Allbirds(BIRD) - 2023 Q4 - Annual Report

Special Note Regarding Forward-Looking Statements This section highlights forward-looking statements in the 10-K, noting substantial risks and uncertainties, and clarifies company communication channels - All statements in the report, other than historical facts, are forward-looking and involve substantial risks and uncertainties, primarily based on current expectations and projections[14][15] - The company communicates material information through SEC filings, press releases, its website (allbirds.com, ir.allbirds.com), and social media accounts[20] Risk Factors Summary This section summarizes key risks for Class A common stock, covering strategic execution, customer retention, economic, brand, and operational challenges - Key risks include potential failure to execute the strategic transformation plan, inability to attract/retain customers, adverse impact from economic uncertainty, and challenges in maintaining brand value[1][23][24] - Operational risks involve manufacturer concentration, impairment of long-lived assets, retail store operations, and intense market competition[5][6] - The company anticipates continued net losses for the foreseeable future and faces risks related to its public benefit corporation status and potential delisting from Nasdaq[2][38] Part I Item 1. Business This section provides a comprehensive overview of the company's business, including its mission, products, marketing, operations, competition, and ESG principles Overview Allbirds, a global lifestyle brand founded in 2015, innovates with sustainable footwear and apparel as a Public Benefit Corporation and B Corp certified - Allbirds was incorporated in Delaware on May 6, 2015, and became a Public Benefit Corporation (PBC) in February 2016, earning B Corporation (B Corp) certification in the same year[53][511] - The company's mission is to innovate with sustainable materials to create better footwear and apparel, while treading lighter on the planet, driven by consumer demand for sustainable products[53][73] Our Products The company's product portfolio primarily consists of footwear, accounting for most revenue, alongside apparel, designed for 'Super Natural Comfort' using sustainable 'Hero' materials - Footwear constitutes the vast majority of revenue and is the brand's foundation, including lifestyle and performance shoes like the Dasher and the Runner[43] - Product innovation is built on 'Hero' materials platforms, including superfine ZQ certified merino wool, tree fibers, and sugarcane[44] - The product development engine integrates strategy, sustainability, design, sourcing, development, and production to deliver comfort and sustainable design[42] Marketing Strategy and Brand Allbirds employs a purpose-driven marketing strategy to build customer loyalty through organic and performance marketing across digital, social, and physical channels, emphasizing sustainability - The company's purpose-driven lifestyle brand aims to inspire consumers to live in better balance, associating the brand with sustainability and high-quality product experiences[75] - Marketing initiatives focus on extending reach through digital and performance marketing, social media, TV, physical stores, and word-of-mouth campaigns[76] - Target customers are typically younger, active, health-conscious, willing to pay for premium products, frequent online shoppers, and appreciate socially conscious brands[77] Direct Business Strategy The company's primary sales channel is its direct business, combining digital platforms with 60 physical retail stores, with plans to optimize the fleet by closing 10 to 15 stores in 2024 - As of December 31, 2023, the company operated 60 company-operated stores across seven countries, predominantly in the United States[57] - Plans for 2024 include optimizing the store fleet by closing 10 to 15 stores based on profitability metrics, aiming to efficiently drive customer acquisition and brand communication[57] - Digital channels, including the website and mobile app, offer a seamless shopping experience, early access to products, and virtual try-ons[56] Third-Party Distribution Strategy Allbirds supplements its direct business with select third-party retail and distributor partnerships in the U.S. and internationally to increase brand awareness and customer reach - The company partners with select retailers in the United States for wholesale distribution through their e-commerce sites and retail stores[59] - Exclusive distributors are appointed in international markets, such as Canada and South Korea, to sell products across various channels[59] Technology Allbirds leverages modern technology, including Shopify, to scale operations and enhance digital customer experience, supported by a sophisticated data infrastructure and robust security measures - The company utilizes Shopify and a common core set of APIs and tools for its digital customer experience, enabling localization and speed-to-market[60] - A sophisticated data infrastructure supports informed decisions in marketing, customer relationship management, inventory planning, and logistics[60] - Security measures include multi-factor authentication, security tools, system monitoring, and audit logs to protect sensitive customer data[60] Supply Chain and Operations Allbirds' supply chain focuses on responsible sourcing, with footwear primarily manufactured in Vietnam and apparel in multiple countries, supported by a global distribution network - Footwear products are manufactured in Vietnam, and apparel/non-footwear products are primarily manufactured in Vietnam and Peru, with support from China, the U.S., and Guatemala[63] - The distribution network includes seven primary distribution centers across eight countries (U.S., U.K., Netherlands, China, Japan, New Zealand), enabling reach to over 35 countries[80][81] - All partners are required to sign a Supplier Code of Conduct, ensuring compliance with applicable laws and International Labour Organization Core Labor Standards[83] Competition The company operates in a highly competitive and fragmented footwear and apparel market, facing larger competitors with greater resources, intensified by low barriers to entry for new digital companies - The market is highly competitive, with competitors including athletic and leisure footwear and apparel companies, many of which are larger with stronger worldwide brand recognition and greater resources[64] - Access to offshore manufacturing and digital growth have lowered barriers to entry, increasing competition in the industry[64] Public Benefit Corporation Status Allbirds became a Public Benefit Corporation (PBC) in 2016, legally committing directors to balance stockholder and stakeholder interests with environmental conservation, requiring biennial public benefit reporting - The company amended its certificate of incorporation in February 2016 to become a PBC under Delaware law, identifying environmental conservation as its public benefit[65][87] - PBC directors have a duty to balance stockholder pecuniary interests, the best interests of materially affected stakeholders, and the specific public benefit[65] - A biennial report detailing success in meeting public benefit objectives must be disclosed to stockholders[66] Certified B Corporation Allbirds achieved B Corp certification in 2016, demonstrating commitment to social and environmental performance, with its latest 2023 recertification score of 96.5 showing continuous improvement - Allbirds was first designated as a B Corp in 2016, based on a comprehensive assessment of its positive impact on society and the environment[88] - The company's latest recertification score in 2023 was 96.5, an increase from 89.4 in 2020 and 81.9 in 2016, significantly higher than the median score of 50.9 for evaluated companies[67][93] Environmental, Social, and Governance (ESG) Allbirds is committed to reversing climate change through a 'measure, reduce, and remove' emissions approach, with targets for carbon footprint reduction, employee well-being, diversity, and robust ESG governance Environmental Allbirds uses LCA to measure product emissions, targeting a 50% carbon footprint reduction by 2025 and 95% by 2030, focusing on Regenerative Agriculture, Renewable Materials, and Responsible Energy - The company uses a Life Cycle Assessment (LCA) methodology, third-party verified to ISO 14067 standards, to measure emissions across product lifecycles[68][95] - Allbirds aims to achieve a 50% reduction in per-unit carbon footprint by the end of 2025 and a 95% reduction by 2030, relative to a 2025 baseline without further action[70][98] - Products are labeled with their carbon footprint to hold the company accountable and empower customers with objective information[91][96] [Social (Our Flock & Community)](index=12&type=section&id=Social%20%28Our%20Flock%20%26%20Community%29