10-Q: Allbirds Q2 2025: Revenue Declines Amid Strategic Shift, Losses Narrow

Allbirds reports a significant revenue decrease for Q2 2025 and the first half of 2025, driven by strategic store closures and international market transitions, while simultaneously narrowing its net and adjusted EBITDA losses through cost control measures.

Summary

• Net revenue for the three months ended June 30, 2025, decreased by 23.1% to $39.7 million, down from $51.6 million in the same period of 2024.
• Net revenue for the six months ended June 30, 2025, decreased by 21.0% to $71.8 million, down from $90.9 million in the same period of 2024.
• Gross profit for Q2 2025 fell by 38.0% to $16.2 million, with gross margin declining to 40.7% from 50.5% in Q2 2024.
• Gross profit for the first half of 2025 decreased by 31.4% to $30.6 million, with gross margin at 42.6% compared to 49.0% in H1 2024.
• Net loss for Q2 2025 improved to $(15.5) million from $(19.1) million in Q2 2024.
• Net loss for the first half of 2025 improved to $(37.4) million from $(46.5) million in H1 2024.
• Adjusted EBITDA loss for Q2 2025 improved to $(12.6) million from $(13.7) million in Q2 2024.
• Adjusted EBITDA loss for the first half of 2025 improved to $(31.2) million from $(34.6) million in H1 2024.
• Operating expenses decreased by 29.3% in Q2 2025 and 26.0% in H1 2025, primarily due to reduced personnel, occupancy, and marketing costs, and the completion of restructuring activities.
• The company closed 9 stores in the United States during the first half of 2025, bringing the total store count to 24 (21 US, 3 International) as of June 30, 2025.
• Allbirds transitioned its direct-to-consumer European business to a third-party distributor in July 2025, following similar transitions in South Korea, Canada, Australasia, Japan, and China in prior periods.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly positive. While revenue and gross margin declined significantly due to strategic shifts, the company successfully reduced its net and adjusted EBITDA losses, indicating effective cost control during a challenging transition period. The new credit facility provides necessary liquidity. The ongoing legal proceedings and competitive market remain concerns, but the execution of the strategic transformation plan is progressing as expected in terms of profitability improvement.

Positives

• Net loss significantly narrowed for both the three months (from $19.1M to $15.5M) and six months (from $46.5M to $37.4M) ended June 30, 2025, compared to the prior year.
• Adjusted EBITDA loss also improved for both the three months (from $13.7M to $12.6M) and six months (from $34.6M to $31.2M) ended June 30, 2025, indicating better operational efficiency.
• Total operating expenses decreased substantially by 29.3% in Q2 2025 and 26.0% in H1 2025, reflecting successful cost control measures and the completion of the strategic transformation plan.
• Restructuring expense was zero for Q2 and H1 2025, down from $0.954M and $1.753M respectively in 2024, indicating the completion of the strategic transformation plan.
• A new secured $50.0 million revolving credit agreement was entered into on June 30, 2025, providing additional liquidity and capital flexibility.
• Foreign currency translation resulted in a gain of $1.894M in Q2 2025 and $2.584M in H1 2025, compared to losses in the prior year periods.

Negatives

• Net revenue decreased by 23.1% in Q2 2025 and 21.0% in H1 2025, primarily due to declines in the direct business, store closures, and the transition to third-party international distributors.
• Gross margin declined significantly to 40.7% in Q2 2025 (from 50.5%) and 42.6% in H1 2025 (from 49.0%), driven by increased promotional activity, inventory adjustments, and a higher mix of international distributor business.
• Inventory write-downs and adjustments increased by $2.4 million in Q2 2025, primarily due to the European market transition to a distributor.
• Interest income decreased substantially by 93.0% in Q2 2025 and 83.1% in H1 2025, due to lower short-term investments in money market funds and interest expense related to the prior credit agreement.
• The company continues to incur significant net losses and anticipates further losses for the foreseeable future.

