April 28, 2024

TLDR:

Changing your life through posting.

The Allbirds Activist Letter

LBAB Community - Post More

You need to post on socials more often.

I know everybody talks about how much of a time suck it is. That it's a lot of bragging, and all these other things that seem like super low value.

But honestly, consistently giving back to a community is one of the greatest value drivers of your life and your career. Even if you aren't looking to get any value out of it, posting about what you’re doing or working on is valuable because it attracts the smartest in that area.

3 reasons why you should post 1x/week: 

1)  It sharpens your mind.

When I started posting on LinkedIn, I had to flesh out and research my ideas so much more vs. when I was just working on them myself. 

The fear of embarrassment around putting out a half-baked idea forced me to up my game and become the best at whatever I was writing about: Hot takes, Email + SMS marketing, product launches, M&A ideas, everything else.

I was forced to deeply think about everything, argue with myself, and break down weaknesses in my ideas because I was putting them out in the public square.

2) The connections are unbelievable.

“You get what you put in” is true.

If you continue to post about content and things that you're interested in, the people you attract are going to be the smartest at those things.

That’s the beauty of constantly posting on the internet. You're connecting with the smartest people in your sector/space/vertical/niche who also want to share ideas, challenge yours, and share their knowledge.

I think the biggest mistake that most people make is thinking post engagement is the beginning and end of LinkedIn’s value.

The most valuable connections and the most interesting people I've met only sometimes (or rarely) engage with my posts. They’ll DM me, or seek me out at an event, or reach out to meet me in person.

“Lurkers” will watch my content for years and then there’ll be one post that drives them to reach out to me. They’ll start a conversation and give me great feedback, which reinforces I’m barking up the right trees. 

3) You’ll meet people who will change your life forever.

One of the coolest things since I started this journey publicly that I’m acquiring a biz is the number of people who bring me deals.

Probably over a hundred people have asked me about my thoughts for deals. A dozen investors have asked to co-invest with us because they've consumed my content, trust me, and have gotten to know me through reading my thoughts every day.

I've never had a conversation with some of them in my life before.

We’ve known of each other or swam in similar circles. They saw my content, and we connected over something I wrote. It’s a huge amplification of old-school networking.

Those three reasons among many are why you should post regularly. And the beauty is it adapts for every person.

And you know, I didn't start daily.

It started with 1-2x/week.

You get to write what you're comfortable about. People know you for posting about “X”.

They send you topics and ideas. Ask for your opinions. It evolves over time. 

But consistently posting on social media (on whichever platform makes the most sense for you in whatever format you're the most comfortable with) will level up your game more than 1 year of doing will.

When you think about all the time and $ you spend to go to conferences/dinners/webinars, you can spend 1-2 hours/week writing + consuming content.

You’ll consistently get the same value instead of paying thousands of $, dealing with four plane rides, and losing half of a week to get the same things. It really has immense benefit beyond building goodwill.

And now for what you came here for. Let’s dive into how we can save Allbirds from Death’s doorstep.

Let’s Examine This Biz

Allbirds is going to be delisted and heading straight for bankruptcy court this year. 

The no-sock sustainable footwear brand has completely lost its way.

Trading at $0.61/share with a $94m market cap, -99% since it IPO’d in 2021.

This is my final plea to the Allbirds board to turn this ship around. It’s past the point of saving and too far gone for an external party to swoop in.

This is the 3rd time we’re posting about Allbirds in the last 12 months. Not because this stock is so easy to beat up on, but because this is a brand that had much greater promise and has been completely mismanaged.

Financial Summary

2023 Financial Statements (YoY Comparison)

Sales: $254m (-15%) 🤮

COGS: $149m (-11%)  👎

Gross Margins: 41% (-6%) 👎
Gross Profits: $104m (-20%) 👎
Marketing: $49m (-17%) 👎

SG&A: $174m (+4%) 👎
OPEX: $257m (+14%)  👎

Net Income: -$152m (+50%) 🤮

EPS: -1.01 🤮

FCF: -$41m (+66%) 🤮

Link to Allbirds 2023 Earnings

TLDR Analysis: Cut SG&A!!!

