Joining other retailers in reducing headcount as consumers reduce spending, ThredUp is laying off 15% of its corporate workforce and closing a process center, CEO and co-founder James Reinhart said on an earnings call Monday. A company spokesperson declined to say how many people are affected.
Reinhart said the resale site is pulling back on expenses because it anticipates a rough few months ahead. The company expects revenue growth to dissipate by the end of the year, with Q4 revenues reaching $70 million to $72 million, per its updated guidance, compared to $72.9 million a year ago.
The company on Monday also reported that Q2 revenue rose 27% to $76.4 million, with its number of active buyers up 29% to 1.7 million. Gross margin contracted to 68.9% from 73.6% a year ago. Operating loss more than doubled to $28.3 million and net loss nearly doubled to $28.4 million.
ThredUp operates in the red-hot resale apparel market and also sells a platform to third-party brands that may be more lucrative than its own retail operations. But it’s still a clothing retailer at time when consumers are buying fewer clothes.
Across the board, fewer people shopped the site from May to July, though more of the discount-oriented customers have pulled back, Reinhart said.
“Discount and budget shoppers make up about one third of our customer base, so essentially nearly one in four of them are sidelining themselves from apparel purchases right now,” he said.
But its customer segments are also behaving differently. Among lower-income shoppers, average order value declined 7% year over year, while among higher-income shoppers, on the site to find upscale goods, the AOV rose 15%. The company has been able to respond accordingly, adjusting its pricing and selection to boost sales and maximize margins, he also said.
Resale-as-a-service, which allows partner retailers to enter the resale market, continues to expand, with Tommy Hilfiger, PacSun, Bernardo, Ozma, and Oak + Fort its most recent new clients, and the company will have more than 40 on board by the end of the year, according to Reinhart.
In the third and fourth quarters, the company expects savings of about $12 million in Q3 and $18 million in Q4 from the layoffs and facility closure initiatives, Chief Financial Officer Sean Sobers told analysts. The willingness to slash expenses indicates a dedication to getting into the black, helped by its resale-as-a-service side gig, according to Wedbush analysts led by Tom Nikic.
“The business has clearly fallen on hard times right now,” Nikic said in emailed comments. “However, we think it's encouraging that management has placed such a high priority on getting to profitability. This stands in stark contrast to the tone from rival [Poshmark] last week ... While ‘unprofitable e-commerce’ isn't exactly top of mind for investors right now, we think that over time the resale market will be a structural ‘winner’ (value + sustainability), and we like the fact that [ThredUp] and [The RealReal] have become very vocal about financial discipline and getting to profitability.”