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Dive Overview:
ThredUp is exiting Europe and exploring strategic alternatives for Remix, a Bulgarian used clothing company it acquired in 2021 for about $28 million, the company announced in its second-quarter earnings call on Monday. Second-quarter sales were $79.8 million, down 3.5% from a year ago. U.S. sales were flat and Europe was down 18% from a year ago. Second-quarter net loss narrowed to $14 million from $18.8 million last year. The company also retreated from a new customer expansion strategy it had piloted. ThredUp estimates that the now-discontinued strategy lost about 90,000 potential customers.
Dive Insights:
ThredUp decided it wouldn't work in Europe.
The company has invested more than $20 million in cash in Europe over six quarters, but its European efforts have struggled. In addition to declining revenue in the second quarter, the European division posted a negative adjusted EBITDA margin of 23% despite “tremendous attention from our U.S. team,” CEO James Reinhart said on a conference call with analysts on Monday. “Our European business really struggled,” he said of the second quarter.
The company has acknowledged that its European division is a drag on profitability and plans to report U.S.-only operating results by the third quarter.
ThredUp is also considering selling Remix, the second-hand goods platform it acquired three years ago. Remix operates as a separate division under ThredUp. At the time of the acquisition, ThredUp was promoting Remix's platform and comparing it to its own.
ThredUp only announced in May that Florin Philote would be joining the company as general manager for Europe. “Since entering the market in 2021, we have made great strides in growing our European business, more than doubling our revenue and driving the adoption of second-hand goods in Central and Eastern Europe,” Reinhart said at the time Philote took over.
A company spokesperson told sister publication Retail Dive that Philote will remain with ThredUp and will continue to lead Remix as it transitions to an independent company.
Wedbush analysts led by Tom Nikic called the quarter a “disappointing quarter” in a report Monday and said “exiting the European business” would “probably be a good idea.” The company will likely sell or write down its European operations and focus all of its efforts on its U.S. business, Nikic wrote.
Additionally, the company decided to change its new buyer strategy from percentage-based discount offers to dollar-based discount offers. The initiative, which began in the middle of the first quarter, backfired and resulted in the loss of tens of thousands of potential new customers. This resulted in a negative impact of $3 million on the company's second quarter, but Reinhart said the company corrected course and returned to its previous strategy on June 1, resulting in an “immediate recovery” that month and in July.
ThredUp also announced several artificial intelligence-powered shopping tools this week to improve product discovery on the platform. “I want to emphasize that this is ThredUp's most significant product launch in a long time, probably since we started the company over a decade ago,” Reinhart said in the company's earnings call. “Much of our future customer innovation will be built on top of this foundational technology for merchandising, search, and inspiration.”
