Dive Brief:
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Allbirds on Wednesday said its Q2 net revenue plunged 26.8% year over year to $51.6 million, in part due to the closure of 10 stores during the period.
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Gross margin expanded by 770 basis points to 50.5%. At quarter’s end, inventory was down 42% to $53.7 million.
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Net loss narrowed by nearly 34% to $19.1 million, according to a company press release.
Dive Insight:
Allbirds began the year ushering in new management, along with a plan to shrink its store footprint by as much as one quarter, or 10 to 15 stores, by the end of the year. With another store closed after Q2 ended, the brand is up to 14 so far, per its release.
“We have closed 14 underperforming U.S. locations to bias toward a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet,” CEO Joe Vernachio told analysts on a Wednesday earnings call.
The company is also opting to sell through third parties abroad rather than directly to consumers and, to that end, inked agreements for new and existing markets including Benelux, Scandinavia, Japan, Australasia and China.
But Q2’s sales plunge was “primarily attributable to lower unit sales, partially offset by higher average selling prices, within our direct business as well as our international distributor transitions and planned retail store closures,” the company said in its release. Those moves here and abroad siphoned 4 points from Allbirds’ top line in the quarter, and taking that into account still leaves a 23% year-over-year Q2 decline, according to Wedbush analysts led by Tom Nikic.
Meeting its full-year goals will take “meaningful top-line improvement in Q4,” Nikic said in a Wednesday client note.
“While they are transitioning the business model to improve fundamentals, we believe it will take quite a bit of time to reenergize the brand,” Nikic said
Allbirds is tackling that too, and Vernachio said that the strategy following the December arrival of Chief Design Officer Adrian Nyman entails paring back new product launches while injecting “newness as quickly as possible,” including new colors, materials and design — with the latter being “the most important part of product.” New launches are resonating with customers in all markets, he said.
“All the energy in product comes through design,” he said. “If a brand is an orange, design is the juice. And if you've ever had an orange with no juice, it's not very good, right?”
