On March 12, 2024, Allbirds Inc (BIRD, Financial) released its 8-K filing, disclosing its financial results for the fourth quarter and full year of 2023. The lifestyle brand, known for its eco-friendly footwear and apparel, faced a challenging year with a significant decrease in net revenue and an increase in net loss. The company also announced a change in leadership, with COO Joe Vernachio stepping up as CEO to further the company's strategic transformation plan.
Company Overview
Allbirds Inc is a global lifestyle brand that focuses on creating footwear and apparel using naturally derived materials. The company aims to offer products that are environmentally friendly and sustainable. The majority of Allbirds' revenue comes from the United States, with sales primarily generated through its shoes and apparel products.
Financial Performance and Challenges
The reported decrease in net revenue for both the fourth quarter and the full year reflects a lower average selling price, which was driven by increased promotional activity. This strategy was partially offset by an increase in third-party net revenue. The company's net loss and net loss margin also increased significantly, indicating challenges in profitability.
The decline in gross profit and gross margin was primarily due to the decrease in average selling price. Selling, general, and administrative expenses (SG&A) decreased slightly, primarily due to a decrease in stock-based compensation, but were offset by an increase in depreciation and amortization expense. Marketing expenses were reduced, reflecting a decrease in digital advertising spend.
Impairment expenses rose dramatically due to the non-cash impairment of property and equipment and operating lease right-of-use assets associated with certain retail stores. This, along with restructuring expenses related to the strategic transformation plan, contributed to the net loss.
Strategic Transformation Plan
Allbirds' strategic transformation plan, which was initiated in 2023, aims to reignite growth, improve capital efficiency, and drive profitability. The plan focuses on product and brand revitalization, optimizing U.S. distribution and retail store profitability, transitioning to a distributor model in certain international markets, and improving cost savings and capital efficiency.
The company expects to close 10-15 U.S. retail store locations in 2024 and has already transitioned to a distributor model in Canada, South Korea, Australasia, and Japan. These changes are part of Allbirds' efforts to streamline operations and focus on areas with the highest growth potential.
Balance Sheet Highlights
Allbirds ended the year with a strong liquidity position, including a significant improvement in operating cash use. Inventory levels were reduced by over 50%, reflecting a more efficient management of on-hand inventory.
2024 Financial Guidance Targets
For the full year 2024, Allbirds provided financial guidance targets, anticipating net revenue between $190 million to $210 million, with a gross margin of 42% to 45%, and an adjusted EBITDA loss of $78 million to $63 million. The guidance reflects the impact of transitioning to a distributor model in international markets and the planned closure of several retail stores.
The company will provide additional commentary on its 2023 business trends during its earnings call, and investors can access a live webcast and replay on the Allbirds investor relations website.
Conclusion
While Allbirds Inc (BIRD, Financial) faced a challenging 2023 with decreased revenue and increased net loss, the company's strategic transformation plan and leadership changes signal a commitment to restructuring for future growth. Investors and stakeholders will be watching closely to see how these initiatives impact the company's performance in the coming year.
Explore the complete 8-K earnings release (here) from Allbirds Inc for further details.
