What Happened:
Shares of online fashion resale marketplace ThredUp (NASDAQ:TDUP) fell 52.6% in the afternoon session after the company reported second-quarter earnings results. Its full-year revenue guidance missed, and its revenue guidance for the next quarter fell short of Wall Street's estimates. Notably, management called out "challenges in both the U.S. and Europe." Overall, this was a mediocre quarter for ThredUp.
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What is the market telling us:
ThredUp's shares are quite volatile and over the last year have had 58 moves greater than 5%. But moves this big are very rare even for ThredUp and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 24.9% on the news that the company reported fourth-quarter results with its operating margin, EPS, and active buyers falling short of Wall Street's estimates. This isn't great as the company is unprofitable, and its number of active buyers is a proxy for the health of its platform.
On the other hand, ThredUp provided full-year revenue guidance that slightly topped analysts' expectations. In addition, its revenue narrowly outperformed Wall Street's estimates during the quarter. The mixed topline performance was driven by weak product revenue (down 25% year on year), which fell below expectations, offsetting the outperformance in consignment revenue (up 49% year-on-year). The company expects the trend to continue and guided for "outsized growth in consignment and declines in product revenue throughout 2024." However, it is encouraging to know that consignment revenue is expected to grow to about 80% for the full year, minimizing the headwinds from the product business. Overall, the results could have been better.
ThredUp is down 67% since the beginning of the year, and at $0.76 per share it is trading 81.9% below its 52-week high of $4.20 from August 2023. Investors who bought $1,000 worth of ThredUp's shares at the IPO in March 2021 would now be looking at an investment worth $37.50.
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