ThredUp knows where its resale future lies, and that is its U.S. operations.
Company founder and CEO James Reinhart told investors in a company conference call on third-quarter earnings results that it has made “substantial progress in the divestiture” of its European operation, Remix. The plan is to sell a majority stake in a management buyout led by current general manager Florin Filote. ThredUp would fund Remix with a final cash investment of $2 million, and retain a minority interest in the business. That deal could close by year-end.
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As for the U.S. marketplace, Reinhart said sourcing strategy and pricing algorithms played a role in strong third-quarter results.
“Continued refinements in our sourcing strategy and pricing algorithms have allowed us to delight customers with incredible deals, driving strong sell-through and expanding our contribution margins despite the lower exit rate out of Q2,” he said.
He added that while sales contracted in the third quarter, the company was able to generate more cash flow from operations and expanded adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) by nearly 100 basis points. The expectation now is the cash flow from operations will be positive on a full-year basis in the U.S. in 2024, and “the U.S. will be roughly free cash flow breakeven for the full year.”
Reinhart told investors “we’ve made real progress in course-correcting in the U.S. since last quarter.” He cited to the company exceeding its own third quarter expectations and the raising of fourth quarter and full-year estimates. He’s expecting “just a 4 percent seasonal decline” in the fourth quarter as consumers shift to new goods for gift giving. And while ThredUp normally doesn’t report gross merchandise value (GMV), Reinhart disclosed that GMV grew 7 percent year-over-year in the quarter to $457 million from $426 million last year at its midpoint, an indication he said that customers are still shopping regularly at ThredUp.
“We see opportunities both in what we’re doing at ThredUp, but also in the macro environment to generate higher willingness to pay and more flow-through as we turn the page to 2025,” the CEO said.
Looking at other growth and profit targets, he said the third quarter was the “strongest new buyer acquisition quarter we’ve had in more than two years,” citing better ad targeting as helpful tool. He also noted that repeat rates for new customers are up 12 percent over the past few months. “We now believe we are back in a position to invest more aggressively in growing new buyers while still achieving our free cash flow targets,” Reinhart said.
One big change is the marketplace transition to consignment, which the CEO said is in its final stages. “Consignment revenue now makes up more than 90 percent of U.S. revenue, and it’s expected to trend toward the mid-90s in 2025,” he said. Another plus will be its operating infrastructure which continues to improve through automation and processing.
And the company is also using generative AI products and technology investments to improve the customer experience. Its Style Chat is expected to power new social commerce features in 2025, “empowering creators, influencers, and affiliates to curate and showcase our 4 million-plus items,” he said, adding that Image Search allows users to “import any photo into ThredUp’s mobile experience to find premium looks” on the site at a fraction of what it would cost if new.
The company is also trialing a peer-to-peer resale marketplace, difference from its traditional Resale-as-a-Service model.
For the quarter ended Sept. 30, the net loss widened to $24.8 million, or 22 cents a dilute share, from a net loss of $18.1 million, or 17 cents, in the year-ago quarter. Total revenue fell 11 percent to $73.0 million from $82.0 million, which included a 3.5 percent increase in consignment revenue to $59.9 million from $57.8 million. The balance was from product sales.
For the nine months, the loss narrowed to $55.3 million, or 50 cents a diluted share, from $56.6 million, or 54 cents, a year ago. Total revenue slipped 3.4 percent to $232.4 million from $240.6 million, which included a 17.2 percent jump in consignment revenue to $184.9 million from $157.7 million.
For the fourth quarter, the company forecasted revenue in the range of $67.2 million to $69.2 million, with total US. revenue in the range of $58.0 million to $60.9 million.
For the full fiscal year 2024, total revenue was guided to the range of $300 million to $302 million.
