in certain international markets to grow internationally in a cost- and capital-efficient manner;
- Improve cost savings and capital efficiency, building on, and further accelerating, 2022 cost and cash optimization initiatives to accelerate the cost of revenue savings and SG&A savings and improve cash optimization.
August 2022 Simplification Initiatives
In the fourth quarter of 2022, Allbirds substantially completed its previously announced simplification initiatives designed to generate cost of revenue savings, streamline workflows and lower operating costs.
Balance Sheet Highlights
Allbirds ended the quarter with $167.1 million of cash and cash equivalents and $40 million available under its revolving credit agreement. In the first quarter of 2023, we executed a letter of intent to extend and upsize our undrawn revolver, which when amended, would extend the maturity through 2026 and provide us with access to up to $50 million of committed liquidity and the option to request an upsize to $100 million. Inventories totaled $116.8 million, an increase of 9.3 percent compared to $106.9 million at the end of 2021. The increase from the end of 2021 is attributable to higher on-hand inventory and the impact of higher inbound freight costs.
2023 Q1 Financial Guidance Targets
- Net revenue of $45 million to $50 million, a decrease of 20 percent to 28 percent versus the first quarter of fiscal 2022; and
- Adjusted EBITDA3 loss of $29 million to $26 million.
Photo courtesy Allbirds