Allbirds, the sustainable footwear company, smashed predictions in its IPO twelve months ago. Now the brand is struggling to entice investors.
- Allbirds stock generated double its initial price on the first day of trading
- The stellar performance appeared to confirm the market hunger for sustainable products
- But sales have not grown as quickly as expected, causing stock prices to slump
“An opportunity for the planet”
Sustainable footwear company Allbirds smashed predictions in its initial public offering in November 2021. While the sustainable footwear brand was expected to raise $268.8 million with a valuation of more than $2 billion, it ultimately made 303 million dollars, achieving a market capitalization of $3.75 billion.
Issuing shares jumped 93 percent above their offering price on the first day of trading: shares were initially offered between $12 and $14 before the IPO price was ultimately raised to $15 per share; on the day it went public, BIRD stock fetched up to $30 apiece.
Company executives claim that strong performance owes to the market’s hunger for sustainability-driven companies. “I think why the demand was so great…investors were really attracted by the opportunity to put their capital against a great opportunity to create outcomes that were better for the planet,” said Joey Zwillinger, Allbirds’ co-founder and co-CEO, in an interview on CNBC’s Squawk Box.
Flaunting sustainable credentials
The company flaunted its sustainability credentials before the IPO, claiming ahead of the sale that it would be the first sustainable company to trade on the stock market. The brand was later forced to drop the claim.
Allbirds, which claims to make the world’s most comfortable shoe, incorporates crab shells, eucalyptus, wool, sugarcane and other natural materials into its products. It claims its average pair of shoes requires 30 percent less carbon to produce than a standard pair of shoes.
In November, Allbirds launched the Plant Pacer, billed as the world’s first one-hundred-per-cent vegan sneaker. The brand claims that materials used in the shoe – including rubber plant oils, upcycled rice hulls and citrus peels – produce 88 percent less carbon than conventional animal leather.
Stock market fragility
Yet initial stock market success has been fragile. In the space of a year, share prices had slumped to around $2.8 apiece by the end of November. The stock fell from $3.4 to new lows of $2.5, a 26 percent fall, between Oct. 31 and Nov. 9.
Given some of the company’s apparently strong financial results, the tumble may initially seem surprising. In November, Allbirds announced that revenue had grown 16% to $72.7 million year on year and that Q3 sales had beat expectations. The brand is growing particularly in the US, where it currently has 42 retail stores, up 15 since 2021, in addition to 15 stores abroad.
Penny-pinching consumers
Yet consistent losses, which stood at $76 million in the first three quarters of the year, appear to have turned off investors. Furthermore, the management’s revenue guidance, between 10 percent and 14 percent for the holiday quarter, was lower than the consensus estimate for the fourth quarter.
Battling falling demand, supply chain snags and decades-high inflation, Allbirds laid off 8 percent of its workforce (or 23 jobs) in August 2022; the company has also announced that hiring will be slowed and logistics costs trimmed in the United States by transitioning to automated distribution centers and a dedicated returns processor – a move expected to save the company between $13 million to $15 million annually from 2023. The company cited a slowdown in consumer spending toward the end of June for the changes.
Due to the expensive sustainable materials used, Allbirds shoes are necessarily expensive compared with many of its competitors (the brand’s standard Men’s Wool Runners, for example, cost $110). As cost-of-living crises take hold across the world, consumers may be favoring cheaper products.
“Looking ahead to year-end and 2023, we continue to expect macro headwinds to persist but believe that our brand, our growth strategy and simplification initiatives position us well to emerge strongly from this period,” Zwillinger said in a press release. Realistically, however, it seems unlikely that Allbirds will recover its early form anytime soon.
