Allbirds, the B Corporation certified brand of sneakers and apparel based in San Francisco, has filed an application with the U.S. Securities and Exchange Commission for a so-called “sustainable” initial public offering on Nasdaq. The document indicates the size of the transaction at $100 million, which is an estimation solely made to define the registration fee of $10,910, but gives no indication about the pricing of the shares. Allbirds was last valued at around $1.7 billion in a $100 million Series E funding round held in September 2020.
The filing showed that the direct-to-consumer company has been making losses despite strong sales growth over the past years, up to a level of $219.3 million in 2020 and $118 million for the first six months of this year. Allbirds’ gross margin increased by 4.54 percent points from 46.9 percent in 2018 to 51.4 percent in 2020. But, adjusted Ebitda was a negative $1.3 million in 2019 and a negative $15.4 million last year, due to investments in new staff, operations and digital advertising. The net loss increased from $14.5 million two years ago to $25.9 million in 2020. The company expects that revenue expansion and improved operational efficiency will lead to a “robust bottom line,” but,it also warned that it has incurred significant net losses since its start in 2015, and anticipates to continue posting losses for “the foreseeable future.”
Allbirds pointed out that, thanks to the structure of its carbon-neutral supply chain, its products can go from the purchase order to exiting the factory in 45 days. And with nine distribution centers located in eight countries, it can reach up to 2.5 billion people across 35 countries ”in a matter of days.” The company plans to grow footwear sales by broadening its assortment, adding performance athletic shoes, while also introducing new styles, fits, and size ranges as “the lines have blurred between home, gym and play.”
As previously reported, it recently partnered with Adidas on a lightweight, sustainable running shoe. In its filing, the company indicated that it feels it has an edge over its competitors because the carbon footprint of its sneakers is about 30 percent lower than theirs. Allbirds has also just launched its first line of activewear.
Allbirds says it will focus on “a number” of apparel categories to complement its footwear line. “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. We have several offerings currently under development which will empower our customers to explore and appreciate the great outdoors, better connecting with nature,” it added. The brand launched its first apparel line in October 2020.
The company saw net revenues grow by an annual average of 31.9 percent between 2018 and 2020. Over the period, digital revenues grew by an annual average of 31.1 percent, reaching $194.6 million in 2020, and the store network increased from three in 2018 to 22 in 2020. Last year, the online channel represented 89 percent of the company’s sales, with stores accounted for the remaining 11 percent. “Our stores serve as an effective and profitable source of new customer acquisition, increase awareness of our brand, and drive traffic to our digital platform,” Allbirds said in the document. Last month, the brand opened its 30th store worldwide. The 3,000-square-foot location is situated at Atlanta’s Ponce City Market.
“We are in the early phase of a ramp towards hundreds of potential locations in the future, with strong unit economics,” Allbirds announced. The brand claims that its store operations have historically been ”highly profitable, capital-efficient, and provided strong investment returns.” All U.S. stores that were operating in 2019 generated about $4.3 million in average unit volume in their first 12 months of operation, including those that had their first 12 months of sales affected by Covid-19 after March 2020, it added. ”Based on this pre-Covid performance, we believe our new stores will 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,” it stressed.
Between 2018 and 2020, the company’s U.S. revenues rose by an annual average of 20.8 percent, while international sales jumped by 112.4 percent a year, representing 24 percent of the total turnover last year. Allbirds expects local teams hired in China, Germany, Japan, New Zealand, South Korea and the U.K. to help fuel sales in key foreign markets in the future.
The company claims that some 53 percent of sales came last year from repeat customers. It estimates to have sold products to over four million customers since its founding. As of June 30, 2021, Allbirds had more than two million people on its email list and nearly one million followers on social media.
Thanks to its direct-to-consumer model, Allbirds feels that it can “own the customer experience, driving deeper brand engagement and loyalty, and effectively managing inventory, while also realizing better margins.” It claims that since its inception, about 98 percent of gross sales were achieved at full price. “Vertical retail not only allows us to better understand our customers, but also enables us to cut out the layers of costs associated with traditional wholesalers, creating a more efficient cost structure,” it added. The brand believes that its business model enables it to “deliver better products and a better experience to customers, one that competitors relying on wholesale distribution cannot afford to deliver at our price point.”
The company noted that its brand awareness reached 10.9 percent in the U.S. in the first quarter of 2021, up from from 8.4 percent in the fourth quarter of 2020 thanks its marketing efforts, which included television advertising. It sees “significant whitespace for growth” as it presents itself to new consumers. Allbirds stressed that more than 60 percent of consumers have stated that the environmental impact is an important factor in their purchasing decisions, based on a 2020 McKinsey study.
“Our sustainable materials innovation and simple, comfortable designs will allow us to continue to build closet share and grow revenue with new and existing customers, and our vertical retail model meets customers where and when they want to shop, all while treading lighter on the planet,” Allbirds commented.
According to Statista, apparel, footwear, and accessories represented 29.5 percent of total U.S. e-commerce retail sales in 2020 and are expected to increase to approximately 32.2 percent by 2024. Based on a 2021 consumer survey conducted by Appnovation, about 80 percent of respondents expected or hoped that brands would adopt digital solutions to better serve their consumers.
The offering is being underwritten by Morgan Stanley, JPMorgan and Bank of America. The company plans to list under the symbol BIRD.
