What happened
Shares of ThredUP (TDUP -5.44%) popped today after the clothing resale specialist posted better-than-expected results in its second-quarter earnings reports even as growth remains slow and the company is unprofitable.
The stock closed up 26.1% on the news.
So what
Revenue rose 8% to $82.7 million in the quarter, which topped estimates at $81.2 million.
The company has been focused on growing its resale-as-a-service business, adding customers like American Eagle, TOMS, and The Container Store, and it's focusing on a more upscale market in order to drive profitability.
Gross margin in the quarter fell from 68.9% to 67.4%. Active buyers were down 0.8% to 1.7 million, and orders increased 5% to 1.8 million.
Its loss under adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from $13.5 million to $5 million as operating expense fell, and it reported a loss per share of $0.18, an improvement from $0.29 in the quarter a year ago and better than the consensus for a loss of $0.23 per share.
CEO James Reinhart said, "Our performance demonstrates both the management team's ability to forecast and manage the business amid a dynamic consumer environment as well as the sound strategy behind key company initiatives that have powered our growth and margin expansion."
Now what
Looking ahead, the company expects revenue of $82 million to $84 million in the third quarter, implying an increase of 27.2%.
It also expects to hit a break-even adjusted EBITDA margin in the fourth quarter as its cost-cutting starts to pay off.
ThredUP still has a lot of work to do to become a healthy business. Today's gains are primarily due to the stock's plunge since its initial public offering; it now trades in penny stock range at $4 a share. I'd wait for more evidence that the business can reach full health before buying the stock.
