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Allbirds: A Sustainable Footwear and Apparel Compnay

The company is laser-focused on making a positive impact on the environment while rewarding shareholders

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Dec 03, 2021
Summary
  • Allbirds, Inc. is a footwear and apparel company based in the United States that is known for manufacturing eco-friendly products.
  • The company is also recognized as a Certified B Corporation, which confirms Allbirds is nicely balancing profits and purpose.
  • Consumers are becoming more aware of their purchasing habits, which creates a favorable outlook for Allbirds.
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Allbirds, Inc. (

BIRD, Financial) is a footwear and apparel company based in the United States that is known for manufacturing eco-friendly products. The company is also recognized as a Certified B Corporation, which confirms that the company is nicely balancing profits and purpose. This certification is awarded by B Lab, a non-profit organization that requires businesses to meet social and environmental performance standards, accountability standards and public transparency standards.

Allbirds sells its products exclusively through its website and retail stores, following a direct-to-consumer strategy. The company operates stores in the United States, New Zealand, the United Kingdom, the Netherlands, Germany, China, Japan and South Korea.

On Nov. 3, the company went public on the Nasdaq stock exchange, raising more than $300 million. The stock price skyrocketed 90% on the first day of trading, valuing the company at $4.1 billion. Although the company has yet to turn a profit, Allbirds seems well-positioned to gain traction because of its commitment to making fashion sustainable and environment-friendly, and this focus could help the company break through to profitability in the next few years.

The demand for 'good for the planet' products is growing

The fashion industry has been frequently chastised for its bad environmental policies, and this sector is responsible for approximately 8% to 10% of worldwide carbon emissions, as well as nearly 20% of industrial wastewater, according to the findings of the United Nations Economic Commission for Europe. Apparel businesses consume a high degree of energy and emit more carbon annually than all international flights and maritime shipping combined as well, which goes on to highlight the negative impact this industry has on the environment.

The rapidly growing fast fashion industry has exacerbated the problem, making it more difficult for sustainable fashion brands to raise awareness of the environmental implications of these trends. However, there is a notable shift toward conscious buying where consumers are spending on products that are environmentally friendly while embracing zero-waste packaging. These trends will have a big impact on how fashion brands develop, evolve and build brand value in the future. According to a poll conducted by the European Union, 75% of survey respondents agreed that they would pay more for environmentally friendly fashion items if such products were available.

Exhibit 1: Consumer preference characteristics

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Source: World Business Council for Sustainable Development

Given this developing trend, Allbirds has laid out a strategic plan to become a global fashion leader by promoting itself as an environmentally friendly shoemaker, using natural materials such as eucalyptus fiber, castor bean oil, crab shells and wool to manufacture footwear. Allbirds is continuing to make long-term investments in its business by researching the possibility of using other types of natural materials to design fashionwear.

As Allbirds is a B-Corp, it is required to disclose the impact the company has had on society and the environment, setting it apart from other claimed-to-be-sustainable fashion brands. The company is now recognized as a material innovation leader, and it has collaborated with other brands and artists to raise awareness about the impact of footwear on the environment. Through strategic collaboration, the company intends to attract younger customers who are more concerned about how and where their products are manufactured.

The company’s efforts to bring positive changes in the footwear and apparel industry have already received bullish notes from analysts. Its manufacturing techniques also impressed Leonardo DiCaprio, who became an investor in the company in 2018.

However, the business has been impacted by the factory shutdowns in Vietnam as its footwear is mostly made in Korea and Vietnam. Despite some factories reopening, production is still increasing at a slow speed, and it would make sense for investors to expect a deceleration in revenue growth rates in the coming quarters until the company sorts out these supply chain challenges.

Takeaway

Consumers are becoming more aware of their purchasing habits and how they impact the environment, and every industry, from technology to food, is becoming more environmentally conscious as a result. Allbirds is in a great position to profit from these changes, and the company seems to be moving in the right direction to enjoy competitive advantages in the long run. Product innovation and marketing will be at the heart of the company’s success, and the management is focused on both these areas.

Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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