Shares of Allbirds Inc. dropped over 16 percent in after-market trading on Thursday as the footwear company lowered its guidance for the year following its latest earnings report.

In the second quarter of fiscal 2025, the San Francisco-based company reported that net revenue decreased 23.1 percent to $39.7 million, compared to $51.6 million in the same time last year. There was also a net loss in Q2 of $15.5 million, compared to $19.1 million in the first quarter of 2024.

Allbirds noted that its year-over-year decrease is primarily attributable to the company’s planned retail store closures and international distributor transitions. The company also said that its gross margin declined in the period primarily due to increased promotional activity, inventory adjustments primarily associated with the transition of the European market to a distributor, a higher mix of business from international distributors and a lower mix from retail stores, and increased per unit freight and duty costs in our direct business.

Earnings for Q2 were in line with Allbirds’ expectations, however. For the second quarter, the company was expecting net revenue between $36 million to $41 million. For analysts, they were expecting earnings in Q2 to be between $36 million and $40.8 million, according to Yahoo Finance.

Joe Vernachio, chief executive officer of Allbirds, said in a statement that “strong execution” during the first half of the year has set the company up for what’s ahead this fall.

“We are thrilled to be at the threshold of our product, marketing and customer experience initiatives coming together as we continue on our path to reigniting the Allbirds brand,” Vernachio said. “In the weeks and months ahead, we’ll be delivering a continuous flow of modern lifestyle footwear that is distinctively Allbirds – modern design, unique materials and unmatched comfort. This debut, coupled with the operational and financial rigor we have embedded into the organization in recent years, gives us confidence in our expected return to top line growth in the fourth quarter of this year.”

Looking ahead, Allbirds said it expects negative impacts of approximately $20 million to $25 million of revenue associated with the transition from a direct selling model to a distributor model in certain international markets and the closure of certain Allbirds stores in the U.S. This is up from prior guidance of $18 million to $23 million of impact.

As such, the company is lowering its revenue guidance for the year. Allbirds now expects net revenue in fiscal 2025 between $165 million and $180 million compared to previous guidance of between $175 million to $195 million.

In the third quarter of fiscal 2025, the company is forecasting net revenue between $33 million and $38 million.