Allbirds went public yesterday (Wednesday, November 4th). They offered at $15 per share valued them at just over $2b; however, the share price skyrocketed up to the high $20s, giving them a valuation of nearly $4b. As I write this right now, their share price is at $26.22, giving them a valuation of about $3.7b.
I dove into their S-1 to learn more about Allbirds. Here are my interesting takeaways:
- 2018-2020 Digital Sales accounted for 89% of their overall net revenue (You can only purchase their products on their website, they do not sell on Amazon or any other 3rd party digital channel).
- In 2019, Allbirds operated 11 Brick and Mortar stores, and as of June 2020, they operated 27 Brick and Mortar stores.
- Their average order value is $124
- Of U.S. customers acquired between 2019 and 2019, 43% returned to make a second purchase by the end of 2020. After a second purchase, 50% of those customers returned to purchase a 3rd time. And after the 3rd purchase, 55% of those customers purchased again.
- The average lifetime spend of the top 25% of their customers is $446
- Brick and Mortar stores help drive digital sales for the areas that the store is in.
- Q4 (October, November, December) is their peak seasonality for sales. Q2 is their second-highest quarter for sales.
Monthly Digital Revenue
I have been tracking Allbirds’ digital sales for the past several months. I estimate their Q3 2021 digital sales to be about $49.8M. I estimate in 2021, their digital sales will be about 85% of overall sales. Thus, making their overall sales in Q3 about $58.6M.
Based on a quick growth analysis from previous years and quarter over quarter, I expect their Q4 total sales to be about $92.7M, and digital sales will be about $78.8M of that. From their order volume that I am tracking, I can estimate they generated around $20.8M in digital sales in October. This means, I expect them to generate about $58M of digital sales for November and October.
I am no expert at valuation (and please do not take any of this as financial advice), but it appears Allbirds is trading at about a 14x multiple of their sales.
Based on all the data I am tracking and reviewing, Allbirds will generate about $268M in total revenue for 2021 ($228M of that will be from digital). Their current market cap is about $3.7B, which is about 14x their sales.
This seems awfully high to me, especially considering they are not even close to profitable. Nike trades at a 6x of their sales, Adidas is at a 3x, and Under Armour is at a 2x. I also quickly took a look at Figs who is a direct-to-consumer retailer for medical apparel (yes, not a direct competitor to Allbirds). They went public earlier this year, and they trade at about 15x their sales. However, Figs is profitable.
I just have a hard time believing that Allbirds should have a valuation that is 14x their sales. Maybe they will prove me wrong.
Brick and Mortar Stores
As of June 2021, Allbirds is operating 27 Brick and Mortar stores. Allbirds believes these stores serve as an effective and profitable source of new customer acquisition, increase brand awareness, and drive traffic to their digital platform. Allbirds also sees increased net revenue and gross margin benefit from these stores due to lower return rates and decreased shipping costs (almost the reverse argument of why brands love DTC).
Allbirds did a study of the impact of their Boston Back Bay store, which opened in 2019. Allbirds saw an increase of digital traffic from the Boston designated market area by 15%. They saw 83% increase in new customers and 77% increase in overall net sales as compared to a comparable control market.
In 2020, Allbirds spent $55m on marketing and advertising. This was 25% of their overall revenue. In 2019, they spent $44M (22% of overall revenue).
For the first 6 months of 2021, Allbirds spent $26M in marketing (22% of revenue). For the first 6 months of 2020, Allbirds spent $19.5M on marketing (21% of revenue).
Their ad spend has been slightly less efficient than it used to be. I expect this trend to continue for them (especially with all the issues with Facebook ads since IOS14 update).
Allbirds Facebook Ads:
Top 5 Paid Search Keywords:
- nurse shoes
- walking shoes
- men’s shoes
- denim joggers
- mens boat shoes
Allbirds started TV ads in January 2021. Here is a quote from their S-1 about how they see the results of these ads:
“Early signs in the United States and Europe have indicated that this channel increases brand awareness, allowing us to expand our customer reach and introduce our brand to new customers for the first time. We expect these efficient investments in TV to fill the top of our marketing funnel and drive customers from awareness to conversion. Our TV creative approach is inspirational, irreverent, unassuming, and relays our products’ natural materials benefits.”