ThredUp reduces its corporate workforce by 15%, as losses deepen during Q2.
ThredUp Announces 15% Workforce Reduction, Anticipates Slower Revenue Growth
In a move mirroring other retailers grappling with declining consumer spending, ThredUp, the resale apparel platform, announced it is laying off 15% of its corporate workforce and closing a process center. The company's CEO, James Reinhart, disclosed this information during an earnings call on Monday. Despite declining to specify the number of affected employees, Reinhart explained the decision was driven by anticipating challenging economic conditions ahead.
The resale site plans to curtail expenses due to expectations of weakness in revenue growth by the end of the year. ThredUp has revised its guidance, predicting Q4 revenues will range between $70 million and $72 million, marking a decrease from the $72.9 million reported in the same quarter last year.
During Monday's financial report, ThredUp revealed Q2 revenue had grown 27% to $76.4 million, while the number of active buyers increased 29% to 1.7 million. However, the company's gross margin contracted to 68.9% from 73.6% a year ago, and both operating and net losses nearly doubled.
ThredUp operates in the burgeoning resale market and also offers a platform to third-party brands. Despite the current slowdown in consumer spending, the company's resale-as-a-service expansion continues, with Tommy Hilfiger, PacSun, Bernardo, Ozma, and Oak + Fort signing on as recent clients. By the end of the year, more than 40 brands will be part of the resale-as-a-service partnership, according to Reinhart.
In the third and fourth quarters, ThredUp expects to save approximately $12 million in Q3 and $18 million in Q4 from the layoffs and facility closure initiatives, as per Chief Financial Officer Sean Sobers. Wedbush analysts have commended the company's commitment to reducing expenses as a sign of its dedication to profitability, especially amidst more modest performances from competitors like Poshmark.
The positive reception of analysts, coupled with ThredUp's financial improvements, reflects increased consumer interest in secondhand clothing, positive responses to technological innovations, and a competitive advantage in the fragmented resale market. By focusing on logistics, technology, and curated experiences, ThredUp has managed to thrive despite broader economic uncertainties.
- In an attempt to address challenging economic conditions and slower revenue growth, ThredUp plans to make significant updates in their business, including a 15% workforce reduction and the closure of a process center.
- ThredUp expects to save around $12 million in Q3 and $18 million in Q4 due to these cost-cutting measures, as stated by the Chief Financial Officer, Sean Sobers.
- While the resale site is facing difficulties in the retail industry, it continues to expand its resale-as-a-service, partnering with brands like Tommy Hilfiger, PacSun, Bernardo, Ozma, and Oak + Fort.
- Despite the current economic slowdown, ThredUp's dedication to technological innovations, logistics, and curated experiences gives it a competitive edge in the fragmented resale market, resulting in increasing consumer interest in secondhand clothing.
