Allbirds Banks on Holiday Season and Discounts for Recovery

Straying away from its core customer was one of Allbird’s biggest mistakes made this year.

In March, Co-Founder and Co-CEO Joey Zwillinger of Allbirds acknowledged that the company’s performance had been hurt in the previous year due to a shift away from its core business and an overemphasis on non-core products. This culminated in the fourth quarter, resulting in disappointing sales within a highly promotional market. In response, the company initiated efforts to address and rectify the situation.

Read more: Allbirds Goes Back to Basics as Efforts to Attract New Customers Fail

Today, the company reported that, although it is still in the process of cleaning up, it is aiming for a significant boost in the upcoming holiday season. During their most recent earnings call Wednesday (Nov 8), it disclosed its intention to maintain a reasonably consistent promotional approach in alignment with market trends.

The company recognizes the industry’s shift toward early promotions as a standard practice, and its objective is to maintain competitiveness in the market.

“We’re trying to line up, but what we’re seeing in the market is that people are starting to promote pretty early, maybe even earlier than what we saw last year,” said the company during the call.

To meet its goal, Allbirds acknowledged the need for further work, aiming to reduce year-over-year inventory by around 40% by the year’s end. The company intends to implement discounting strategies during major shopping days like Black Friday and Cyber Monday, offering discounts on specific styles and colors that are not part of Allbirds’ plans. These promotions are primarily aimed at clearing out inventory, especially for slower-selling colors.

The approach for this year aims to preserve the brand’s full-price reputation while strategically implementing promotions.

Allbirds’ strategy has two key elements: First, introduce a more extensive product range to attract consumers back to full-price purchases. Second, lessen the intensity of discounts by maintaining the frequency while reducing the markdown size.

Looking ahead, the company says it will refrain from collections and colorways that don’t align with Allbirds’ core customer.

Allbirds by the Numbers

“Our third quarter results reflect another quarter of solid execution under our strategic transformation plan,” Zwillinger said in a statement. “We made important progress on our key benchmarks of inventory reduction, operating cash use, and cost control, resulting in adjusted EBITDA ahead of our expectations. We also meaningfully advanced our strategy to transition from a direct distribution model to third-party distributors in key international markets. Nearing the end of our first year of transformation, our path remains clear and we are operating with discipline to deliver profitable growth and build shareholder value over the long term.”

Allbirds’ net revenue fell 21.2% in the quarter year over year (YoY), to $57.2 million, and an 8.7% decline compared to Q3 2021. The company reported a net loss of $31.6 million, equivalent to $0.21 per basic and diluted share. Additionally, it recorded an adjusted EBITDA loss of $19.0 million.

Its ending inventory stood at $79.9 million, reflecting a 37% reduction YoY. Allbirds curtailed its operating cash usage during Q3, reporting cash use of $5.4 million compared to $17.5 million in the prior year.

Allbirds executed previously announced distribution agreements and transitioned to a new operating model in Canada and South Korea.