Greg Smith: Devon Funds Head of Retail on Allbirds posting a multi-million dollar net loss

There's bad news for a former darling of the footwear world.

Kiwi shoe company Allbirds, co-founded by former All White Tim Brown, has posted a net loss of $19 million for the second quarter of 2024.

Greg Smith from Devon Funds says the company runs the risk of being de-listed from the Nasdaq.

"The valuation of the company was over $4 billion, the year before, they'd made over $200 million in sales. Fast forward four years, they're still at $200 million - the cool factor dissipated."

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Episode Transcript

Speaker 1 (00:00):
Now more bad news for former market darling. All Birds,
the eco friendly shoemaker, which was co founded, obviously by
former all White Tim Brown, has posted a net loss
of nineteen million US dollars for the second quarter this year.
All Birds shares were trading at almost thirty US bucks
each when the company listed on the NASDAQ three years ago.
They're now worth less than a dollar. Greg Smith is

(00:20):
the head of retail at Devin Funds Management and with
us Hey, Greg, Hi, Heather. Are they going to be
forced to dlist?

Speaker 2 (00:25):
Well, that's the sort of the latest sort of risk.
I suppose the NAR's ex issued them. I noticed since
notice that they've traded below the dollar mark for thirty days,
So they basically got to the end of to September
to get it above a dollar for ten consecutive business datis,
so the clock is ticking. But you know, they could
actually request an extension of up to six months, and

(00:46):
there's actually a way they can engineer it by doing
a reverse stock splits. So but I think they've got
bigger problems than the delisting.

Speaker 1 (00:54):
Yeah, what are the bigger problems?

Speaker 2 (00:55):
Well, look, when you look at I think it's really
been a victim of its own hype. As you pointed out,
it listed at the peak of the pandemic late twenty
twenty one. Consumer brands are in fashion. You know, had
the eco friendly company footwear story to tell people love
the love the story. You know Obama he was wearing
will Runners Liono Leonardo DiCaprio. He was an early investor.

(01:16):
Time dubbed at the most comfortable shoe in the world.
It was crazy when you think about it. You know,
the valuation in the company was over four billion US dollars.
The year before, they'd made just two hundred million in sales.
You fast forward four years, they're still around about two
hundred million in sales. So the call fact that dissipated
are they expanded overseas that was expensive Brooks and Watar
stores competitors, and then we've had a cost of living

(01:37):
crisis and the company doesn't discount. So yeah, it's a lot.
Read ink. One hundred and fifty million dollars is what
the company lost twenty twenty three. And as you point out,
the valuation has fallen and I can invested the peak,
you'd be down around him at ninety eight percent. But
they have a new CEO and he has a plan.

Speaker 1 (01:54):
Yeah, now on that new CEO, right, he's one of
the so called traditional executives that they've brought in. They've
also fired a whole bunch of people. They shut a
bunch of shops. Is this showing any signs of working?

Speaker 2 (02:05):
It's actually showing some margin imprevment, But it's a long
way back, and you know that that top line is
never going to eventuate how it was imagined, so all
you can do is work with what he's got. So
what they're doing really is closing underperforming stores in the US,
they're closing up to fourteen this year. Offshore markets are
moving to a distributed model, which is less costly than

(02:27):
obviously having their own stores, and they're just having direct
markets in the US, UK and EU shifted their factories
that's a bit cheaper, the factories in Vietnam there as well.
They're still not discounting, So yeah, they could be a
bit of a here when we have got a cost
of living crisis, and yeah, consumers are feeling the pinch,
and you look at the top line revenues down twenty
seven percent at the last quarter on a year ago.

(02:49):
Listen to the earning call and management still talking about
telling a story to consumers, which I thought was somewhat ironic.
They've got some new brands coming. They actually have stopped
the pace of the new brands that are coming, but
they have got the tree Glider. They're doing things of
a few new colors as well. But yet it is
a long road back, and you know, we are not
going to get back to that four billion valuation, probably

(03:12):
not in the next sort of fifty years anyway, Oh.

Speaker 1 (03:14):
Great, fifty years.

Speaker 2 (03:15):
Okay.

Speaker 1 (03:16):
I mean, listen, if what made them so wealthy, so
valuable was the fact that they were an it shoe,
and when they're not in an itshoe, it's not working
for them, does that mean that that is the key
they need to be cool again.

Speaker 2 (03:28):
Yeah. And then we were seeing as coll You're quite right,
you know, he had all the A listers wearing them.
You know, they were seeing this comfy. Actually the other
point as well was, you know, I suppose part of
the issue has been the actual feedback from consumers is actually,
don't last that long now, they're not the lacking and durability,
which is a bit of a here when particularly when
people are feeling the pinch and they want stuff that's
going to last. So that cool factor, I think, you know,

(03:50):
was engineered a lot of the hype that you saw,
you know, and then the lead up to the stock listing,
and also there were stock market conditions which also drove
that hype as well. Yes, so becoming cool the game
would help. I'm not sure if we're going to see
Donald Trump wearing wearing them all or Kamela Harris, but yeah,
it is a long way back. And you know, brands

(04:12):
do sort of have their day in the sun, but
they also do make a comeback. And who would have
thought CROs would make a revival, so you ne evern know.

Speaker 1 (04:18):
Well, that's a very good point, Greg, actually an excellent point.
Thank you so much. Made appreciate it. Greg Smith, head
of retail at Devin Funds Management.

Speaker 2 (04:25):
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