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

2024-04-05 22:19:06 ET

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.

Introduction and thesis

ThredUP ( 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.

TDUP has managed to achieve strong growth and brand development through innovation in the apparel industry, utilizing technology and changes in shopping behaviors to drive traffic to its offering. Whilst this has propelled the company’s revenue trajectory, its bottom line financial development has been disappointing....

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