Allbirds founder Tim Brown. Photo / Dean Purcell
How was your Christmas Eve? Probably better than Tim Brown’s.
The Kiwi co-founder and co-CEO of Allbirds opened The Wall Street Journal to see the headline, “Allbirds Were the Tech Bro ‘It’ Shoe. Then the Tech Bros Moved On”.
Brown’s San Francisco-based firm - which makes shoes and activewear from New Zealand Merino wool and other sustainable materials - had already suffered an annus horribilis on the stock market. Its shares were recently trading at US$2.51, or 90.4 per cent below their Nasdaq IPO, when it listed at US$15.00 then closed at US$26.03.
The firm was already facing something of an ESG (environmental and social governance) backlash in the US, plus the peril of a possible spending slowdown worldwide.
In November, as it reported a September quarter net loss of US$25.2 million (vs a year-ago loss of US$13.8m), Allbirds co-CEO Joey Zwillinger warned “We are preparing for a scenario in which consumer headwinds worsen in the coming months”. The firm had already lowered its full-year forecasts back in July, when it said the cost-of-living crisis was finally catching up with its customers and that 8 per cent of its workforce would be laid off.
Now the Journal had thrown fresh fuel on the fire, suggesting Allbirds were uncool.
The influential paper quoted a stylist who said hipster Silicon Valley clients had moved on to other brands - adding that her clients think Allbirds’ flagship Wool Runners don’t offer enough support if you’re on your feet for long periods, and that the Wool Runners and Tree Trunners “flounder in wet weather”. The Journal quoted an analyst who said repeat customers’ annual spend was down US$31 since 2018, and it quoted tweets that called Allbirds’ shoes “passé”, “Crocs for tech bros” and “sweatpants for your feet”.
Ouch.
How does Allbirds defend its honour?
On Allbirds no longer being the “it” shoe with the IT crowd, the spokesperson said while the number of “tech bros” who buy the company’s footwear has dipped, the drop is marginal.
And the firm has now expanded way behind its initial Silicon Valley base. Some 25 per cent of sales are now outside the US, with China and the UK as Allbirds’ two biggest markets.
And a majority of customers are no longer “bros”, of the tech variety or otherwise. “Our gender mix is slightly more tilted towards women - mid-to-high 50s by per cent”, the spokeswoman said. During the pandemic, Allbirds released a shoe specifically designed for women - a ballet flat called The Breezer.
“When we launched, word spread rapidly about the world’s most comfortable shoe - particularly in our hometown of San Francisco, which has a thriving community passionate about innovation and sustainability,” the spokeswoman said.
“Since then, our mission has attracted a global audience, with customers in more than 30 countries, and 2022 marking a record-breaking year for new store openings. The last year, alone, has seen a 12 per cent increase in customers - so, yes, the percentage of people who you might label ‘tech bros’ has dropped - by 1 per cent. But, overall, that’s an almost identical slice of a much, much bigger pie. Even amid rapid growth, our customers stay with us. In 2022, almost half of our business was from repeat customers - way above the industry average of 26 per cent.”
The claim that repeat customers were spending US$31 less per year than 2018 was “incorrect and does not reflect our customer data” (the Journal has stuck by the stat).
Allbirds did not offer an alternative dollar figure, but said that there are now more repeat customers.
“We have seen a 20 per cent increase in repeat customer rates since 2019,” the spokeswoman said.
“Around 40 per cent of our customers in 2022 were repeat customers. That’s well above industry average, which according to Shopify, is around 26 per cent. As was shared on the third-quater earnings call, there has been a 12 per cent increase in active customers year-on-year.”
The repeat shoppers have helped to boost income. Although Allbirds losses widened during the first nine months of 2022, revenue rose 18.5 per cent to US$213.6m.
On weather resistance, the spokeswoman said, “Since we are a global brand, with consumers using Allbirds in a variety of climates spanning from hot summers to snowy winters, we tailor our products specially for specific conditions. For wet weather, Allbirds offers five water-resistant styles from our Mizzle collection, which feature bio-based water-repellent protection, Puddle Guard technology with high-top upper soles and traction grips to prevent slipping.”
As for durability, “We stand by the high quality of our products and put each of our products through rigorous wear testing so that what arrives on consumers’ feet meets our own high standards,” the Allbirds spokeswoman said.
“However, as with all footwear, product lifespan varies from person to person based on gait, use case and a variety of other factors.
“With that in mind, we also believe in constant improvement and are always innovating our processes and materials to deliver the very best for our consumers. That has been part of our spirit since the beginning — our first Wool Runner, for instance, went through hundreds of iterations before being brought to market, and we’re still innovating changes today. Similarly, our Tree Flyer was tested with more than 100 runners, logging thousands of miles across an array of conditions and climates before it became commercially available.”
New Zealand retail investors are not seeing Allbirds’ post-IPO low as a buying opportunity, from the standpoint of Leighton Roberts, co-founder of trading platform Sharesies - though he notes some will be indirectly adding to their holding via their contribution to an ESG-focussed fund.
“Allbirds is one of the top 150 stocks held by Sharesies investors. While similar funds, blue chip, and technology companies tend to dominate as the most popular investments on our platform,” Roberts told the Herald.
“When it comes to Allbirds, Sharesies investors are currently continuing to ride out the market, instead of buying the dip,”
In general, there are more people moving to funds over choosing their individual stocks, Roberts said.
“Fashion makes up just under 1 per cent of the total holdings on the Sharesies platform, which is interesting as around 25 per cent of auto-investors in NZ using solely ESG-focused funds and 41 per cent of Australian investors are auto-investing in socially and sustainability-focused funds.”
"If you’re loyal to them, they will be loyal to you."