ThredUp Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 5, 2026

Key Takeaways

  • Positive Sentiment: Q2 results exceeded expectations, with revenue up 16.9% year over year to $90.8 million, gross margin expanding to 79.9%, and adjusted EBITDA rising to $4.8 million. Active buyers increased 21% and orders rose 22%.
  • Negative Sentiment: ThredUp lowered its second-half outlook, citing a more price-sensitive lower-income customer base and an expected $7 million revenue headwind from elevated promotions. Full-year revenue is now expected to grow approximately 11% at the midpoint, while near-term EBITDA margins are pressured by lower revenue and continued investments.
  • Positive Sentiment: The company is shifting customer acquisition toward Meta and Pinterest, where it reports higher lifetime values and lower customer acquisition costs, while premium supply is expanding. Premium items rose 32% year over year, and management expects the customer mix to continue moving toward more affluent shoppers.
  • Positive Sentiment: ThredUp reported early traction from AI-driven personalization and shopping tools. Its real-time personalization engine generated a 5% lift in item engagement and a 7% increase in profit per buyer for new customers in an initial test, while features such as Exact Match and Notify Me aim to improve conversion and repeat visits.
  • Neutral Sentiment: The newly expanded peer-to-peer direct-listing marketplace surpassed 100,000 listings with an average listing price of $80, but sell-through is slower than in the managed marketplace because sellers tend to price items above market-clearing levels.
AI Generated. May Contain Errors.
Earnings Conference Call
ThredUp Q2 2026
00:00 / 00:00

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Operator

Hello. Thank you for standing by. My name is Regina. I will be your Conference Operator today. At this time, I would like to welcome everyone to the ThredUp second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Lauren Frasch, Investor Relations. Please go ahead.

Lauren Frasch
Lauren Frasch
Head of Investor Relations at ThredUp

Good afternoon. Thank you for joining us on today's conference call to discuss ThredUp's fourth quarter of 2025 financial results. With me are James Reinhart, ThredUp CEO and Co-Founder, and Sean Sobers, CFO. We posted our press release and supplemental financial information on our investor relations website at ir.thredup.com. This call is being webcast on our IR website. A replay of this call will be available on the site shortly. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information, and our forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors.

Lauren Frasch
Lauren Frasch
Head of Investor Relations at ThredUp

We undertake no obligation to update any forward-looking statements. During this call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and supplemental financial information, which are distributed and available to the public through our investor relations website located at ir.thredup.com. Now, I'd like to turn the call over to James. James?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Good afternoon, everyone. I'm James Reinhart, CEO and Co-Founder of ThredUp. Thank you for joining our second quarter 2026 earnings call. Today, I'll walk through our Q2 results, the key drivers behind them, and how we're thinking about the back half of the year. I'll then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q3, Q4, and the full year. We'll close with a question-and-answer session. First, let me start with the results. In the second quarter, revenue was $90.8 million, up 16.9% year-over-year. Gross margin was 79.9%, up 40 basis points. Net loss was $5.9 million, and adjusted EBITDA was $4.8 million, or 5.3% of revenue. Active buyers on a trailing 12-month basis also grew 21% year-over-year, while orders were up 22%.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

All of these metrics exceeded our expectations. We're pleased with our Q2 results. This was a tougher consumer environment than we would have expected at the beginning of the year. Despite a record quarter for new buyers acquired and record active buyers, we had to be incrementally promotional to drive conversion among our most price-sensitive shoppers. This approach in Q2 led to lower ASPs and average revenue per buyer. Ultimately, we estimate a $3 million headwind to our top-line results in Q2. Turning to the back half of the year, as we continue to move throughout 2026, our focus remains on the three strategic priorities that I outlined last quarter. Continuing to grow and retain high-value buyers, scaling high-quality, premium supply from a diverse group of sellers, and developing AI technology that helps customers discover and shop across our vast marketplace.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

