Allbirds IPO: Future of sustainable brands depends on Generation-Z's habits - The Average Joe

    Allbirds IPO: Future of sustainable brands depends on Generation-Z’s habits

    Victor Lei β€” Head of Research

    November 3, 2021

    allbirds

    November 3, 2021

    Can a massive waste problem and Gen-Z’s love for sustainability translate into investor returns? We’re about to find out β€” with the stock market debut of Allbirds, the sustainability apparel brand.

    What Gen-Z habits tell us about the future

    Consumers are more mindful about sustainability β€” and Gen-Zs are leading the way.

    • 9 out of 10 Gen-Z consumers think companies have a responsibility to address environmental and social issues.
    • Gen-Z incomes are expected to surpass millennials’ in 10 years β€” with a wealth transfer of $78T from baby boomers.

    Figuring out Gen-Z spending habits and preferences will be crucial for investors. According to Influential, the top 3 brands mentioned among Gen-Zs are Nike, Adidas and Vans.

    Gen-Zs have a preference for e-commerce β€” and so do investors. In the past year, several e-commerce-first brands went public including Figs (NYSE:FIGS) and Warby Parker (NYSE:WRBY). Allbirds is next to debut on the market this week.

    Judge a person by their shoes…

    Founded in 2015, Allbirds is an e-commerce-first sustainable apparel brand, known for its popular wool sneakers, minimalist designs and use of sustainable materials. Here are the important numbers:

    • Expected $2B+ valuation upon listing.
    • $112M in 2020 sales β€” up 14% from 2019 but heavily impacted by COVID.
    • Opened 27+ stores β€” with plans to open hundreds more.

    But it’ll be difficult to make a dent in the hyper-competitive sneaker and activewear market…

    • Nike is the $260B dominant gorilla on top.
    • Allbird’s sales are concentrated in shoes β€” as it just launched its collection of activewear in April.

    It’s still too early to gauge the success of its activewear line β€” as it’s up against brands like Lululemon and Under Armour.

    Investors: Similarities to Lululemon

    Lululemon is one of the most successful brands in recent years, thanks to community building and popularizing the athleisure trend. And similar to Lulu β€” which rarely offers discounts, Allbirds:

    • Never offers discounts β€” giving it a higher gross profit margin compared to other apparel brands.
    • Has a growing loyal ESG (Environmental, Social, Governance) community β€” although it’s uncertain if the masses will pay for sustainability.

    While ESG investing is becoming more important, whether they lead to higher long-term stock returns is another question.

    Must-read: The dangers of investing in a company as soon as they go public.

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