Allbirds ‘dramatically’ slows pace of new hires as loss widens

Allbirds on Monday trimmed its financial forecast for the year and announced a number of efforts to cut costs as the sustainable shoe maker reported a wider quarterly loss compared with a year earlier.

The company citied a slowdown in consumer spending toward the end of June and said it has “dramatically” slowed the pace of corporate new hires and backfills for departing employees. It said it has cut its global corporate workforce by about 8%, or 23 people.

Chief Financial Officer Mike Bufano said the retailer anticipates any external headwinds pressuring consumer spending in the United States will persist in the back half of 2022. “As a result, we continue to take a cautious outlook,” he said in a statement.

Allbirds shares fell more than 13% in after-hours trading on the news. The stock had tumbled more than 60% year to date, as of Monday’s market close, bringing Allbirds’ market cap to about $842 million.

Here’s how Allbirds did in its fiscal second quarter compared with what analysts were anticipating, based on Refinitiv estimates:

• Loss per share: 12 cents adjusted vs. 16 cents expected
• Revenue: $78.2 million vs. $77.8 million expected

Allbirds reported a net loss in the three-month period ended June 30 of $29.4 million, or 20 cents per share, compared with a loss of $7.6 million, or 14 cents a share, a year earlier. Excluding one-time items it lost 12 cents per share, better than the 16-cent loss that analysts were looking for.

Revenue grew 15% to $78.2 million compared with $67.9 million a year earlier. That topped estimates for sales of $77.8 million.

Allbirds reported both an increase in the number of orders and in average order value, which it said was due in part to price hikes amid inflation. The company is best known for its slip-on wool loafers but also entered the apparel business during the pandemic and has been launching a variety of shoes, including for running.

Sales in the United States grew 21% from year-ago levels, while it said international revenue was flat due to ongoing Covid-related restrictions in China and the war in Ukraine.

Retailers from Walmart to Gap in recent weeks have trimmed their expectations for future sales and profits as businesses attempt to gauge how consumers are responding to 40-year-high inflation. Companies say lower-income households have been particularly pressured by the higher prices and have started to tighten their budgets for discretionary items, including apparel.

For the year, Allbirds is now calling for adjusted net revenue to between $305 million and $315 million. It previously forecast net revenue of $335 million to $345 million.

It sees adjusted gross profits amounting to between $150 million and $157.5 million, compared with prior guidance for gross profit of $170 million to $177.5 million.

And it’s anticipating an adjusted EBITDA loss of $42.5 million to $37.5 million, compared with a prior forecast for a loss of $25 million to $21 million.

Along with the slower pace of hiring, Allbirds said it will look to trim logistics costs in the United States by transitioning to automated distribution centers and a dedicated returns processor. The company is also hoping to accelerate the scaling of its owned manufacturing base to slash product costs over time.

Bufano said the changes are expected to save the company between $13 million to $15 million on an annualized basis beginning in 2023.

“We will reinvest some of these savings into building brand momentum through product innovation, marketing, retail stores, and marquee third party partnerships,” he said.

Allbirds, which went public at a more than $4 billion valuation last November, recently inked a deal to sell its products in Nordstrom‘s department stores. The retailer has also been opening brick-and-mortar shops to reach more consumers, ending the second quarter with 46 locations globally.