Rev falling faster than COGS. 🤮

SG&A’s consistently increased for 3 yrs despite shrinking sales. 🤮

Continuing to cut marketing budget. 🤮

At this point, it’s too late to save Allbirds. It isn’t worth taking private.

This is one of the hardest decisions in the M&A game: when you find a biz that you want to see exist in the world. It’s easy to see the potential of this biz and the height it should have flown to. But after seeing the Financial and Operational bloodbath, it becomes untouchable. 

Allbirds has $130m in Cash & Equivalents and lost $152m last year. They won’t have the runway to see New Years 2025.

But that won’t stop us from pitching their board to give it 1 last try to save this biz from demise.

Let’s Fix This Biz!

Here’s the 3-step game plan to turn Allbirds back into the $2B+ sustainable footwear brand it should be.

1) Refocus on the core Customer

Allbirds needs to be honest with itself and bet the biz on its core consumer. Allbirds sells Sustainable shoes to Finance/Tech Bros who want to show off how much money they have and the good they’re doing for the planet.

If Allbirds wants to survive to 2025, they can’t worry about mainstream appeal. They need to increase the number of shoes people in Silicon Valley and Wall St. wear to work.

The reason Allbirds never had to run a sale until 2 years ago is because they sold expensive, highly-coveted shoes to high-discretionary customers who could afford multiple pairs. 

Allbirds are a status symbol, not a functional shoe you actually wear to get stuff done.

Customers weren’t buying them to go running and be outside. They bought Allbirds to tell everyone at dinner parties about how great it was to not have to wear socks in machine washable shoes that cost $$$$. 

Straying away from this path was the existential mistake that has led Allbirds to this dire situation.

If you become a meme, don’t be ashamed of that branding. Lean into it 10x to attract more of those customers! The customers who aren’t going to buy because they don’t find that “branding appeal” aren’t going to buy when you cater to them or not.

1/3 of the population will never buy your product for a whole host of reasons. If that segment trash talks you, it makes your hardcore customers love you more. Take the free Marketing all day long. Fan their flames to drive more attention. It’s why political candidates move so much merch.

Even if people buy your product to mock your shoes… 

They still bought your product at full price.

Takeaway: Never abandon your core audience in pursuit of newer, sexier audiences.

2) Stop Opening New Stores

Allbirds strategy is built around rapid owned retail expansion. SG&A has been the only metric that has consistently increased over L3. 

The quick SG&A breakdown:

2021: $122.2m (44% of Rev)

2022: $166.7m (56% of Rev)

2023: $174m (69% of Rev)

The largest driver of this increase is more store openings. Over that same time period, Allbirds stores count grew:

2021: 35 (+59% YoY)

2022: 42 (+20% YoY)

2023: 58 (+38% YoY)

The fact that SG&A as a % of Rev has increased from 44% in ‘21 -> 69% in ‘23 is catastrophic. It consistently drove up OPEX and demolished earnings in a year where sales fell. 

1 clear trend is emerging: New Store openings ≠ Topline growth.

The reasonably intelligent strategy is to slow down and figure out what in the Retail expansion is broken. Pause all Retail sales expansion until the biz can figure out how Retail fits in actually driving Rev.

Is Retail an actual Sales channel we expect to drive profitable growth?

Or is Retail a marketing channel where we drive foot traffic and media buzz?

Both can work and have been successful strategies for brands that leverage the channel properly, but not in a year where store locations increased +38% YoY and Sales fell -15%.

Takeaway: Retail is a funnel. Fix the leaky bucket before scaling.

3) Get into Wholesale Distribution. Finally.

We’ve covered this at length with guest writer Jason Greenwood when we covered Allbirds in October. Check out the full newsletter here.

The TLDR for you here if you don’t want to read the whole newsletter:

Lower the Retail MOQ to build momentum.

Lock in 1 national Retail distributor every 6 mos.

