ThredUp is laying off approximately 15 percent of its corporate workforce and closing one of its processing centers in Lebanon, Tenn.
The company reported revenue of $76.4 million, a 27.5 percent increase year-over-year, and posted a net loss of $28.4 million.
In general: Like top resale competitor Poshmark, ThredUp is struggling to turn a profit, and economic uncertainty is making matters worse. Co-Founder CEO James Reinhart told Wall Street analysts on Monday that the consumer environment is “very different than it was two months ago.”
“All the data we’re seeing indicates that consumer health is declining, especially among budget consumers, who are a significant portion of our customer base,” Reinhart said. “Through the last few weeks of Q2, we’ve seen a trend of slower business continuing into Q3.”
Consumers are increasingly segmented by economy line, and average order values (AOVs) from the company’s “deep discount” consumers are down 7 percent compared to last year, Reinhart said. Meanwhile, top buyers’ AOV increased 15 percent.
He said the dichotomy becomes even more pronounced when consumers consider the types of products they buy. High-discount shoppers are now buying 24 percent less, while typical budget shoppers are buying 8 percent cheaper. Meanwhile, the top consumer is doing the opposite – buying 8 percent more expensive items.
“Where we saw a slight decline in the number of high-end shoppers shopping with us, we saw a 23 percent drop in discount and budget shoppers in July compared to the same period in May,” Reinhart said. “Discount and budget shoppers make up about one-third of our customer base. So nearly one in four are currently opting out of clothing shopping.
Going forward, ThredUp is focused on its new goal of breaking even on adjusted EBITDA levels by mid-2023, with job cuts and processing center closures being the first steps in that direction. ThredUp did not say how many employees were affected by the scandals. The company started the year with 398 employees outside of its distribution centers and has hired an additional 2,496 employees.
ThredUp is putting the brakes on its Dallas fulfillment center under development, which is expected to initially hold up to 10 million items.
“We’ll build Phase 1 first, which will house about five million units,” said Shane Sobers, chief financial officer, “and then we’ll build the second half as needed.”
The company has been pulling back spending in areas such as marketing and onboarding in response to slowing demand. In the third and fourth quarters, ThredUp expects these measures to save about $12 million to $18 million.
But despite the price cuts, the resale company cut its full-year guidance for a second time, signaling the waters ahead. For the full year 2022, ThredUp now expects revenue in the range of $283 million to $287 million—12.4 percent to 14 percent—down from $315 million to $325 million previously, representing 25.1 percent to 29.1 percent growth.
Third-quarter guidance projects revenue in the range of $64 million to $66 million—growth of 1.1 percent to 4.2 percent. Gross margin is estimated in the range of 65 percent to 67 percent.
Currently, the marketplace is attracting new consumers. Total quarterly active buyers jumped 28.6 percent to 1.72 million, up from 1.34 million in the second quarter of 2021. Total orders rose 39.9 percent in the quarter to 1.70 million from 1.22 million in the quarter.
The “resale-as-a-service” (RaaS) company recently launched Resale 360 for Tommy Hilfiger, as well as a resale platform for sustainable fashion brand Oak + Fort. The company remains on track to have more than 40 brands on its RaaS platform by the end of the year.
Inventory rose 219.6 percent to $13.9 million from $4.4 million last year.
Second quarter gross margin was 68.9 percent, down 4.7 percentage points from 2021’s second quarter gross margin of 73.6 percent. The gross margin of American trade reached 74.2 percent.
The lower gross margin was largely due to the consolidation of the Remix European resale business, which it acquired last year.
“In the next few years, we plan to move the European business to higher margins,” Sobers said. “Currently, European product margins are materially lower than ThredUp US product margins and we see significant opportunities to improve product revenue margins through investments in automation and data science to bring US production closer to 50 percent. “Margin Order.”
Cash, cash equivalents, restricted cash and short-term marketable securities were $155.7 million at the end of the quarter.
net income ThredUp’s second quarter revenue came in at $76.4 million, a 27.5 percent increase compared to $60 million in the year-ago quarter.
Freight revenue was flat, at $48.5 million compared to $48.6 million last year.
Product revenue contributed to most of the revenue increase, rising 145.4 percent to $27.9 million from $11.4 million. According to Sobers, the majority of product revenue growth will come from Remix’s acquisition and growth of the RaaS channel.
net income Net loss for the second quarter of 2022 was $28.4 million, more than double the net loss of $14.4 million last year. Related to the losses, ThredUp posted a net loss of 29 cents, and doubled its loss of 15 cents per share in the 2021 period.
Adjusted EBITDA loss for the quarter was $13.5 million, widening from an adjusted EBITDA loss of $9 million for the 2021 quarter.
Take the CEO. Reinhart believes the economic environment is stabilizing, which should help ThredUp reach its operating revenue goal of $80 million to $85 million next year.
“I think the way we run the business is to be flexible. We’ve built that into our assumption that it’s going to be more competitive. And so, we have to change pricing, promotions, discounts and payments to our vendors,” Reinhart said. “So we’re willing to change all those things to be competitive in the environment. It reflects what we expect to be a competitive environment through the middle of the year and into 2023.