Risks

• Inability to successfully execute the long-term growth strategy, including maintaining or growing revenue and profit levels, reducing costs, or accurately forecasting demand and supply for products.
• Failure to attract new customers, retain existing customers, or maintain or increase sales to customers.
• Operating results may fluctuate significantly, and past results may not indicate future performance.
• Potential need for additional capital to support business growth, which might be unavailable or available only by diluting existing stockholders.
• International go-to-market strategy transition from a direct to a distributor model may not be successful and could negatively impact operating results and brand value.
• Economic uncertainty in key markets may affect consumer purchases of discretionary items, adversely affecting demand for products.
• International operations expose the company to various risks, such as foreign currency exchange rate fluctuations, tariffs, trade restrictions, shipping channel constraints, and changing tax laws.
• Inability to maintain and enhance the value and reputation of the brand or counter negative publicity.
• Operating in a highly competitive market where larger competitors may compete more effectively, leading to loss of market share and decreased revenue/profitability.
• Focus on sustainable, high-quality materials and environmentally friendly manufacturing processes may increase cost of revenue and hinder revenue growth.
• Climate change and increased focus on sustainability issues may adversely affect reputation, business, and financial results.
• Inability to anticipate product trends and consumer preferences or successfully develop and introduce new high-quality products.
• Increased costs of advertising or marketing, or failure of initiatives to achieve desired impact, may hinder profitable business growth.
• Business is subject to manufacturer concentration risk, with reliance on a limited number of third-party contract manufacturers.
• Significant amount of long-lived assets are assessed for impairment, and the full value may never be realized, potentially causing material impairment charges.
• Risks associated with operating retail stores, including commercial real estate and labor and employment risks, and inability to successfully implement and expand third-party distribution and retail arrangements.
• Dependence on maintaining a strong community of engaged customers, including through social media, with risks from negative publicity or failure to meet customer expectations.
• Financial results may be adversely affected if substantial investments in businesses and operations fail to produce expected returns.
• Risks related to ESG activities and disclosures, and potential harm to reputation if public sustainability targets and goals are not met.
• Failure of contractors or licensees to comply with the supplier code of conduct, contractual obligations, local laws, and other standards.
• Fluctuating cost of raw materials could increase cost of revenue and negatively impact results.
• Failure to protect intellectual property rights, conflicts with others' rights, or inability to acquire/maintain marks and domain names.
• Heavy reliance on information technology systems; any significant failure, inadequacy, interruption, or cybersecurity incident could adversely affect business.
• Unique risks as a Delaware public benefit corporation (PBC) and certified B Corporation (B Corp), including balancing various interests and potential for actions not maximizing stockholder value.
• Risk of delisting from Nasdaq if all applicable requirements (e.g., minimum closing bid price) are not satisfied.
• Failure to accurately forecast consumer demand could lead to excess inventories or inventory shortages, decreasing operating margins and cash flows.
• The dual class structure of common stock concentrates voting control with co-founders, directors, and principal stockholders, limiting influence of other stockholders.
• The company does not intend to pay dividends for the foreseeable future.
• Additional stock issuances could result in significant dilution to stockholders.
• Delaware law, PBC status, and charter provisions could make a merger, tender offer, or proxy contest more difficult.
• The market price of Class A common stock has declined and may decline further.
• Estimates of market opportunity and forecasts of market growth may prove inaccurate.
• Acquisitions or investments may fail to be adequately managed or integrated, or fail to realize anticipated returns.
• Requirements of being a public company increase costs, strain resources, and divert management's attention.
• Failure to maintain proper and effective internal control over financial reporting.
• Emerging growth company status may make Class A common stock less attractive to investors.
• Securities or industry analysts publishing inaccurate or unfavorable research could cause stock price decline.
• Losses from fraud or theft.
• Incorrect estimates or judgments relating to critical accounting policies could adversely affect results.
• Extreme weather conditions, natural disasters, public health crises, political crises, and other catastrophic events could negatively impact results.

Future Outlook

Management expects overall sales in 2025 to decrease from 2024, primarily due to international distributor transitions, retail store closures, and direct business sales trends in the first three quarters, partially offset by anticipated demand for new products in the fourth quarter. Gross margin is expected to improve for fiscal year 2025 compared to fiscal year 2024. Marketing expense is projected to increase in 2025, prioritizing spend to align with the product strategy.

Management Comments

• Our continued focus on elevating our product offerings combined with our differentiated brand approach and authenticity is critical to attracting new customers and increasing closet share.
• We plan to try to optimize our store fleet and focus on ensuring that our retail stores are efficiently driving customer acquisition.
• We expect overall sales in 2025 to decrease from 2024, primarily driven by the impacts of our international distributor transitions, retail store closures, and sales trends in our direct business in the first three quarters of the year, partially offset by demand for new products in the fourth quarter of the year.
• We expect gross margin improvement for fiscal year 2025 as compared to fiscal year 2024.
• We expect marketing expense to increase in 2025 as we are prioritizing our marketing spend to align with our product strategy.