Launch a dedicated Wholesale B2B Site to process orders.

The key to all of these tactics and the overall strategy: leverage other bizs resources to tap into the $86B/yr US footwear market.

Allbirds is a disruptor who created distinguishing value props that customers care about:

Comfortable shoes you don’t need to wear socks with

Machine washable shoes

Sustainable materials

In the pursuit to be different and run a “better biz model,” they are losing out on one of the most value accretive tactics a biz can undertake:

An Army of local salespeople who can introduce and sell net new customers on Allbirds’ behalf. 

For all the control freaks in the audience (myself included), that sounds like a massive headache, but it’s a key tactic that every brand dreams of: growing through another biz’s Balance Sheet.

👆= a real growth hack.

Yes, it would require more investment in the channel. And yes, you’d give up control of how your products are positioned to another biz. But if you can enable and motivate their sales teams, well, that’s an enormous growth lever that doesn’t hit the Balance sheet..

Takeaway: Retail isn’t the enemy. It’s the future for your brand.

Final Thought

There are so many bizs that launch, get funded, and scale that honestly the world wouldn’t be much different if they went bankrupt. The most frustrating part of Allbirds is that they are a biz that should exist and actually makes the world a better place.

I’m not a customer and don’t see their brand/product assortment as something I’d purchase, but Allbirds invented a new type of shoe and footwear sub-category. 

They even motivated the incumbents to adapt and become more sustainable. 

But they became the classic “too big for their britches” startup. Once they went public, riding the back of the COVID boom, they thought they could conquer the world instead of playing this game like the best do: step by step. 

Only expanding into their next best market when their current market’s slowing down. Not jumping into completely new markets from a cold start and shying away from their core customer base.

What Allbirds should have done is slap every Silicon Valley and Wall St. logo on their product. Lean into their base as hard as possible.

Somehow Cole Haan beat Allbirds to a collab with Slack. Cole Haan?!?!

If I was on Allbirds’ partnerships team, I would be embarrassed. There should be an enormous B2B collab arm of the biz where Goldman Sachs, Google and Andreeson Horowitz wear Allbirds with their Patagonia branded fleeces. Yes that sounds obnoxious to most people, but do you know how much money those people would spend on shoes?

And for easily the best possible collab…

👏👏👏

Stop looking at competitors and spreadsheets to figure out how to grow your biz. Allbirds investing in becoming a “running” brand is comical. 

No one is buying Allbirds to run marathons.

But you know what is a massive trend that Allbirds is perfectly positioned for? The casualization of the workplace and streetwear style invading the office. It’s going to be next to impossible for the Big Tech Dir. of Growth or Managing Partner at a Fim to bring their Air Force 1s into their office. 

You know what would be the talk of the office? Salesforce Ones. Then, just like how high schoolers wear Nike to “dress for the job they want, all those Harvard MBAs will start buying Allbirds going into their summer internship interviews.

When you stop investing in your customers, they stop investing in you. 

Allbirds is the poster child of what happens when you stray from the light of your customers’ needs.

The darkness will smother your biz.

🧠 The Takeaways

Allbirds will be bankrupt by the end of the year if we don’t step in. The maniacal DTC focus + lack of customer obsession is the worst possible combination.

Allbirds need to refocus on their core customers and stop chasing new for newness’s sake.

Retail expansion works if you know how to use it. Allbirds needs to pause new store openings until it can figure out how to fit the tool in the toolbox.

Every brand eventually needs to get into Wholesale. To survive, Allbirds must stop fighting the inevitable.

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About the author 

Jeremy Horowitz

Jeremy's mission: Buy an Ecommerce brand ($10m - $100m revenue) and Saas app ($1m - $10m revenue) in the next year.

As he looks at deals and investigates investing opportunities he shares his perspective about acquiring bizs, the market, Shopify landscape and perspectives that come from his search for the right business to buy.

Jeremy always includes the facts and simple tear-downs of public bizs to provide the insights on how to run an effective biz that is ready for sale.

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