ThredUP's Q4 report reveals mixed results in spite of 14.5% YoY revenue growth.
Mar 7th 2023, 10:03 pm
Part 1: Performance Analysis ThredUP Inc. has reported a total revenue of $288.4 million for the year ended December 31, 2022, which represents a year-over-year increase of 14.5%. The company has witnessed growth in its revenue, primarily due to its custom-built operating platform that consists of distributed processing infrastructure, proprietary software, and data science expertise, powering the rapidly emerging resale economy. The company operates one of the largest online resale platforms for apparel, shoes, and accessories. ThredUP's core marketplace in the U.S has enabled buyers to browse and purchase resale items for primarily women’s and kids’ apparel, shoes and accessories across a wide range of price points. It's sellers order a Clean Out Kit, fill it and return it to us using our prepaid label. The gross profit for the year ended December 31, 2022, was $192.3 million, representing an increase of 8.0% year-over-year. However, the gross margin decreased by 405 basis points to 66.7% from 70.7% year-over-year. ThredUP's gross margin has been on the decline due to increased operating costs. The company has been experiencing impact from macroeconomic factors like inflation, increased interest rates, significant capital market volatility, prolonged COVID-19 pandemic, global supply chain constraints, and global economic and geopolitical developments that have direct and indirect impacts on their results of operations that are difficult to isolate and quantify. Increased transportation costs and wage rates have primarily contributed to the operating costs during 2022. Despite the growth in revenue, ThredUP's net loss attributable to common stockholders for the year ended December 31, 2022, was $92.3 million, or a negative 32.0% of revenue, which is higher compared to a net loss attributable to common stockholders of $63.2 million, or a negative 25.1% of revenue, for the same period in 2021. Also, the Non-GAAP Adjusted EBITDA loss was $43.4 million, or a negative 15.0% of revenue, for the year ended December 31, 2022, compared to a non-GAAP Adjusted EBITDA loss of $36.5 million, or a negative 14.5% of revenue, for the same period in 2021. Part 2: Forward-Looking Analysis ThredUP's custom-built operating platform has enabled it to power the rapidly emerging resale economy, one of the fastest-growing sectors in retail. However, macroeconomic factors like inflation, increased interest rates, significant capital market volatility, the prolonged COVID-19 pandemic, and global supply chain constraints may continue to impact the company's operations. ThredUP's acquisition of Remix Global EAD in 2021 has enabled the company to expand its reach to European customers and add a complementary operational infrastructure. Further expanding its reach to other geographies can be a significant growth driver for the company. According to the CEO, the company continues to believe that resale will be a material part of the apparel market in the years ahead, and there is a considerable market opportunity beyond the U.S. and Europe. In addition to its core marketplace, ThredUP's RaaS offering allows some of the world's leading brands and retailers to offer a convenient, scalable closet cleanout service and/or resale shop to their customers. This offering presents an opportunity for growth, and the company expects RaaS to accelerate the growth of the emerging category and form the backbone of the modern resale experience domestically and internationally. ThredUP's gross margin has been declining due to increased costs, and the company will need to address these cost headwinds to improve profitability. The management has undertaken restructuring activities in the second and third quarters of 2022 to improve efficiencies and reduce overhead costs. The company aims to attract more buyers and sellers in the market and offer a better experience to generate higher revenue. ThredUP's strategy includes differentiating itself from other resellers by offering a wide array of products and a seamless user experience. In conclusion, ThredUP Inc. presents an opportunity for investors to invest in a company with a sustainable business model that creates a positive impact to the benefit of buyers, sellers, clients, employees, investors, and the environment. The company operates in the rapidly emerging resale economy and has a custom-built operating platform that powers this sector. While macroeconomic factors may impact its performance, the company's acquisition strategy, RaaS offering, and focus on improving profitability present growth opportunities.