Allbirds stock tumbles on earnings guidance cut

Yahoo Finance Live anchors discuss Allbirds stock performance after the company slashed its guidance.

Video Transcript

BRAD SMITH: From the big board that we were looking at on Wall Street to Big Bird here. Shares of Allbirds, the wing ticker symbol BIRD--

BRIAN SOZZI: Well.

BRAD SMITH: --that's moving-- I tried, man. I tried.

[LAUGHTER]

It's down by 16%. You got to throw things at the wall, see what sticks. Well, BIRD shares not sticking here today.

[LAUGHTER]

This is despite topping earnings estimates. The company announced it cut its guidance for the rest of the year due to a slowdown in consumer spending. I'm gonna wrap up my thoughts here very briefly so I can toss to one of you and stop making any more bad puns.

But I think for one thing that we did see with BIRD, especially in the environment where inventory certainly has been one of the headwinds for competition in the larger kind of retail landscape. For BIRD, I believe they had said that inventories had only slightly grown by about 1%. And so keeping a close eye on there as well as some of the new product launches where they're going to be investing into.

They're gonna be looking across some of those same cost pressure mechanisms that they can explore from their physical retail stores, those channel sales grew actually 120%. So that was compared to 2021. So good quarter there on the retail side channel wise, but then it does come back down to how much they are able to move through this inventory. And it sounds like discounting might also have to happen on some of the older models as well.

BRIAN SOZZI: It's tough to see this stuff. Here's the company legitimately trying to do something good, has a strong sustainability message, has been delivering on it. But just falling victim to the consumer spending backdrop. Conference call last night, company talked about now it's marking down a lot of inventory, notably in apparel.

Seeing some weakness that persisted towards around-- started around Father's Day. That has continued, weak demand-- weakness has continued, looks to be into the third quarter. So you're getting a company now, like a lot of other tech companies, trying to rightsize their business. But again, tough to see this quarter from them.

JULIE HYMAN: The drop in gross margin at this company is shocking to me. A 20-basis point drop in gross margin to 36.1% from 56.1% in the year earlier quarter. I mean, that's-- I can't recall when I've seen a gross margin drop by that large.

Part of that does have to do with the write down in inventory, that it had some excess inventory here. But obviously, that's a problem for the company. And it's cutting back. It looks like there are some reports now it's cutting back, what, its global corporate workforce by about 8%. And that's only 23 people, because it's not that big of a company at this point in time, but still. And the company is saying it sounds like it's gonna be slowing some hiring as well.

BRIAN SOZZI: Yeah, if there's any saving grace here or positive, they have set the stage I think-- they've reset the business enough where if there is no recession next year, they might finally reach profitability because of these cuts.

BRAD SMITH: Well, it depends upon the product line as well that they're trying to push forward at that point. But on the call they said, until they have more certainty around the length and severity of external headwinds-- and everyone throughout the earnings calls this season has had to either acknowledge one way or another the risk of a recession and what that might mean for their business-- a slowdown in US consumer spending, a major headwind for Allbirds here.

BRIAN SOZZI: Their shoes are so comfortable. Myself, our head honcho, Mr. Ken Underwood, loves them, too, as well. I mean, these are comfortable shoes.

BRAD SMITH: [INAUDIBLE] he said.

BRIAN SOZZI: It's just a matter of, can they take that comfort and spread out into running, and more lines, compete more effectively with the Nike and Under Armor? Right now, not there yet.

BRAD SMITH: Yeah, you didn't say Lulu. You don't believe they can compete?

BRIAN SOZZI: No, you know where I stand.

BRAD SMITH: All right, cool.