Allbirds, which, on Tuesday, filed for an initial public offering, expects to grow by expanding across categories, raising brand awareness, deepening its engagement with consumers, and opening “hundreds” of additional stores.
The San Francisco-based manufacturer of eco-friendly merino wool shoes listed five near-term growth drivers in its prospectus.
Innovate And Make Great New Products With Natural, Sustainable Materials
Allbirds noted that in the six months ended June 30, approximately 80 percent of its orders from repeat customers included a different item than was included in their first order. The company added, “We believe this highlights an opportunity to continue expanding our product portfolio to increase engagement and drive lifetime customer value.”
The company’s growth plan comes from innovations in new materials, such as its collaboration with Natural Fiber Welding, Inc. to commercialize a 100 percent plant-based leather alternative; the expansion of its footwear; its apparel across functional casual wear; and performance athletics. Allbirds said, “Our expertise with materials allows us to expand in basics and functional casual apparel, and has significant application to natural performance apparel, which we believe will be a complementary offering to our newly established credibility in performance footwear.”
The company this month said it is launching a new line of athletic gear made of merino wool and yarn created from the pulp of eucalyptus trees.
Raise Awareness And Grow Customer Community
The six-year-old brand has an Aided Brand Awareness of just 10.9 percent in the U.S. in the first quarter of 2021. Steps to raise awareness include “thought leadership moments,” including the recognition the brand gains from its sustainability efforts. In 2020, the company launched the Allgood Collective, a community of ambassadors who promote “the power of collective action as a force for good,” positioning Allbirds as a vehicle for positive change. The brand’s growing store base, typically in high-traffic areas, “serve as billboards while providing an immersive and tactile introduction to the brand.” Finally, Allbirds recently began television advertising and has reached a scale to broaden its marketing outreach beyond primarily direct, digital conversations. Allbirds wrote, “As we increase awareness, add stores, and broaden our product assortment, we believe this full-funnel approach will increase marketing efficiency.”
Deepen Engagement With Community Of Customers
The digitally-native vertical retailer sees opportunities to increase purchase frequency by expanding product offerings to provide more opportunities to buy, investing in personalization to deliver more relevant offerings and exchanges with consumers, and expanding its retail and digital footprint to get closer to consumers. Allbirds wrote, “By deepening our relationships with our repeat customers, we believe we are well-positioned to capture a greater share of the approximately seven pairs of shoes and 68 pieces of clothing that the average American bought in 2018 and realize a substantial growth in our business. We believe there is continued opportunity to grow our closet share as we further expand our brand and product selection, as evidenced by the fact that approximately 80 percent of orders from repeat customers in the six month period ended June 30, 2021 included a different item than in their first order and 26 percent of those orders were for multiple items.”
Expand Vertical Retail Distribution To Meet Customers Where They Are
Allbirds said it has “just scratched the surface” in its physical store potential, particularly in the U.S., with 27 stores globally as of June 30. Allbirds wrote, “We are in the early phase of a ramp towards hundreds of potential locations in the future, with strong unit economics. Furthermore, as our store fleet expands, we expect our growth to accelerate, as compared to 2020, through more efficient customer acquisition while also receiving the benefit of increasing digital traffic as more people learn about our brand through our stores. Based on our stores’ pre-COVID-19 performance, we believe our new stores will also be highly profitable, have attractive payback periods, serve as good capital investments, and be positioned well to take advantage of physical retail’s recovery from the pandemic.”
Strong potential for further growth was seen internationally, with 24 percent of net revenue coming from outside the U.S. in 2020. Investments in personalization are expected to elevate the brand’s interactions with both new and existing customers to help drive website and mobile app traffic, conversion, and revenue. Allbirds wrote, “Furthermore, through our vertical retail strategy, we believe we will be able to continue to expand our valuable multi-channel customer base. Across all cohorts and through June 30, 2021, our multi-channel repeat customers, who represented 12 percent of our total repeat customers as of such date, on average spent approximately 1.5 times more than our single-channel repeat customers.”
Optimize Infrastructure For Profitable Growth
Allbird’s filings indicate that it has incurred substantial net operating losses during its brief history but now has the ability to scale the business with much of its major investments completed. Allbirds wrote, “With much of this global infrastructure built, we can now scale our business to use the full capacity of the supply chain and technology in place, including store fleet expansion and international growth, all of which should result in margin expansion, operational leverage, and profitable growth.”
Two-Year CAGR Growth Of 32 Percent
Sales have grown from $126.0 million in 2018 to $219.3 million in 2020, representing a compound annual growth rate, or CAGR, of 31.9 percent. In 2020, digital represented 89 percent of sales. Earnings before tax grew from $1.3 million in 2019 to $15.4 million in 2020.
Net revenue rose to $219.3 million from $193.7 million, driven by increases in average order value and digital sales. Sales were $126.0 million in 2018 Allbirds posted a net loss of $25.86 million for 2020, wider than the $14.53 million loss in the prior year due to costs associated with investments in headcount, operations and digital advertising, according to the prospectus. The company said that it expects to continue to be lossmaking for the foreseeable future.
Allbirds, founded in 2015, gained popularity among sustainability-conscious Millennials with its wool-based athletic trainers, dubbed “the world’s most comfortable running shoe” by Time Magazine in 2016. The footwear brand’s products are produced using naturally derived materials, and the company claims in its filing that the carbon footprint from making a standard pair of its sneakers is about 30 percent less than that of its rivals. It said its supply chain had been carbon neutral since 2019.
Allbirds’ filing highlighted its ESG credentials and noted that environmental impact and brand trust were increasingly important factors for GenZ and Millennial consumers, according to a McKinsey study. Allbirds is also bringing its sustainability focus to the IPO. In going public, the company said it is committed to a framework centered around environmental, social and governance criteria. Among Allbirds’ commitments is to report progress on policies or programs to address its most material environmental issues, such as land, chemical and energy use.
Reports had arrived in June that Allbirds had confidentially filed for an IPO. The number of shares being sold and the size of the offering weren’t disclosed in the regulatory filing. The company, backed by T Rowe Price, Franklin Templeton and Baillie Gifford, last raised $100 million in a Series E funding round in September 2020, earning a valuation of $1 billion.
Proceeds from the offering will be used to fund its working capital, operating expenses, capital expenditures, and other purposes. The company said it could also use a portion of the proceeds to acquire, or invest, in complementary businesses, products, services, or technologies.
The offering is being underwritten by Morgan Stanley, JPMorgan and Bank of America. The company plans to list under the symbol BIRD.
Photo courtesy Allbirds