What Happened:
Shares of online fashion resale marketplace ThredUp (NASDAQ:TDUP) fell 24.9% in the morning session after 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.
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What is the market telling us:
ThredUp's shares are quite volatile and over the last year have had 83 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.
ThredUp is down 20.9% since the beginning of the year, and at $1.79 per share it is trading 57.3% 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 $89.75.
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