Industry Context

Allbirds operates in a highly competitive retail footwear and apparel industry, which is influenced by general seasonal trends, with sales typically lower in Q1 and higher in Q4. The company is navigating macroeconomic uncertainties, including elevated inflation, rising interest rates, and supply chain disruptions, which impact consumer discretionary spending. Allbirds' focus on sustainable materials and its status as a Public Benefit Corporation and certified B Corp position it at the intersection of consumer demand for responsible and purpose-driven brands, though this commitment can also increase costs and complexity.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Two substantially similar securities class action lawsuits (Shnayder v. Allbirds, Inc., et al. and Delgado v. Allbirds, Inc., et al.) were consolidated, alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Sections 11 and 15 of the Securities Act. The court granted motions to dismiss the initial and second amended complaints, with leave to amend. A third amended complaint was filed on July 14, 2025, and the company expects to file a motion to dismiss by August 27, 2025.
• Two substantially similar shareholder derivative suits (Park v. Zwillinger, et al. and Junker v. Zwillinger, et al.) were filed, alleging breach of fiduciary duties, unjust enrichment, and violations of the Exchange Act and Securities Act. These cases are currently stayed pending the outcome of the securities class action lawsuits.

Related Party Transactions

• A promissory note from an employee, received on November 19, 2018, in consideration for the early exercise of 11,000 shares of common stock options, remained outstanding as of June 30, 2025. The note was amended in June 2023 to no longer accrue interest after March 31, 2023, and to extend the maturity date to October 1, 2025. Due to its limited recourse nature, the note receivable is not reflected in the condensed consolidated balance sheets.

Stakeholder Impact

• Shareholders: Face potential dilution from future equity or convertible debt issuances, concentrated voting control by co-founders and principal stockholders, and no anticipated dividends. The market price of Class A common stock has declined and may remain volatile.
• Employees: Subject to potential employee-related costs from store closures and international business transitions. The company focuses on attracting and retaining highly skilled personnel in a competitive market.
• Customers: May experience impacts from store closures and changes in international distribution channels. The company's focus on product innovation and sustainability aims to maintain customer engagement and brand loyalty.
• Suppliers and Manufacturers: The company's reliance on a limited number of third-party manufacturers and its commitment to sustainable materials and processes create supply chain risks, including potential for increased costs and disruptions.
• Creditors: The new $50.0 million revolving credit agreement includes customary covenants and events of default, which could limit the company's financial and operational flexibility.

Next Steps

• Continue to evaluate the total number of stores operated domestically and internationally, and optimize the store fleet.
• Expand the use of the distributor model to additional countries over time, following the recent transition of the European business.
• Continue to improve operational and capital efficiencies and thoughtfully optimize infrastructure.
• Make ongoing investments in developing relationships across the full supply chain.
• Continue to make investments to support business growth, potentially requiring additional equity or debt financings.
• Vigorously defend against ongoing securities class action and shareholder derivative lawsuits, with a motion to dismiss the third amended complaint expected by August 27, 2025, and full briefing by November 12, 2025.
• Evaluate the impact of the One Big Beautiful Bill Act (2025 Tax Act) on consolidated financial position and results of operations for the year ending December 31, 2025.

Key Dates

Recommendation

Allbirds is in a critical strategic transformation phase, which is reflected in the mixed financial results. While revenue continues to decline due to planned store closures and international market transitions, the significant reduction in net and adjusted EBITDA losses demonstrates effective cost control and progress towards profitability. The new credit facility provides necessary liquidity for ongoing operations. However, the company still faces substantial risks, including intense competition, ongoing legal proceedings, and the inherent uncertainties of its evolving business model. A 'hold' recommendation is appropriate as investors should monitor the successful execution of the strategic plan and its impact on sustained revenue growth and profitability before making further investment decisions.

Keywords

Allbirds, Footwear, Apparel, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Revenue, Net Loss, Adjusted EBITDA, Gross Margin, Strategic Transformation, Store Closures, International Distributors, Sustainability, ESG, Public Benefit Corporation, B Corp, Retail, eCommerce, Cost Control, Liquidity, Credit Agreement