Allbirds is liquidating activewear inventory at a $11.6 million loss
  • Allbirds is narrowing its apparel strategy to focus on outfit staples like t-shirts and socks. 
  • The decision comes less than a year after the DTC darling’s first big foray into apparel. 
  • Allbirds is liquidating much of its “first-generation” apparel inventory at a loss. 

Allbirds is scrapping the original plans for its apparel business at a significant loss and moving forward with a new approach after some items in the ultra-competitive activewear category, like leggings, failed to perform. 

The DTC sneaker brand plans to pare down the number of items in its apparel collection and focus on versatile wardrobe staples like t-shirts and socks made from the company’s signature sustainable materials, cofounder and co-CEO Joey Zwillinger said on the company’s second-quarter earnings call this week.

“Given the strong sell-through data, we know that our customer values and prefers classic seasonless items such as tees that complement our footwear offering,” he told analysts. 

Allbirds first launched apparel in 2019 with socks made from the company’s signature New Zealand-sourced merino wool, retailing at $12 to $16. In 2020, it expanded the category with a small collection of clothing items, including a shirt made from discarded crab shells and a wool puffer jacket. It launched a full activewear collection in September 2021, ahead of its initial public offering in November

The company’s entry into the cutthroat activewear category was not the success it hoped for. Allbirds “went too deep on leggings, an incredibly competitive category,” Zwillinger said.

Allbirds’ first major activewear collection included items like high-waisted leggings for $98, biker shorts for $68, a running tank with a built-in bra for $68, t-shirts for $58 and running shorts for $58, made mostly from natural fibers, according to a CNBC report last year.  

Zwillinger noted that the apparel launch, which included a range of seasonal activewear mostly geared towards running, was “overly focused on items with narrow end-use cases.” 

Allbirds shoppers, Zwillinger emphasized on the call, gravitated more towards everyday basics like t-shirts, sweats, and socks. 

The brand said it’s liquidating old inventory, mostly first-generation apparel, below its cost. 

“What they’re essentially saying is they’ve got inventory that they’re going to liquidate for pennies on the dollar,” said Wedbush analyst Tom Nikic. “In total, they think they’re going to make $11.6 million less than what they paid for that inventory.”

In a note to investors Tuesday, Nikic said he “would not expect the stock to stage a rebound anytime soon,” but he thinks in the long term “the brand will be able to carve a niche for itself.”

Nikic has an outperform rating and a $5.50 12-month price target on the stock, which traded for $4.69 in later afternoon trading Wednesday.

Apparel represents 10% of the brand’s total sales, cofounder and co-CEO Tim Brown told investors, and Allbirds doesn’t see that changing.

“The innovation and product focus remains vastly on footwear,” Brown added.

Allbirds also said it plans to open a design and product hub in Portland, Oregon, home to the corporate offices of Nike and Adidas North America, as well as some of the footwear operations of Lululemon and Under Armour. “This office will serve as the creative headquarters for the majority of our design and product development teams, enabling us to centralize resources operate with greater agility and access world-class talent in the Greater Portland area,” Brown said. 

“We remain committed to investing in our product and innovation teams which play a critical role in the continued success of Allbirds,” he added. 

Allbirds revenue in the second quarter grew 15% to $78.2 million. The company, however, cut its financial forecast for the year, based on data from the second-half of June suggesting its customers are starting to tighten their purse strings. 

Allbirds reported a net loss of $29.4 million for the second quarter, compared to a loss of $7.6 million for the prior-year period. The company conducted layoffs in August, totaling 8% of its headcount, in efforts to reduce costs amid high inflation and slower consumer spend. Allbirds stock, as of this week, has plunged nearly 85% since its IPO. 

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