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: Allbirds’ international business takes a hit from war in Ukraine, COVID in China

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Allbirds Inc. says Russia’s attack on Ukraine and COVID in China have suppressed demand across its international business, driving down expectations for the year.

The strong dollar is also a factor, the company said.

“These headwinds created a drag on revenue estimated to be approximately $2 million in the quarter, which would have represented an additional 15% year-over-year growth in our international business,” said Joey Zwillinger, co-founder and co-chief executive of Allbirds
BIRD,
-11.06%
,
on the earnings call, according to a Motley Fool transcript.

“As we look at the balance of 2022, we are managing to a more conservative outlook to reflect what we believe are transitory factors affecting our international business. We believe that the impact of full year revenue will be approximately $15 million to $20 million, which is reflected in the guidance we’re providing today.”

Allbirds’ new outlook is for revenue of $335 million to $345 million, down from $355 million and $365 million previously. Shares of the sustainable shoe company sank nearly 11% in early Wednesday trading after the guidance adjustment.

Shares sank 8.4% in Wednesday trading after the earnings announcement. The stock has sunk 72.5% for the year to date.

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“We continue to view the scale-up of our international business as an important element of our growth algorithm. Having invested early in regions like Europe and Asia, we believe we have established a broad foundation from which to grow as we strive to elevate our brand awareness into a consumer set that is at least as large as the opportunity in the U.S.,” Zwillinger said.

U.S. revenue for the quarter was up 35% while international revenue grew 3%. Revenue for the quarter totaled $62.8 million, up from $49.6 million last year and just above the FactSet consensus for $62.0 million.

“Investor skepticism in this name was already high, and the guide down is not going to convert many doubters to believers,” wrote Wedbush analysts.

“Silver linings, however, include the strong U.S. growth, positive commentary around early wholesale sell-throughs, plans for more cautious expense growth in 2H (getting the company to EBITDA breakeven in 2H), and the fact that the guidance cut embeds a fairly draconian international scenario.”

Wedbush rates Allbirds stock outperform and trimmed its price target to $7 from $8.

“We acknowledge external challenges (Ukraine, China COVID restrictions, FX, supply chain, etc.) and are encouraged by attention to expense management but business momentum is underwhelming relative to expectations,” said Stifel.

“In the context of both the external disruptions and the rerating of the valuation, we believe the current share price undervalues the business, franchise, and asset including sustainable materials intellectual property.”

Stifel rates Allbirds stock buy and slashed its price target to $7 from $20.

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Allbirds said stores were a big growth driver, with U.S. retail growing 150% year-over-year.

“[W]e see ‘early innings’ growth of +20-30%, with Allbirds’ positioning versus peers differentiated through minimalist ‘evergreen’ product designs, innovative and novel materials science, and a digitally led omni-channel approach,” said JPMorgan.

“That being said, Allbirds’ growth is highly dependent on new store growth contributions, new product launches, and brand awareness growth.”

JPMorgan rates Allbirds shares neutral with a $7 price target, down from $12.

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