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Why Allbirds Stock Lost 21% in December

By Jeremy Bowman – Jan 5, 2022 at 8:13AM

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Its earnings report didn't live up to expectations.

What happened

Shares of Allbirds (BIRD 0.87%), a maker of lightweight shoes, were falling last month after investors were disappointed by the company's third-quarter earnings report at the end of the November. According to data from S&P Global Market Intelligence, the stock finished last month down 21%.

As you can see from the chart below, the stock fell sharply at the beginning of the month after the earnings report came out, and stayed in the red in volatile trading for the rest of the month.

BIRD Chart

BIRD data by YCharts

So what

Shares of Allbirds fell 17% on Dec. 1 after the company reported third-quarter earnings.

Two people sitting in front of a shelf of Allbirds shoes.

Image source: Allbirds.

The results were solid with revenue increasing 33% to $62.7 million, which topped expectations at $61.9 billion. The company's gross margin ticked up from 52.9% to 54.1%, and it reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $6.3 million with its margin expanding from negative 8.1% to negative 10.1%. Allbirds also continued to expand its brick-and-mortar format, adding four stores to bring its total to 31.

"Revenue was strong across channels and geographies, growing 33% year over year, with notable strength in U.S. physical retail," Co-CEO Joey Zwillinger said in a statement. "Importantly, we saw strong consumer response in the quarter to our new product innovation, including our new Perform Apparel line."

Allbirds' guidance seemed to call for a sharp decline in revenue in the fourth quarter, projecting full-year revenue of $270 million to $272 million, up 23% to 24%, implying fourth-quarter revenue of roughly 15%. Still, that forecast was essentially in line with analyst estimates at $271.9 million.

While the third-quarter numbers were mostly better than expected, investors may have been looking for strong beats from the Silicon Valley company, especially since this was its debut earnings report.

Now what

Allbirds has a unique approach to footwear with a focus sustainability and comfort through materials like merino wool, eucalyptus tree fiber, and sugarcane-based foam. Allbirds' gross margin around 54% is especially strong for a footwear brand, which indicates that the company has a pricing advantage.

At a market cap of $2.3 billion, the stock trades at a price-to-sales ratio of 8, which is pricy for a consumer brand, and the footwear industry is notoriously competitive; Allbirds is competing against giants like Nike and Adidas.

With market sentiment changing, Allbirds stock could come under pressure in 2022. We'll learn more when the company provides 2022 guidance, which may not come until March.

Jeremy Bowman owns Nike. The Motley Fool owns and recommends Nike. The Motley Fool has a disclosure policy.

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