Now the question is, how quickly the company can combat its cash burn, and will investors be patient enough to wait for the company to get to profitability?
Allbirds ended its most recent quarter with roughly $240 million in cash, down nearly $49 million since the end of the previous quarter.
Allbirds declined to speak to Insider for this story.
'Brand building' through stores
Allbirds was investing heavily in new stores when the pandemic hit. Between the end of 2019 and December 2021, Allbirds opened 13 new brick-and-mortar locations, bringing the brand's store count to 35 across eight countries.
The company's first stores in New York and San Francisco, locations where Allbirds had high brand awareness, performed exceptionally well for a digitally native brand.
"They were getting really good traffic and sales volumes in the first handful of stores. Their first crop of stores were essentially doing $4 million to $4.5 million per store, which is quite a lot for a new brand," Tom Nikic, a senior equity research analyst at Wedbush Securities, said.
But COVID forced the company to close its stores for extended periods, which eroded sales, especially in weaker markets.
"That threw a monkey wrench into the company's trajectory," Nikic said.
Nikic calculated that in 2019 the average Allbirds store did $3.8 million in sales. He calculated that by 2021, average store sales had decreased to $1.8 million.
Allbirds is continuing to invest in brick-and-mortar retail stores despite weakening sales during the pandemic. The company plans to open 16 to 17 stores this year, including a newly opened flagship in Manhattan's Flatiron District and a store in Vancouver.
On the company's first-quarter earnings call in May, Zwillinger acknowledged that Allbirds' operating expenses had risen because of the costs of expanding its fleet of stores, but noted that physical retail is essential to the company's "brand building."
Zwillinger told analysts he's confident in retail's comeback and said that Allbirds has been signing leases in areas where foot traffic has rebounded faster, like suburban malls.
He also noted that the launch of the Flatiron location has been "really, really fantastic."
"It gives us a lot of confidence in the comeback for Manhattan, which is, I think, a really nice bellwether for a lot of urban environments," Zwillinger added.
In another effort to grow brand awareness — and sales — Allbirds is betting on partnerships with third-party retailers.
In June, Allbirds started selling a selection of its products at Nordstrom and announced wholesale partnerships with Public Lands in the US and Zalando in Europe.
The move into wholesale partnerships is one many other DTC startups, from Vuori to Peloton, are making now as they begin to face pressure from investors to reach profitability faster.
"They're not unique. A lot of pure-play DTC businesses have struggled to become profitable," Daniel McCarthy, an assistant professor of marketing at Emory University, said.
He added that as small DTC businesses get bigger, they have to spend more money on marketing and customer acquisition.
"I think that they have been seeing that, and I think that it's made it hard for them to hurdle all the expenses," he said.
Some analysts view wholesale expansion as crucial for Allbirds' path to profitability.
"You're seeing it with most of the digitally native businesses that have popped up over the last 10 years or so — you kinda have to have a physical brick-and-mortar experience for your customers or you're positioning yourself at a disadvantage," Nikic said.
Beyond the 'iconic' fuzzy sneaker
Product expansion, like Allbirds' new performance and athleisure shoe styles, could also help with sales in both Allbirds stand-alone stores and third-party retailers.
"If you have one really nice shoe, I might come in once every six to 12 months maybe. A wider assortment to sell across makes it easier to have four-wall profitability in a store," McCarthy said.
In 2020, Allbirds launched an activewear line for men and women, a range of athleisure essentials including T-shirts and puffer jackets made from the company's signature merino wool and other sustainable materials like Tencel. Still a new category for Allbirds, apparel is a less-popular part of the business. It was barely mentioned on the company's most recent earnings call, though the cofounder and co-CEO, Tim Brown, mentioned that clothing has served as a "compelling reengagement tactic" for customers who have already shopped Allbirds.
So far this year, Allbirds has released several new shoe styles in the hopes of attracting different groups of customers to the brand.
Performance styles like the Tree Dasher 2, a lighter and more comfortable version of the company's original running sneaker, and the Trail Runner and Tree Flyer, for trail and distance running, were designed for customers who are serious about running for sport.
In the lifestyle category, the $50 Sugar Sliders, made with the brand's signature sugarcane-based foam, offer a more sustainable take on the trendy Amazon "pillow slides," the company says. Allbirds has also continued to depart from its traditional muted color palette and launched partnerships with fashion designers and brands like Adidas.
But new releases have failed to gain the attention of its first release, the Wool Runner. When it launched in 2016, the comfortable, fuzzy wool sneaker quickly became the signature shoe of Silicon Valley's professional class.
In its S-1, Allbirds referred to Wool Runners as its most "iconic" product, noting it sold a million pairs between 2016 and 2018, its first two years on the market.
Skeptics of Allbirds say the startup has been too focused on its core product at the expense of its overall brand, which could make it harder to compete with the likes of Nike and Adidas.
Compared to major sneaker and sports-apparel players like Nike and Adidas, Allbirds is still in its infancy. Nike and Adidas spent decades cultivating relationships with customers.
Allbirds reported $62.8 million in sales in its last financial quarter, compared to $1.4 billion and 5.3 billion euros for Nike and Adidas, respectively.
"They haven't necessarily earned the level of trust that a Nike has or an Adidas or even a brand like Skechers," Nikic said of Allbirds.
Allbirds isn't profitable yet, but Nikic and other analysts think the company will be breakeven in 2024.
"They're going to lose money again this year and make progress next year," he said. But investors have little patience in the current economy.
"Money-losing companies with short track records are not exactly what investors are looking for right now," Nikic added.
