Allbirds was once a consumer darling, promising shoes that were not only comfortable and fashionable but also environmentally sustainable, attracting the attention of investors such as Leonardo DiCaprio and Warby Parker founder Andrew Hunt. In fact, his social purpose was inseparable from his business model. Now it’s a six month warning.
The San Francisco-based eco-friendly footwear brand received a notice of non-compliance from Nasdaq on Monday after its stock prices fell below $1 for 30 straight days. Allbirds stock, hovering around $0.60 per share over the past two weeks, was last above the dollar threshold for market listing eligibility. February, 15.
In accordance with Nasdaq Listing RulesAllbirds has six months, or until September 30, to regain compliance by closing its common stock at more than $1.00 for 10 consecutive business days. The company reported in Press release that it will “actively monitor” share prices and “consider actions it may take in response to this notice.”
“Over the past year, in line with our plan, we have significantly improved our business model by clearing inventory, achieving cost savings, reducing our use of operating cash and signing agreements with international distributors, providing the runway and financial flexibility to continue our operations. plan and position the company for profitable growth in future years,” an Allbirds spokesperson said. Luck in the statement.
Allbirds’ fiscal 2023 was marred by a nearly 15% drop in net revenue and gross profit of $104.2 million, down 41% from $129.6 million in 2022. Last month, Chief Operating Officer Joe Vernachio took over the company as CEO and implemented a “strategic transformation plan” that included closing 10 to 15 U.S. stores and adopting a distributor model in international markets, according to him fourth quarter earnings report.
Allbirds’ recent difficulties highlight the company’s albatross: it has never made a profit for nine years of work. Although the company prioritized its sustainability mission, there is evidence that it was achieved at the expense of actually making money for the company. To understand what’s going on, you need to dive into the world of B Corps.
Environmentally or economically sustainable?
All the birds got B Corp classification that meets social and environmental standards set by the independent non-profit organization B Labs in 2016, when the CEOs yearned for certification, wanting to sincerely make a difference through this status, which comes with a clear social mission. As of 2023, there are over 6,000 certified B Corp companies, a figure that has tripled since 2016.
Set out in them Product Carbon Footprint MethodologyAllbirds uses natural materials such as sugar cane and wood fibers, as well as recycled materials, to make its shoes. In 2023, the company has committed to reduce carbon dioxide emissions per unit of production by 95% by 2030. But its environmental commitments haven’t always translated into profits. Allbirds revealed in a post dated December 31st. filing documents with the SECthat it had accumulated a deficit of $391.2 million at the time of reporting: “We have incurred significant net losses since inception and expect to continue to incur losses for the foreseeable future.”
While the remote work boom has arrived, which has seen decrease in demand When it came to work-appropriate footwear, Allbirds ultimately failed to understand its audience: although the company’s founder cared about the environment, their target audience actually didn’t, says Neil Saunders, GlobalData’s managing director of retail. told RetailDive in March.
“Allbirds promotes sustainability because it is the passion of its founder,” he said. “That’s fine, but individuals’ passions don’t sell strengths if they don’t fit the market.”
The company’s commitment to sustainability became evident when Amazon introduced Galen wool sneakers in 2019, which cost 50% less. Then-CEO Joey Zwillinger admitted that he wasn’t upset that Amazon adapted a similar design, but he was confident that Amazon did so without copying Allbirds’ sustainability practices.
“Given what I know about manufacturing, you can’t sell shoes at such a low price with all the environmental, animal welfare and compliance aspects we take into account,” Zwillinger. said in an interview with Co.Design in September 2019. “Amazon says it wants to be a green company. It should take steps to make its products more sustainable.”
Amazon rejected copying Allbirds’ design, stating in 2019 that “this aesthetic is not limited to Allbirds, with several other brands offering similar products as well.” The e-commerce giant sells Allbirds on its marketplace.
Blues B Corp
Of course, some B Corp firms have used certification as a form of virtue signaling, touting their commitment to social and environmental issues while also finding ways to cut corners. While Nestlé subsidiary Nespresso achieved B Corp certification in 2022, smaller coffee roasters accused the company paying coffee farmers a pittance and selling disposable cups, which creates enormous waste. Nespresso published Organic growth of 5.3% in fiscal year 2023.
But others, like the Allbirds, stuck to their political beliefs, sometimes to make money. Ben & Jerry’s, a certified B Corporation since 2012, is the parent company of Unilever. problem childas it received backlash due to its social stances, such as refusing to sell ice cream in the Israeli-occupied Palestinian territories and claiming that the U.S.based on stolen indigenous land”
Last month Unilever decided restructure the company spin off its ice cream division, including Ben & Jerry’s, laying off 7,500 mostly office employees. The restructuring began immediately and is due to be completed by 2025.
Unilever and many of its subsidiaries have B Corp status. for years, although not always to the delight of shareholders. Investors such as Terry Smith, who is behind Unilever’s 10th largest shareholder Fundsmith, have long criticized Unilever for its social messages that distract from its business.
“A company that feels it has to define the purpose of Hellmann’s mayonnaise has, in our opinion, clearly missed the point,” He wrote in a 2022 letter to investors.
Smith praised the conglomerate’s decision to restructure. In a similar moment of reckoning, Allbirds management expressed some optimism about the brand’s future. Company updated its iconic wool sneakers late last year in an attempt to get back to basics.
“People love the comeback and I think they love what we stand for,” Brown. told Business Insider In November. “Now we just have to do really well.”