For many direct-to-consumer brands, e-commerce marketplaces and resale platforms, the path to profitability is less of a marathon and more of an Indiana Jones-style sprint to stay ahead of the giant boulder threatening to crush any stragglers. Most of the fashion and beauty start-ups that went public in the last few years are struggling to convince investors they have what it takes to weather the current period of sluggish growth and elusive profitability. Patience is wearing thin for some of the worst-off names, and a few, like Poshmark, have already been acquired at a discount.
The gloomy atmosphere is reflected in share prices: Allbirds and The RealReal are down over 90 percent from their IPOs. Both trade perilously close to $1 a share, the threshold where they risk being delisted by the Nasdaq exchange. Allbirds has to prove it can revive interest in its sneakers through new wholesale partnerships, while The RealReal needs its revamped consignment programme and other changes to achieve profitability by its 2024 target. High interest rates ensure few of these firms will be able to count on an outside infusion of cash when their money runs out.
Other companies reporting next week are in a less dire position, though they will need to show that recent progress can be sustained. Warby Parker is predicting revenue will rise by 8 to 10 percent this year as it opens more stores, and that EBITDA margins will markedly improve. Thredup is projecting it will break even on an adjusted EBITDA basis by the end of 2023, as it works through excess inventory and ramps up its business providing resale to third-party retailers. Results this week will help determine whether investors believe these forecasts.
The latest round of numbers will also help shape thinking around fashion’s start-up scene, particularly the more recent wave of Gen-Z targeting brands that hope to avoid their predecessors’ mistakes. Currently, the mood is grim across the board. But we may begin to see more of a winners-and-losers narrative emerge.
What Else to Watch for This Week
MTV Movie & TV Awards
London Craft Week begins
Among the companies reporting earnings: Coupang, Under Armour, Coty, Olaplex, Warby Parker, Affirm, Allbirds, Thredup and The RealReal
Tod’s, Asos and Mytheresa report results
US April inflation data released
JD.com, Tapestry, Prada report results
Bank of England interest rate decision
Richemont, Shiseido report results
UK Q1 GDP data
Prada Mode in Tokyo
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