One of the interesting developments of the past decade has been the rise of direct to consumer (DTC) brands that have harnessed the power of the Internet to rapidly grow. Since they are e-commerce based without the challenges of physical retail stores, they have higher margins and were able to grow in a more organic manner. Two of the larger and more successful DTC companies recently filed to go public - Warby Parker, an eyeglass company, and AllBirds, a footwear maker.
Company Profile
AllBirds is a New Zealand-based company that was started by Tim Brown in 2016. Brown, originally designed and made his own shoes as a hobby but got the idea to utilize softer fabrics like wool and polyester. He was able to raise more than $100,000 on Kickstarter for the project based on a prototype.
From there, the company has become a cult hit and introduced new versions of shoes that are known for their comfort and use of eco-sustainable materials. Additionally, due to its DTC model, prices are quite competitive. Now, the shows are even carried at some large shoe retailers like DSW.
Recently, the company has introduced apparel as well. It's expected to IPO later this month and trade under the ticker "BIRD". It's going public through a traditional IPO and lead underwriters are Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), and Morgan Stanley (NYSE: MS). It expects to raise $100 million in the IPO.
Like a lot of e-commerce and casual apparel companies, AllBirds' business accelerated during the pandemic. So, there is some concern that this could be closer to the top in terms of its growth rate even if the business could keep expanding albeit at a slower rate.
Last year, the company had revenue of $219.3 million which was up 14% from the previous year. Nearly 90% of its revenue came from digital revenue with 53% of sales coming from repeat customers. Last year's net loss was $23.6 million which was more than its $14.6 million loss in 2019. In the first six months of this year, its net loss was $21.1 million with revenue increasing to $117 million from $91 million.
Outlook
Although there's plenty to like about Allbirds, it may be better to buy its products rather than the stock. Growth is decelerating despite many favorable trends last year that won't be repeated anytime soon. Further, it is now opening up retail stores which will mitigate many of its advantages as a DTC brand and compress margins.