Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allbirds Inc (BIRD, Financial) reported strong execution and performance in line with expectations for Q2 2024.
- The company successfully transitioned to a distributor model in five targeted international regions, positioning for profitable and scalable growth.
- Significant cost of goods sold (COGS) savings were achieved through a shift to a new factory and material optimizations, driving long-term gross margin expansion.
- Inventory was cut by more than half, leading to improved working capital and a healthy balance sheet entering 2024.
- Positive consumer response to new product launches, such as the Wool Runner 2, Tree Runner Go, and Canvas Piper, indicating strong market demand.
Negative Points
- Q2 revenue of $52 million was primarily impacted by lower unit sales and the transition to a distributor model, resulting in a near-term headwind to sales.
- The closure of 14 underperforming US retail stores and the transition to international distributors reduced the top line and associated gross profit dollars.
- Freight costs remain a pressure point, although actively managed, they still pose a challenge.
- Marketing spend is expected to increase in the second half of 2024, which could impact short-term profitability.
- Q3 revenue guidance indicates a continued decline, with expected net revenue between $40 million and $43 million, reflecting the impact of store closures and international transitions.
Q & A Highlights
Q: Can you give more color on freight and how it impacts the gross margin guide?
A: Freight is a pressure point, but we've considered it in our plans and are actively managing it. We don't view it as a significant headwind. (Annie Mitchell, CFO)
Q: Are you seeing differences in how new launches are resonating with customers in the US versus international markets?
A: We are seeing strong responses in all markets. In the US, the last three launches have been our strongest in the past two years. Internationally, momentum continued as we transitioned to new distributors. (Joe Vernachio, CEO)
Q: What KPIs indicate positive consumer response, and how will the back half of '25 launches be different?
A: We focus on new customer acquisition (NCA) and maintaining full price on new products. The back half of '25 will see a broader product line, emphasizing our lifestyle footwear brand across seasons and use occasions. (Joe Vernachio, CEO)
Q: Can you explain the near-term top line trend and the expected improvement in Q4?
A: Q3 guidance reflects similar trends to Q1 and Q2, with impacts from retail and international transitions. Q4 will see the full impact of these transitions, but we expect improvement due to less promotional activity and new product launches. (Annie Mitchell, CFO)
Q: How are you managing the transition to a distributor model and its impact on revenue?
A: The transition to a distributor model in five regions is reducing top line revenue but supports cost management and efficiency. This is offset by savings in marketing and SG&A. (Annie Mitchell, CFO)
Q: What are the key drivers for the expected gross margin improvement in the second half of 2024?
A: Key drivers include reduced promotional intensity, lower freight costs, and initial savings from our factory shift to Vietnam and materials innovation. (Annie Mitchell, CFO)
Q: How are you planning to enhance the consumer shopping experience in stores and online?
A: We are improving in-store assortment presentation, wayfinding, and floor displays. In 2025, we plan to make stores and websites easier and more enjoyable to shop. (Joe Vernachio, CEO)
Q: What strategic actions are you taking to return to top line growth in 2025?
A: We are focusing on making great products, telling compelling stories, and providing an engaging shopping experience. This includes new product launches and increased marketing investment. (Annie Mitchell, CFO)
Q: How are you managing inventory and working capital?
A: We cut inventory by more than half and improved working capital in 2023. We are carefully managing inventory going forward to maintain a healthy position. (Joe Vernachio, CEO)
Q: What is the financial outlook for the full year 2024?
A: Full year net revenue is expected to be between $190 million and $210 million. Gross margin is expected to be in the range of 43% to 46%, and adjusted EBITDA loss is expected to be between $75 million and $63 million. (Annie Mitchell, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