New buyer growth was again strong, up 13% in the quarter, lapping the 72% growth from the prior year quarter. Q2 was our strongest quarter on record for new buyers acquired. This is especially promising due to the higher expected LTVs of these new buyers and is consistent with our ongoing shift to a more premium buyer. We are continuing to reduce spend on Google PMax in favor of Meta and Pinterest, where LTVs are higher, customer acquisition costs are coming down, and volume is scaling quickly. As such, new customer volume on Meta and Pinterest grew 130% and 145% year-over-year, respectively. Brand is a big part of why that shift is working. We believe that those who discover secondhand through creators and culture, rather than through search or promotions, tend to be stickier over time.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Our most recent campaign, Dress the Part(y), generated hundreds of millions of earned impressions this June. Proof that we can create an owned cultural moment, not just buy media around one. On the supply side, active sellers grew to record levels, with quality keeping pace. The volume of premium bag items was up 32% year-over-year, representing 12% of the overall mix. We're targeting an even stronger mix by year-end through seller incentives, new acquisition channels for premium sellers, and continuing investment in the seller experience. In June, we opened direct listings, our peer-to-peer offering, to everyone in our marketplace. Since then, items listed are up 89% month-over-month, and there are now more than 100,000 items listed, with an average listing price of $80. While just a small fraction of total available items, we're pleased with the steady organic growth and premium mix of these items.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Let me turn to Resale-as-a-Service. This quarter, we launched three new brand storefronts, Steve Madden, Dolce Vita, and Betsey Johnson. As a reminder, each new brand gives us access to an entirely new set of sellers. Customers with real affinity for that brand who send us their Clean Out Kits because they trust the storefront carrying a name they already shop. That's a distribution advantage we don't get from any other channel, and it compounds every time we add a new brand to the roster. Let me talk about the product experience. We're now more than two years into our AI transformation work. No longer do we merely, quote, "work on AI products." Rather, they are, quote, "The foundation of everything we build across the enterprise." I'm often asked: What's the biggest impact, short and long term? In the short term, it's efficiency and cost leverage.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I'm confident that advancements in AI technology will provide significant cost savings for the business by reducing the need to grow headcount as fast and by helping our teams to be more productive. The phase we're entering now is closer to what I think the long-term impact will be, speed. The speed at which we can test, learn, adapt is accelerating. The rate at which we can develop next-generation product experiences, test pricing algorithms, design new back-end operations processes is unlike anything I've seen in my years running the business. Of course, many companies will speed up, the rate of change we will see across consumer experiences will likely accelerate. We think that will only make our unique, defensible, competitive advantages more pronounced.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Generative AI will commoditize a lot of the technology stack, it will not replace the fact that we still put real clothes on every day. Our continued investments in our supply chain and processing infrastructure, our compounding data advantage, and our trusted marketplace enable us to build world-class buyer and seller experiences. With that context, let me turn to recent product advancements. Over the past several calls, I've walked you through individual features that use AI to make a five million single SKU catalog feel more easily shoppable. I believe the most powerful example for where our technology is going now is with our real-time personalization engine. We see more than 250,000 anonymous sessions a day. Historically, the experience stayed largely static until our systems adapted for the shopper's next visit.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Our new real-time engine reads intent within seconds, retailers the feed on the very next fetch of inventory. In our first A/B test, that drove a 5% lift in item engagement and a 7% lift in profit per buyer for new customers. It's early, it's a real signal on what this system can unlock. We've also now widely deployed several AI-driven product experience to cut down the overwhelm of shopping second-hand. Clustering, Exact Match, and Notify Me all get at reducing cognitive shopping friction and are especially effective for newer customers. Clustering brings visually similar items together into a single browsing experience, keying off buyer intent and preference.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Exact Match goes further, aggregates listings of the exact same item into a single product page, where one item means one page, where a user chooses their size, color, or condition, rather than seeing the same item show up as 10 near-identical listings. Both features remove visual redundancy and bring second-hand shopping closer to a traditional e-commerce experience, critical technology for scaling our marketplace. This advancement also unlocks a Notify Me feature. Notify Me turns a sold-out single SKU item from a dead end into a reason to come back once it's restocked. Opt-ins for Notify Me have grown more than 50% week-over-week since its launch. For someone new to resale, this makes our marketplace feel as easy to shop as buying new. Taken together, this is why we believe that advancements in AI create a structural advantage for us.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

It makes our marketplace more fun to shop and more efficient for us to run. Let's look ahead. While Sean will discuss our second half guidance in more detail, I want to be clear that we likely could have maintained our original second half outlook. Doing so would have required just about every variable to fall in our favor. Gas prices to come back down and uncertainty to abate. Seasonal acceleration that has proved to be unpredictable the last few years, flawless execution of price, promotion, and customer targeting. This seemed a high bar, one that could risk investor confidence if even one of these things moved against us. Our view is that the business is executing at a high level, with growing active buyers, strong new buyer and seller growth fundamentals, and an exceptional product pipeline.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Even with our updated guidance, our two-year average revenue growth rate in the second half of the year is projected to be 16.6%. Our current approach now allows us to stay committed to building durable, compounding performance over time without compromising our long-term vision for short-term gains. With that, I'll turn it over to Sean.

