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

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

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  Speaker 2: Now.
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  Speaker 3: More bad news for former market Darling. All Birds, the
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  Speaker 3: eco friendly shoemaker, which was co founded, obviously by former
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  Speaker 3: all White Tim Brown, has posted a net loss of
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  Speaker 3: nineteen million US dollars for the second quarter this year.
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  Speaker 3: All Birds shares were trading at almost thirty US bucks
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  Speaker 3: each when the company listed on the Nasdaq three years ago.
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  Speaker 3: They're now worth less than a dollar. Greg Smith is
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  Speaker 3: the head of retail at Devin Funds Management and with us.
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  Speaker 2: Hey, Greg, Hi, Heather.
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  Speaker 3: Are they going to be forced to dlist?
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  Speaker 2: Well, that's the sort of the latest sort of risk.
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  Speaker 2: I suppose the NAR's ex issued them a notice since
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  Speaker 2: notice that they've traded below the dollar mark for thirty days,
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  Speaker 2: so they basically got to the end of to September
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  Speaker 2: to get it above a dollar for ten consecutive business datis,
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  Speaker 2: so the clock is ticking. But you know, they could
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  Speaker 2: actually request an extension of up to six months, and
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  Speaker 2: there's actually a way they can engineer it by doing
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  Speaker 2: a reverse stock splits. So but I think they've got
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  Speaker 2: bigger problems than the delisting.
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  Speaker 3: Yeah, what are the bigger problems.
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  Speaker 2: Well, look, when you look at I think it's really
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  Speaker 2: been a victim of its own hype. As you pointed out,
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  Speaker 2: it listed at the peak of the pandemic late twenty
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  Speaker 2: twenty one. Consumer brands are in fashion. You know, had
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  Speaker 2: the eco friendly company footwear story to tell people, love
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  Speaker 2: the love the story. You know Obama he was wearing
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  Speaker 2: will Runners Liano Leonardo DiCaprio. He was an early investor.
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  Speaker 2: Time dubbed at the most comfortable shoe in the world.
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  Speaker 2: It was crazy when you think about it. You know,
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  Speaker 2: the valuation in the company was over four billion US dollars.
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  Speaker 2: The year before they'd made just two hundred million in sales.
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  Speaker 2: You fast forward four years, they're still around about two
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  Speaker 2: hundred million in sales. So the cool fact that dissipated
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  Speaker 2: are they expanded overseas that was expensive Brooks and Watar
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  Speaker 2: stores competitors, and then we've had a cost of living
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  Speaker 2: crisis and the company doesn't discount. So yeah, it's a lot.
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  Speaker 2: Read ink. One hundred and fifty million dollars is what
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  Speaker 2: the company lost twenty twenty three, and as you point out,
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  Speaker 2: the valuation has fallen, and if you can invested the peak,
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  Speaker 2: you'd be down around him at ninety eight percent. But
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  Speaker 2: they have a new CEO and he has a plan.
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  Speaker 1: Yeah.
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  Speaker 3: Now on that new CEO, right, he's one of the
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  Speaker 3: so called traditional executives that they've brought in. They've also
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  Speaker 3: fired a whole bunch of people. They shut a bunch
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  Speaker 3: of shops. Is this showing any signs of working?
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  Speaker 2: It's actually showing some margin im prevment, but it's a
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  Speaker 2: long way back, and you know that that top line
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  Speaker 2: is never going to eventuate how it was imagined, So
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  Speaker 2: all you can do is work with what he's got.
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  Speaker 2: So what they're doing really is closing underperforming stores in
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  Speaker 2: the US, they're closing up to fourteen this year. Offshore
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  Speaker 2: markets are moving to a distributed model, which is less
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  Speaker 2: costly than obviously having their own stores, and they're just
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  Speaker 2: having direct markets in the US, UK and EU. The
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  Speaker 2: shifted their factories. That's a bit cheaper the factories than
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  Speaker 2: Vietnam there as well. They're still not discounting, so yeah,
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  Speaker 2: they could be a bit of a here when we
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  Speaker 2: have got a cost of living crisis, and yeah, consumers
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  Speaker 2: are feeling the pinch and you look at the top
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  Speaker 2: line revenues down twenty seven percent at the last quarter
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  Speaker 2: on a year ago. Listen to the earning call and
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  Speaker 2: managements all talking about telling a story to consumers, which
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  Speaker 2: I thought was somewhat ironic. They've got some new brands coming.
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  Speaker 2: They actually have stopped the pace of the new brands
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  Speaker 2: that are coming, but they have got the tree Glider,
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  Speaker 2: They're doing things of a few new colors as well.
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  Speaker 2: But yet it's a long road back, and you know,
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  Speaker 2: we are not going to get back to that four
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  Speaker 2: billion valuation, probably not in the next sort of fifty
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  Speaker 2: years anyway, Oh.
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  Speaker 3: Great, fifty years.
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  Speaker 2: Okay.
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  Speaker 3: I mean, listen, if what made them so wealthy, so
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  Speaker 3: valuable was the fact that they were an it shoe,
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  Speaker 3: and when they're not in an itshoe, it's not working
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  Speaker 3: for them, does that mean that that is the key
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  Speaker 3: they need to be cool again.
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  Speaker 2: Yeah. And then we were seeing as call You're quite right,
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  Speaker 2: you know, he had all the A listers wearing them.
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  Speaker 2: You know, they were seeing this comfy. Actually, the other
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  Speaker 2: point as well was, you know, I suppose part of
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  Speaker 2: the issue has been the actual feedback from consumers is actually,
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  Speaker 2: don't last that long. Now, they're not the lacking and durability,
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  Speaker 2: which is a bit of a here when particularly when
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  Speaker 2: people are feeling the pinch and they want stuff that's
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  Speaker 2: going to last. So that cool factor, I think, you know,
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  Speaker 2: was you know, engineer a lot of the hype that
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  Speaker 2: you saw, you know, and then the lead up to
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  Speaker 2: the stop stock listing and also there were stock market
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  Speaker 2: conditions which also drove that hype as well. Yeah, so
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  Speaker 2: becoming cool the game would help. I'm not sure if
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  Speaker 2: we're going to see Donald Trump wearing wearing them all
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  Speaker 2: or Kamala Harris, but yeah, it is a long road back,
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  Speaker 2: and you know, brands do sort of have their day
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  Speaker 2: in the sun, but they also do make a comeback.
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  Speaker 2: And who would have thought Crocs would make a revival?
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  Speaker 3: So you nevern know, Well, that's a very good point, Greg,
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  Speaker 3: actually an excellent point. Thank you so much. Made appreciate it.
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  Speaker 3: Greg Smith, head of Retail at Devin Funds Management.
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