ThredUp (NASDAQ:TDUP) Misses Q1 Sales Targets, Stock Drops

Petr Huřťák /
2024/05/06 4:10 pm EDT

Online fashion resale marketplace ThredUp (NASDAQ:TDUP) missed analysts' expectations in Q1 CY2024, with revenue up 4.8% year on year to $79.59 million. Next quarter's revenue guidance of $82 million also underwhelmed, coming in 4.7% below analysts' estimates. It made a GAAP loss of $0.15 per share, improving from its loss of $0.19 per share in the same quarter last year.

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ThredUp (TDUP) Q1 CY2024 Highlights:

  • Revenue: $79.59 million vs analyst estimates of $80.32 million (small miss)
  • EPS: -$0.15 vs analyst expectations of -$0.14 (9.1% miss)
  • Revenue Guidance for Q2 CY2024 is $82 million at the midpoint, below analyst estimates of $86 million
  • The company dropped its revenue guidance for the full year from $345 million to $333 million at the midpoint, a 3.5% decrease
  • Gross Margin (GAAP): 69.5%, up from 67.3% in the same quarter last year
  • Free Cash Flow was -$227,000 compared to -$10.18 million in the previous quarter
  • Active Buyers: 1.7 million
  • Market Capitalization: $198.4 million

“We delivered another quarter of strong financial performance, demonstrating healthy gross profit growth and bottom-line leverage,” said ThredUp CEO and co-founder James Reinhart.

Founded to revolutionize thrifting, ThredUp (NASDAQ:TDUP) is a leading online fashion resale marketplace that offers a wide selection of gently-used clothing and accessories.

Apparel, Accessories and Luxury Goods

Within apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales Growth

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. ThredUp's annualized revenue growth rate of 16.1% over the last four years was decent for a consumer discretionary business. ThredUp Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. ThredUp's recent history shows the business has slowed as its annualized revenue growth of 10.1% over the last two years is below its four-year trend.

This quarter, ThredUp's revenue grew 4.8% year on year to $79.59 million, falling short of Wall Street's estimates. For next quarter, the company is guiding for flat year on year revenue of $82 million, slowing from the 8.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 8.2% over the next 12 months, an acceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

Over the last two years, ThredUp's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 18.6%.

ThredUp Free Cash Flow Margin

ThredUp broke even from a free cash flow perspective in Q1. This quarter's result was great for the business as its margin was 13.1 percentage points higher than in the same period last year. Over the next year, analysts predict ThredUp's cash profitability will improve to break even. Their consensus estimates imply its LTM free cash flow margin of negative 8.8% will increase by 8 percentage points.

Key Takeaways from ThredUp's Q1 Results

We struggled to find many strong positives in these results. Its revenue and full-year revenue guidance missed Wall Street's estimates along with its operating margin and EPS. This poor performance was driven by fewer active buyers on the platform than expected. Overall, this was a bad quarter for ThredUp. The company is down 6.2% on the results and currently trades at $1.75 per share.

ThredUp may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.