E-commerce stocks have taken the investing world by storm in recent years. With so many top stocks trading down right now, there's no shortage of companies on sale to pick from. Should you add ThredUp (TDUP -1.92%) to your list of potential buys in 2022? In this segment of Backstage Pass, recorded on Jan. 10, Fool contributors Rachel Warren, Danny Vena, and Jamie Louko discuss the popular online consignment store, its recent financial performance, and its potential growth opportunity.
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Rachel Warren: What was interesting was ThredUp released something called their 2021 fashion resale market report in 2021, explaining all the opportunity in this space. According to this report by ThredUp released last year, the second-hand market is projected to double in the next five years, reaching a total valuation of $77 billion.
According to this report, there were 36.2 million first-time sellers in 2020, total sellers 52.6 million and ThredUp is anticipating in this resale space 118.8 million anticipated future sellers. Report also said that 76% of people who have never resold clothing are open to trying it. A lot of opportunity in this space. Let me share my screen here really fast.
Danny Vena: I know I'd certainly be willing to get some of the stuff out of my closet that I don't wear anymore. [laughs]
Warren: Right? I was like, I should look into this. Real quick, founded in 2009. We know it's an online consignment store. As of the most recent quarter, ThredUp had 1.4 million active buyers on its platform.
Another one of those IPO stocks as well that has significantly trailed the S&P 500's total return. Not surprising it has not been public for quite a year yet. Third-quarter total revenue was up 35% year over year. Gross profits were up 41% year over year. Its gross margin expanded to 73% compared to 70% in the same quarter in the prior year.
Although it still reported a net loss, that net loss comprised the same amount of its revenue as it did in the previous year, so that was interesting.
Also adjusted EBITDA loss of 7.8 million or 12% of revenue, which was actually a little bit lower than its adjusted EBITDA loss the same quarter the previous year.
As mentioned, active buyers reached 1.4 million individuals in that quarter. Orders of 1.3 million up 28% year over year, also doing well in terms of its liquidity to debt. So interesting company, not one I would buy yet. I think of the two, I'm optimistic about ThredUp.
Vena: Yeah. I like the idea of being able to just bag up some of my old clothes. I have a few Hawaiian shirts that just don't quite fit anymore. I'd sure hate for those to go to waste. I'd like for them to find a loving home. Perhaps something that ThredUp could help with. Jamie, did you have anything you want to add to that?
Louko: Yeah. We have a store pretty close to us here in Maine where we can do something very similar to this. We can spring a bunch of clothes, we don't like, they'll take a look through, and they'll buy them straight off of us.
As a potential seller, I would love to have a big market for men because these stores do not buy any of my clothes. They buy all my girlfriend's clothes. They love her clothes. [laughs] They hate my clothes. Maybe it's a fashion statement more than anything and I just have bad fashion. Maybe they take men's clothes.
Warren: It is interesting how these stores, they tend to focus more although Poshmark does both men and women's. But yeah ThredUp specifically, their focus is on kids and women's apparel so definitely narrower.
Just looking at some of those numbers and vast opportunity in the reselling space and how many clothes are just going to waste, there is definitely no shortage of inventory.