ThredUp: Further Pain Ahead And No Light At The End Of The Tunnel

Summary

• TDUP’s revenue has grown well (+20% CAGR), driven by an aggressive go-to-market strategy, as the company seeks to gain market share and develop a marketplace in a highly competitive industry.
• We struggle to see how TDUP can develop into a lucrative business. The industry is attractive, but the inability to develop a meaningful moat and heavy competition limit shareholder returns.
• TDUP is spending 90% of its revenue on S&A, while its GPM has shown minimal improvement. We see a negative spiral if costs are cut rapidly, with revenue declining.
• TDUP will likely need to raise financing in the near future to fund its operations as the company continues to burn cash.
• The company is not noticeably overvalued or undervalued in our view, although it is facing near-term headwinds due to weak economic conditions.

Kathrin Ziegler/DigitalVision via Getty Images

Introduction and thesis

ThredUP (NASDAQ:TDUP) is a leading online thrift store and fashion resale platform founded in 2009. It operates in the secondhand fashion market, allowing consumers to buy and sell high-quality, gently used clothing, shoes, and accessories.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.