Allbirds Goes Back to Basics as Efforts to Attract New Customers Fail

Allbirds is struggling to soar high after going public, with the company recording the first quarter of negative growth in its nearly decade-long history.

The direct-to-consumer (D2C) shoe company fell short of full-year sales and profit targets, but its leadership believes with some adjustments, it has a chance of recovering.

The company generated $297.8 million in net revenue for the fiscal year 2022, a 7.3% improvement over the year before. However, Allbirds failed to meet its projected revenue range of $305 million to $315 million. It also missed gross profit projections, with net loss significantly widening from $45.4 million in 2021 to $101.4 million in 2023.

According to Co-founder and Co-CEO Joey Zwillinger, the company’s performance suffered last year as it lost its focus on its core business and placed excessive emphasis on non-core products. This problem reached its peak in the fourth quarter, leading to disappointing sales in a highly promotional environment.

The company’s troubles, however, began two years earlier when Allbirds started targeting a younger and more fashion-forward audience, unintentionally alienating its loyal customer base.

“We over-emphasized products that extended beyond our core DNA,” Zwillinger said during a Thursday (March 9) earnings call.

The company notes that the shifted its focus away from its core consumer and plans to refocus immediately. Specifically, this dynamic was exacerbated by the fact that the final weeks of December were exceptionally promotional and Allbirds did not sufficiently promote to meet consumers’ expectations.

The sustainability-focused footwear brand said it over-invested in seasonal trends, colors and new silhouettes that failed to attract new consumers to the brand and proved to have lower conversion and sell-throughs in comparison to the company’s classic styles that were popular with its loyal customer base.

Learning from its mistakes, the company is returning its focus to its core customers, who are a “largely affluent” group of 30- to 40-year-old men and women who are interested in an active lifestyle in urban exploration. Allbirds has also realized there is a bigger opportunity with women than it first understood.

It plans to keep a tighter focus on accommodating the needs of the demographic group and better align its products with the overall positioning of the brand.

“We expect to make significant strides by offering a more curated seasonal color offering utilizing a gender-specific color segmentation. We will also leverage our various materials platforms to create embellishments across core franchises,” Zwillinger said.

However, during this transition, Allbirds expects to face margin pressures as they plan to leverage discounts to ensure the line has been recalibrated and move into 2024 with a cleaner inventory position.

The company generated $297.8 million in net revenue for the fiscal year 2022, a 7.3% improvement over the year before. However, the company failed to meet its projected revenue range of $305 million to $315 million. It also missed gross profit projections, with net loss significantly widening from $45.4 million in 2021 to $101.4 million in 2023.

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