They may be some of the best known and well-liked brands around, but the stocks of the so-called direct-to-consumer (D2C) darlings are nothing short of disaster.
While the products and services sold by Allbirds, Etsy, Warby Parker, Peloton and others are widely respected, their respective share prices have all declined by 60% — or more — in the past six months alone.
In short, there is a serious disconnect going on right now between viable, well-liked consumer-facing businesses and the cratering stock prices they seem powerless to reverse at a time of increased external economic headwinds.
“The short answer is, ‘No, we haven’t seen any sort of drop-off in our expectation in the U.S.,’” Allbirds Chief Financial Officer Mike Bufano said in response to an analyst’s question about whether rising energy prices, interest rates and stock market volatility were impacting demand for the brand domestically.
“We feel really great about the 35% [sales] growth that we saw in the U.S., and that tells us the long-term thesis is intact,” he added in reference to the sneaker company’s first-quarter earnings results released after the close of business Tuesday (May 10).
And yet, the company’s cautious outlook and continued losses sent investors fleeing, pushing the recently listed shoe company’s stock to $4 per share in early trading Wednesday (May 11), down from a high of $32 hit shortly after its initial public offering (IPO) in November.
Read more: Allbirds Sees 91% Gain in Wall Street Debut Almost Doubling IPO Price
Fix What You Can Control
To be sure, Allbirds and its D2C peers are not idly accepting their diminished capacity and have each recently spoken with investors about various plans to restore their former stature.
In the case of the San Francisco-based wool sneaker maker, that response has resulted in a shift to grow its wholesale business, the opening of three dozen physical stores, as well as continued product innovation, category expansion into apparel and all new partnerships.
“Our latest collaboration with Adidas dropped in early April to a phenomenal consumer response,” Allbirds Co-Founder and Co-CEO Tim Brown told investors. “We sold through more than 90% of our inventory in three days’ time.”
While the company also noted that its shift to stores is working, with Q1 physical retail channel sales up 129%, the management team’s repeated references to “external headwinds” no less than a dozen times during the call clearly rattled investors.
“Until we have more certainty around the length and severity of the external headwinds, we are incorporating a more cautious outlook for our updated 2022 guidance targets, particularly in the second quarter,” Bufano said, calling the lowered outlook a “prudent approach” given the current pressures and uncertainty it is facing internationally.
Life in the Limelight
To be sure, there is something heady about completing an IPO and seeing your company’s brand plastered all over the news while at the same time seeing your corporate bank account and buying power swell alongside the infinite possibilities that come with tapping such broad-based capitalization.
While the promise of going public and what-might-be has brought billions of dollars’ worth of value to dozens of great young companies such as Allbirds, as well as the venture capitalists and bankers that brought them there, the sheer fact that they are listed companies that must answer to investors every 90 days only complicates their comebacks.
The flip side is that all this strife in the D2C space is not a reflection on the increased use, viability and advantages of selling directly to customers. After all, brands as big as Nike are actively repositioning their portfolios to sell more products this way.
The slump also carries with it the prospect of increased buyouts and privatization plays, given market valuations that have become far more attractive and digestible for bargain-hunters who prefer to carry out their revamps in private.
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