Sean Sobers
Sean Sobers
CFO at ThredUp

Thanks, James. I'll begin with an overview of our results and follow up with guidance for the third and fourth quarters and full year of 2026. I will discuss non-GAAP results throughout my remarks. We're pleased with our second quarter results. Despite a more challenging consumer and macroeconomic environment than we had anticipated, we delivered strong revenue growth, gross margin, and adjusted EBITDA, all of which exceeded our internal expectations. For the second quarter of 2026, revenue totaled $90.8 million, an increase of 16.9% year-over-year. Our performance was primarily driven by strong buyer trends and higher repurchase rates, supported by elevated promotional activity. These drivers resulted in another record quarter for new buyers acquired, with new buyer acquisition up 13.1% year-over-year.

Sean Sobers
Sean Sobers
CFO at ThredUp

We finished the quarter with 1.8 million active buyers for the trailing 12 months, up 21% over last year, while we had 1.9 million orders in the second quarter, up 22% year-over-year. For the second quarter of 2026, gross margin was 79.9%, a 40 basis point increase versus the same quarter last year as a result of improved efficiency and logistics. For the second quarter of 2026, GAAP net loss was $5.9 million compared to GAAP net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $4.8 million or 5.3% of revenue for the second quarter of 2026, outperforming our internal expectations. Our Q2 result represented a 140 basis point increase over last year. Turning to the balance sheet, we began the quarter with $54.4 million in cash and securities and ended the quarter with $57.4 million.

Sean Sobers
Sean Sobers
CFO at ThredUp

We invested $2.7 million on CapEx and generated $3 million in cash in Q2. We continue to expect similar levels of CapEx investment in 2026 as of last year toward 2025. I'd like to turn to guidance. As James noted, our underlying fundamentals remain strong. In this environment, we are choosing to prioritize buyer engagement, that means investing more in promotions in the second half. We believe protecting buyer engagement is essential to long-term value creation. Because we expect these elevated promotions to create a revenue headwind of approximately $7 million in the second half, we are updating our revenue and EBITDA margin expectations for the balance of the year. In the third quarter, we now expect revenue in the range of $87 million-$89 million, representing 7% year-over-year growth at the midpoint, and a 20.3% two-year average growth rate.

Sean Sobers
Sean Sobers
CFO at ThredUp

Gross margin in the range of 78%-79%, adjusted EBITDA of approximately 4% of revenue, basic weighted average shares outstanding of approximately 132 million shares. In the fourth quarter, we now expect revenue in the range of $85 million-$87 million, representing 8% year-over-year growth at the midpoint, and a 13.2% two-year average growth rate. Gross margins in the range of 77.5%-78.5%, adjusted EBITDA of approximately 6% of revenue, basic weighted average shares outstanding of approximately 133 million shares. For the full year of 2026, we now expect revenue in the range of $344.4 million-$348.4 million, reflecting 11% year-over-year growth at the midpoint, and a 15.5% two-year average growth rate.

Sean Sobers
Sean Sobers
CFO at ThredUp

Gross margin in the range of 78.7%-79.1%, adjusted EBITDA of approximately 4.7% of revenue, representing approximately 30 basis points expansion versus last year, basic weighted average shares outstanding of approximately 131 million shares. Lastly, we expect to continue to be cash flow positive for the full year. As we progress through the back half of 2026 and throughout 2027, we will balance growth investments while planning to drive EBITDA expansion. Despite the temporary macroeconomic friction outside of our control, we remain confident in the core fundamentals of our marketplace, our proven ability to engage buyers, and our path forward towards long-term growth and profitability. James and I are now ready for your questions. Operator, please open the line.

Operator

We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Dylan Carden with William Blair. Please go ahead.

Dylan Carden
Dylan Carden
Analyst at William Blair

Yeah. Thank you. I'm curious, just sort of coming off the quarter that you had and with the idea that you're sort of engaging a stickier buyer and presumably incentivizing or stimulating demand through higher promo, why sort of the level of caution that you're embedding in the guide? Maybe if you can speak to what you're kind of currently seeing in the business. That'd be very helpful. Thanks.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Hey, Dylan. Q2, we beat all of our internal expectations. As I indicated, it was grindy out there in June. It was just more challenging to get customers to convert. We saw lots of visitors, lots of traffic, but you could tell that people needed incentives and promotions to convert. We noticed that through June, and I think as we came into July, we saw some of that same behavior coming out of 4th of July, certainly through the first couple of weeks. I think that we probably could have sort of powered through it, but I think it's going to be challenging, Dylan, in this with some of the segments of customers that have been a little bit more price sensitive.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I think we just decided to be a little bit more cautious with how we thought about the back half of the year, knowing that we will have to be incrementally promotional to maintain buyer engagement. Again, I think the most important thing when you sort of hit these types of points is to maintain strong cohorts and strong buyers. I think we made the conscious decision to be a little bit more promotional, especially to this segment of more budget shoppers. Which again, I just want to emphasize, it's really that segment of our customer base, which is probably less than 20% at this point, customers making under $60,000 a year. That's really where this is landing. We think that that's going to be temporary, and we're continuing to shift our mix of customers out of that.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I think it's going to be a little bit of a headwind in the back half of the year. That's why we made the change we did.

