Dive Brief:

• ThredUp reported Tuesday that total Q1 revenue rose 4% year over year to $75.9 million. Its number of active buyers rose sequentially but fell 3% year over year to 1.7 million, as active orders fell 8%.

• Gross margin shrank to 67.3% from 69.1% a year ago. Net loss narrowed to $19.8 million from $20.7 million last year, and adjusted EBITDA loss narrowed to $6.6 million from $13.0 million.

• ThredUp also announced that it is dual-listed on the Long-Term Stock Exchange, which has been developed for companies with a long-term vision for sustainable and inclusive business practices.

Dive Insight:

ThredUp’s budget-minded customers, once about a third of its customer base, have pulled back in what CEO James Reinhart called “a stubbornly challenging macroenvironment.”

Higher spending from wealthier customers and its European business are making up for that to a great extent, though. Even better, the company expects customers will be back once the markdown deals found at other retailers increasingly disappear, he told analysts during a conference call Tuesday.

“We've been adjusting our strategies in the near term to target the non-budget segment — they're currently more engaged in the apparel market,” he said. “When macro conditions improve and retailer promotion normalizes, we anticipate budget shoppers will return to our marketplace and provide a nice tailwind for growth.”

However, the company isn’t pursuing premium resale-as-a-service clients or luxury merchandise that require high-touch services like refurbishment or authentication because that is difficult to scale, executives said. 

ThredUp has worked through its own inventory backlog and improved its selection after instituting a new clean-out fee and messaging about what it wants to receive, Reinhart said. The company has “played good defense” and switching to offense, is emphasizing growth initiatives even as it works toward its goal of breaking even on an adjusted EBITDA basis at the end of the year, he said.

It remains to be seen whether ThredUp becomes profitable, which has eluded most online retailers of used clothing, but Wedbush analysts led by Tom Nikic noted the company has made progress.

“After a tough 2022, we're starting to see signs that the worst is over, with customer counts and revenues re-accelerating, as well as meaningful improvements in profitability,” Nikic said in emailed comments.

Still, chasing growth could interrupt the company’s goals, according to William Blair analysts Dylan Carden and Uday Avula. 

“We believe the biggest risk is pushing profitability out further, either because management chooses to invest more aggressively in growth and market share or with a more severe downturn in the broader macro environment,” they said in emailed comments.