What Poshmark’s Soft Outlook Means for Secondhand Sellers

In its first financial report since going public, Poshmark Inc. delivered stronger-than-anticipated earnings and sales. However, it issued a sluggish outlook for the next quarter as COVID-19 restrictions remain in place in certain parts of the country.

For the first quarter, the Redwood City, Calif.-based company announced expectations for revenues to increase between 32% and 36% to between $75.5 million and $77.5 million, versus analysts’ estimates of $79.2 million in revenues. It also predicted that it would “remain profitable” with earnings before interest, taxes, depreciation and amortization of $1 million to $2 million.

According to founder and CEO Manish Chandra, demand is down in some regions of the United States where coronavirus-related restrictions are still in effect. While the first quarter started off with “an unseasonably strong January,” he explained that certain states have underperformed “relative to historic trends in February” as secondhand sellers navigate “severe weather” and the COVID-19 health crisis.

“At the start of the pandemic here in the U.S., state-by-state performance varied as our communities faced different localized concerns and lockdown environment, which began to converge as 2020 progressed,” Chandra said in a conference call with analysts. “What we have seen thus far in the first quarter is state performance once again diverging.”

The chief executive described two types of state groupings: The first, counting states like California and Florida, is forecasted to “perform well, with growth rates above the average.” By contrast, the second, which includes states such as New York and Texas, has “seen more volatility” due to fluctuations in the number of COVID-19 infections as well as unseasonably cold weather patterns.

“We conclude that as the COVID-19 vaccine rolls out and the country begins to reopen, trends impacting our community and business will continue to vary state-by-state as reopening time lines vary in the return to normalcy,” Chandra said, adding that “we believe there is still a large opportunity for us. And so we plan to invest in building the brand, grow our user community and international and category expansion.”

Poshmark filed its initial public offering in December and opened its first day of trading in mid-January at $97.50 per share. Its stock has dropped since then and most recently closed at $47.63.

Still, against the backdrop of a pandemic and climate change, an increasing number of consumers are adopting new ways of purchasing apparel, footwear and accessories, which has given resale an added boost. According to a survey in October by Vestiaire Collective, the secondhand market represents $30 billion to $40 billion in value around the world and will likely expand over the next five years by a compound annual growth rate of 15% to 20%.

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