Dylan Carden
Dylan Carden
Analyst at William Blair

Yep. Just two follow-ups from that. When you say more promotional, do you mean adjusting price or actually kind of going out with real, more traditional type of discounts or offers? Then just to confirm the hit on the EBITDA margin line. What's sort of driving that as far as your sort of prior outlook for the year? Thanks.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Sure. I'll let Sean cover the EBITDA one. On price promotion, I appreciate you asking. We're really emphasizing discounts on aging inventory. We used to be able to sell items that, say, were 60 days old or 90 days old at higher prices. What we're finding is that we want to really protect the marketplace willingness to pay of buyers fresh inventory, new listings. We're not discounting that product. We're discounting older inventory, I think that's what's causing us for these elevated price and promotions. To be really direct, the reason why I think that we could have

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

We could have maybe squeezed through the back half of the year, we would've had to do things to discount kind of our best fresh inventory that's coming online in ways that I think are unnatural and in ways that I think actually really hurt us in 2027 with customer expectations, willingness to pay. I think this is totally the right strategy. It's just something that we're going to have to navigate for these couple of quarters.

Sean Sobers
Sean Sobers
CFO at ThredUp

Dylan, on the EBITDA side, obviously the biggest hit is revenue and the flow-through from there. If you can kind of just take the revenue that we reduce it to down to the gross margin rate of about 79%, 80%. I think the piece that makes it a little more impactful is that we are staying on the investment mode in marketing and in processing because we believe in the business, and we're very confident this is temporary. Those two together really have an impact on the EBITDA in the short term, in Q3 and in Q4.

Dylan Carden
Dylan Carden
Analyst at William Blair

Appreciate it. Thank you.

Operator

Our next question comes from the line of Oliver Chen with TD Cowen. Please go ahead.

Oliver Chen
Oliver Chen
Analyst at TD Cowen

Hi, James and Sean. On your comments, what's driving your thoughts that this could be temporary in terms of what you're seeing lately on that price-sensitive consumer? Also, as we think about ASP, what's happening with how we should model ASP in light of what you're seeing as well? Thank you.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah. Hey, Oliver. I think we think that the higher gas prices that have come from sort of conflict in the Middle East, I think, are weighing on, again, Oliver, this sort of budget customer. The reason why I think it's a little bit more temporary is that we are shifting our mix of customers away from that budget customer. On a percentage basis, that budget customer is as low as a percent of our overall mix as it has been in a very long time. What we're seeing among customers who are making $100,000, $150,000 a year, is that their growth rate is significantly higher than that budget customer. So we are shifting the business into that premium segment. Not luxury by any means, but more premium. So I think our strategy is to sort of move away from having that exposure.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I do think it's still part of our mix today, which is why we think the combination of gas prices and the combination of the current mix is a temporary thing. As far as average selling prices, I wouldn't move them for 2027. I think we will be a little bit more promotional with some of our older inventory in the back half of 2026. I think in general, the mix of goods is actually improving and prices are going up. Again, we're just discounting this segment of our aging and older inventory.

Oliver Chen
Oliver Chen
Analyst at TD Cowen

Okay. On the mix strategy, what's limiting that to be even better? Is it supply or demand? It sounds like you're getting good acquisition, but supply also matters too. We talk regularly about AI, what's changed the most since we last talked in AI? It sounds like reinforcement learning is coming into play, can AI offset some of the weaknesses you're seeing in terms of the model?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Well, yeah, on the mix, you're exactly right. We're shifting the buyer mix up. I think, part of the channel shift into Meta and Pinterest has really proving to be valuable, right? Those customers have significantly higher LTVs than the Google PMax customer. I think as you saw in the prepared remarks, premium as a percent of our mix is also growing, and that is having success. I would say, we're slowly moving the entire marketplace up in that direction. It doesn't happen overnight. I think the general trend is right. On the AI front, I think where the most impactful work we're doing is what I commented on, which is just the ability to real-time personalize browsers. We're seeing lift in that for window shoppers, for our new buyers.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I think, part of why the acquisition engine is continuing to work as well as it is conversion rate of new visitors. That new visitor conversion rate is being amplified by the work in AI. I do think it is helping, and we're just going to keep executing against that.

