“At the same time, we are taking definitive steps to further reduce costs, enhance liquidity, and pursue value-creating opportunities.”

‘Unable to address issues’

“Allbirds’ latest financials indicate it hasn’t been able to address underlying financial issues with quarterly sales down 55% compared to September 2022,” Clare Capital partner Alex Gordon told the Herald.

“Allbirds typically sees a bump in sales in the December quarter, but losses have continued since it listed, with losses significantly higher than pre-Covid,” Gordon said.

Trade-sale?

A high-profile brand with a depressed stock price: is that a recipe for a private equity buyout or a trade sale to a larger shoe maker or apparel firm?

“A potential acquirer would be taking on a company whose revenues are falling and which continues to lose money,” Gordon told the Herald.

“While a strategic acquirer might be able to leverage the Allbirds brand and bring its own infrastructure and support with it, the current financials make this a challenge.”

Clare Capital managing partner Mark Clare added: “A trade sale looks hard, but other options don’t look easier either.

“Management has been doing what you would expect, trying to improve sales – or reduce sales declines – and reducing costs.

“Unfortunately, that doesn’t appear to be turning things around fast enough and there isn’t an unlimited runway.”

Allbirds finished the quarter with net cash of US$23.7m (or $11.3m net of debt) from the year-ago US$66m (debt-free).

“So, they will face some hard decisions,” Clare said.

“Options broadly look like selling part or all the business – but at what price? – or raising more capital – if they can, and at what price? Raising more capital requires having a credible long-term story to tell investors.”

What’s gone wrong?

In an investor presentation, Allbirds said its year-on-year fall in third quarter revenue was ”primarily attributable to structural changes, including impacts from international distributor transitions and planned retail store closures”.

Allbirds now has 23 stores, down from 60 in September 2023 near the start of its restructure.

The firm suffered supply chain challenges during the pandemic. More recently, US President Donald Trump’s tariffs have been a challenge. Nearly all of Allbirds’ factories are in Vietnam, which was initially hit by a 48% tariff, moderated to 20% after an October trade deal.

More broadly, there’s been the more intangible problem of the brand – once appearing on the feet of everyone from Barack Obama to Leonardo DiCaprio – losing its cool.

A January 2023 Wall Street Journal feature was headlined, “Allbirds Were the Tech Bro ‘It’ Shoe. Then the Tech Bros Moved On”.

The influential paper quoted a stylist who said hipster Silicon Valley clients had moved on to other brands – adding that her clients think Allbirds’ flagship Wool Runners don’t offer enough support if you’re on your feet for long periods, and that the Wool Runners and Tree Runners “flounder in wet weather”. Allbirds disputed those claims.

The Journal quoted social media posts that called Allbirds’ shoes “passé”, “Crocs for tech bros” and “sweatpants for your feet”.

There was an earlier headache when Amazon – which sold Allbirds – started offering a cheaper dupe under a house brand.

And Brown also acknowledged the challenges of an “anti-woke” backlash among some investors – but also said he welcomed the opportunity it provided to argue the case for his firm’s ESG approach.

‘Allbirdus deflatus’

There was more brand grief this week when US retail analyst Neil Saunders, who has more than 70,000 followers on LinkedIn, took to the platform this week to mock Allbirds after its third-quarter numbers (delivered on November 7), with a satirical post on “Allbirdus deflatus”.

“The species is also known to shed vast amounts of cash when stressed, and its attempts to migrate into new habitats have mostly failed.”

In a separate, more conventional post, Saunders said: “Back in 2022, Allbirds was having its moment in the sun. Annual revenue was approaching US$300m and, while the brand was somewhat niche, it had strong novelty appeal with its core audience.”

But the firm’s range was too narrow to build momentum, the analyst said. An attempt to diversify into wool-blend leggings fell flat (a 2023 Wall Street Journal report called them “see-through”.)

Its decline to a forecast US$166-166m revenue this year, “underlines the fact that Allbirds has fallen out of favour with consumers and suggests that its early success was more of a passing fad than the foundation for a sizeable business”, Saunders said.

Disclosure: Clare Capital principal Mark Clare and Clare Capital partner Alex Gordon hold personal shares in Allbirds. Clare added: “I am a friend of Tim Brown and am currently wearing a pair of Allbirds.”

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.