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Poshmark Tweaking Authentication Threshold This Year

Poshmark is still trying to find the path to profitability.

Despite net revenue increasing 9 percent to $89.1 million in the 2022 second quarter, the peer-to-peer fashion resale marketplace incurred net losses of $22.9 million.

In a Nutshell: Chief financial officer Rodrigo Brumana said the company is now focusing on reviewing its cost structure to implement “cost savings where appropriate” in the current third quarter. Brumana said the company has slowed hiring.

For the third quarter, Poshmark expects revenues of $85 million to $87 million, resulting in potential growth of 7 percent to 9 percent. The company also expects an adjusted EBITDA loss between $9 million and $11 million as investments in product innovation, marketing and infrastructure remain.

Brumana attributed the guidance to seasonality, with lower spending in July before business picks up again in August for back-to-school, as well as continued pressure related to inflation.

Poshmark founder, chairman and CEO Manish Chandra said luggage and travel bags sale were up 50 percent year over year as more consumers took trips, while blazers and suit jackets soared 61 percent.

“The evolution of business casual into business comfort is driving a huge spike in sales for comfort sneaker brands like On Running and Hoka, while orders for Birkenstock sandals and flip flops were up 30 percent year over year during the quarter,” Chandra said.

Zara flare jeans and Abercrombie straight leg jeans were up 97 percent and 64 percent year over year in May, respectively, demonstrating the shift in fashion to elastic waist, relaxed fits and flared bottoms. Tie sales jumped 45 percent.

Fashion-related categories, including apparel, shoes and accessories, drive more than 90 percent of the company’s gross merchandise volume (GMV). For the quarter, GMV was $483.5 million, an 8 percent year-over-year jump from $449.6 million in the second quarter of 2021. Quarterly GMV has increased year-over-year for the past 18 quarters.

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Higher contribution from premium-priced product continues to be one of the factors that drove year-over-year average order value (AOV) growth during the second quarter.

For the trailing 12 months, active buyers reached a record 8 million, a 14 percent year-over-year increase from approximately 7 million in the second quarter of 2021.

User engagement on Poshmark’s marketplace increased 70 percent year over year to a record 57.5 billion social interactions over the past year, including likes, comments and impressions.

Adjusted gross margin was 83.2 percent of revenues in the second quarter, down from 84.4 percent from the year-ago quarter due to higher platform hosting costs and the lapping of a nonrecurring credit in transaction payment processing fees.

The marketplace expects upcoming third-quarter adjusted gross margin to be down slightly on a sequential basis.

Chandra said Poshmark intends to expand its authentication services to merchandise priced below $500 by the end of the year. He said the company has started testing various applications of the technology from its Suede One acquisition to drive innovation in its current authentication processes.

“The strategy we want to take is to really empower the buyers and sellers to participate in it. And we haven’t ruled out the possibility of maybe pricing it slightly for lower price points,” Chandra said. “We launched it so that they can use it based on their needs and not just based on what we provide today.”

Poshmark also updated its proprietary CRM platform, My Shoppers, which enables sellers to communicate with consumers who have engaged with their listings and make offers to groups of potential buyers. The new version has seen higher adoption by sellers and resulted in an increase in seller offers, Chandra said.

The CEO also pointed to other tech wins in the quarter, such as introducing Closet QR Codes that enable users to scan a QR code to share, view and engage with sellers’ closets, and integrating with e-commerce platform ChannelAdvisor. With the integration, Poshmark sellers can synchronize product, inventory, and order information from the marketplace within other e-commerce platforms.

Cash and cash equivalents were $581.2 million as of June 30, with no long-term debt.

Net Revenues: Net revenue was $89.1 million, a 9 percent increase year-over-year from $81.6 million in the second quarter of 2021.

Net Earnings: Net losses at Poshmark totaled $22.9 million, widening from the $2.4 million loss incurred in the second quarter of 2021. Net loss per share attributable to common stockholders was 29 cents, compared to 3 cents in the year-ago period.

Operating losses (excluding stock-based compensation) were $10.8 million, compared to $5.7 million in the prior-year quarter.

Adjusted EBITDA came in at a $9.8 million loss, widening from the $6.5 million loss in the 2021 quarter.

CEO’s Take: Chandra said “seller engagement is definitely higher” going into the third quarter.

“We’re starting to see the sellers starting to come back,” Chandra said. “I think it’s driven by two things. Certainly, the inflation and people’s desire to make money. But I think it is also when you think about what people are facing is that they actually have to rotate their closets. They have to sort of start to refresh that wardrobe. And in so many ways, people are realizing that when they are thinking about the various dimensions of how they engage with fashion, the answer comes back to their closet.”