Dive Brief:
- ThredUp will exit Europe and is exploring strategic alternatives for Bulgaria-based Remix, a secondhand apparel company it acquired in 2021 for around $28 million, the company announced as part of its Q2 earnings on Monday.
- For the quarter, the company reported revenue of $79.8 million, down 3.5% year over year. Revenue for the U.S. was flat, while Europe saw an 18% drop compared to the year-ago quarter. Net loss for the quarter narrowed from $18.8 million last year to $14 million.
- The company also pulled back from a new customer growth strategy it tested. ThredUp estimates it lost around 90,000 potential customers due to the now-abandoned strategy.
Dive Insight:
ThredUp decided it can’t make Europe work.
Its European efforts struggled, even as the company invested over $20 million in cash in it over six quarters. Along with a revenue drop during the second quarter, its European unit reported a negative 23% adjusted EBITDA margin, despite “significant attention from our U.S. team,” CEO James Reinhart said on a Monday call with analysts. “Our European business really struggled,” he said regarding Q2.
The company acknowledged that its European arm has been dragging on its profitability and expects to present U.S.-only operating results by Q3.
ThredUp is also looking to divest Remix, a secondhand platform it acquired three years ago that operates as an independent unit under the larger ThredUp umbrella. At the time of the company’s purchase, ThredUp touted the company’s operating platform and compared it to its own.
ThredUp only in May announced that Florin Filote was joining the company as its general manager of Europe. “We’ve made great strides in growing our European business since entering the market in 2021, more than doubling our revenue and evangelizing secondhand across Central and Eastern Europe,” Reinhart said at the time of Filote’s appointment.
Filote will stay on with ThredUp and continue to lead Remix as it transitions into a stand-alone company, a company spokesperson told sister publication Retail Dive.
In what they called a “disappointing” quarter, Wedbush analysts led by Tom Nikic in a Monday note said that “pulling the plug on Europe” is “probably a good idea.” The company will either sell or write down its European business and focus all of its attention on the U.S., Nikic wrote.
Additionally, the company made a decision to change its new buyer strategy from a percentage-based discount offer to a dollar-based discount offer. The effort was launched in the middle of the first quarter and backfired, resulting in the loss of tens of thousands of potential new customers. The company had a $3 million negative impact in the second quarter because of it, but Reinhart said the company has course-corrected and reverted back to its previous strategy on June 1, resulting in “immediate recovery” for that month and into July.
ThredUp this week also launched multiple artificial intelligence-driven shopping tools to improve product discovery on its platform. “I want to emphasize, this is the most significant product launch we’ve had at ThredUp in a long time, arguably since we launched the company more than a decade ago,” Reinhart said on the company’s earnings call. “Much of the customer innovation from here will build on top of this foundational technology for merchandising, discovery and inspiration.”
