ThredUp is the latest fashion tech company to announce cost-cutting layoffs as softening consumer demand leads to a slowdown in earnings growth.
In its second quarter earnings call on Monday, ThredUp co-founder and CEO James Reinhart said the Oakland, Calif.-based resale platform would lay off about 15% of its corporate workforce and shutter one of its processing centers.
ThredUp also announced on Monday that it is slowing down the build out of its in-development Dallas fulfillment center. The facility is now expected to hold about 5 million items, down from its original plan to hold 10 million items.
“We’ll build out Phase 1 at first which will hold about five million items,” CFO Sean Sobers said on Monday’ earnings call. “And then we’ll build out the second half as needed as we go through it.”
According to Sobers, ThredUp is expected to realize approximately $12 million to $18 million of savings from these cost-cutting initiatives. Based on the current revenue trends in 2023, Sobers said the company now expect $70 million in savings, over half of which are operations and marketing-related, which it expects to redeploy when revenue trends improve.
These cost cutting measures are being taken due to the “deteriorating” consumer health seen in recent months as inflation puts a damper on spending.
“This past quarter, we reduced expenses across head count, R&D, capital expenditures and discretionary spending not pertinent to the current growth trajectory of the business,” Reinhart said on Monday’s call. “We believe these actions will position us well for the uncertain demand environment ahead and accelerate our path to profitability.”
The company generated revenue of $76.4 million in the second quarter, an increase of 27.5% year-over-year, on a net loss of $28.4 million, or 37.2% of revenue.
But despite the cost reductions, the resale company slashed its full-year guidance for the second time. For the full year of 2022, ThredUp now expects revenue in the range of $283 million to $287 million—up 12.4% to 14%—down from the previous $315 million to $325 million range, which would have represented 25.1% to 29.1% growth.
The company, which just inked a deal with Tommy Hilfiger to launch a new 360-resale program, is not the only fashion tech company implementing layoffs.
In July, Shopify co-founder and CEO Tobi Lütke announced in a letter to employees that the commerce tech company would lay off 10% of its staff as the pandemic rush to move retail business online has cooled. In June, StockX laid off 8% of its workforce as part of a plan to reduce costs by prioritizing existing investments, reducing discretionary expenses, placing limits on new hires and improving efficiency in the company’s trade process.