Shares of online retailer ThredUp (TDUP -5.44%) were down as much as 36.3% in trading on Tuesday after the company reported third-quarter financial results. Shares are down 33.7% for the day at 3:30 p.m. ET.
ThredUp's earnings results
Revenue rose 21% versus a year ago to $82 million but reported a net loss of $18.1 million, only a slight improvement from a loss of $23.7 million a year ago.
Management expects fourth-quarter revenue to fall to between $79 million and $81 million with an adjusted EBITDA loss margin of 2% to breakeven. For the full year, they expect revenue of $319.5 million to $321.5 million with adjusted loss margin of 5.3% to 4.7%.
A recovery play on its last leg?
The problem for ThredUp is that revenue growth hasn't led to the kind of operating margins that investors hoped for. And the company keeps burning cash, with operating cash burn of $14.6 million in the first three quarters of the year.
ThredUp's concept, selling products on consignment and secondhand, is interesting, but it hasn't proven to be profitable. That's the ultimate challenge in a retail environment that includes some of the biggest tech companies in the world.
While it's nice to see ThredUp growing, I'm concerned that losses are going to continue for the foreseeable future and that's what will keep me out of the stock. If net margin turns around the analysis will change, but if that's not going to happen during the holiday quarter then I don't know when it will.