Oliver Chen
Oliver Chen
Analyst at TD Cowen

Thank you. Best regards.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Thanks.

Operator

Our next question will come from the line of Ike Boruchow with Wells Fargo. Please go ahead.

Analyst at Wells Fargo

Hey, this is Robert on for Ike. I just want to clarify. It sounds like you guys are maintaining the investment into demand creation. As we look towards the back half of the year, should it be more average order value being impacted from promotions and while orders or active buyers continue to maintain the same level? Is that how we should be thinking about it?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah, Robert, that's right. You should see average order values come down a little bit. You should see orders continue to be strong, buyers continue to be strong. Again, we're working every day to sort of refine that and improve that. I think to the extent that the environment gets a little bit better, some of the seasonal acceleration takes place. I think we're going to have room to take those average order values up, but I think that's probably the right way to model it right now.

Analyst at Wells Fargo

Got you. Just as a follow-up. Usually you pull back in marketing in Q4. Is that going to be the case here, or are you going to ramp up through the back half?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I think right now we're not planning to do anything different than we did last year on the marketing side. I would not characterize it as a ramp-up or a big ramp-down. I think Q4 last year was stronger than our expectations, we feel like we're well-positioned for Q4 in the guide that we provided.

Analyst at Wells Fargo

Gotcha. Thank you.

Operator

Our next question will come from the line of Matt Koranda with ROTH Capital. Please go ahead.

Matt Koranda
Matt Koranda
Analyst at ROTH Capital

Hey, guys. Can you just clarify, I guess, how much of the guidance cut is attributed? It sounds like mostly you're attributing it to weakness with your lower-end customer. It also sounds like there's a bit of an assortment reset going on, where you're trying to get rid of some older inventory and maybe reprioritize some new elements in the assortment that may be higher AOV over time to cater to a higher-end customer.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah.

Matt Koranda
Matt Koranda
Analyst at ROTH Capital

Maybe just, can you parse that out for us? I just want to make sure I understand what's going on there.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah, Matt, I would say both things are true. The weakness that we're seeing is by and large from this segment of buyers making under $60,000 a year. We can see it so clearly in the data, which is why it's actually very easy for us to tell you what we think the quantum of the miss is, because you can just see it in their purchasing behavior and frequency and what they're buying, and what types of promotions and credits are required to get them to move. It's actually quite easy. We were testing this all in June, trying to understand the credit elasticity, the discount elasticity to drive purchases of that lower income cohort, and that's how we were able to really see what we think will happen in the back half of the year.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

At the same time, we are definitely shifting the mix and improving kind of the fresh products that are coming online, and as that mix becomes a larger part of what we do in the back half of the year, I think there is potentially some upside there. At the same time, we know we need to move some of that older stuff, and we can do it effectively with this more budget shopper. Again, we're really making the decision to not discount our best stuff, Matt. It would be easy to start to say, "Hey, let's discount the brand-new products that are coming online. They're very attractive to customers.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

We can drive incrementality. I think that's a very slippery slope when you're building a brand and you're building credibility, and I don't want to do that, because I think it ultimately degrades brand equity and willingness to pay over time. We're going to maintain standards and expectations there for new product coming online and really push on the older stuff.

Sean Sobers
Sean Sobers
CFO at ThredUp

Matt, to add to that.

Matt Koranda
Matt Koranda
Analyst at ROTH Capital

Okay

Sean Sobers
Sean Sobers
CFO at ThredUp

the weakness in the customer and the mix shift that we're doing, again, are both back to driving forces of the macroeconomic environment, right?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah.

Matt Koranda
Matt Koranda
Analyst at ROTH Capital

Yeah. Okay, fair enough. Just maybe, how long do you think the assortment reset takes? Can it be completed by the third quarter so that theoretically you could see growth in AOVs and even maybe better top-line growth by the fourth quarter if you've embedded enough conservatism here, or how should we think about, I guess, the timing of the reset of the assortment and how long that takes?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

I think the assortment, I wouldn't characterize it as a reset of the assortment. We're continuing to put more product online than ever. The ops engine and processing is very strong. I would say that the challenge that we saw as June concluded and into July, is that you just need to be more promotional on some of this older stuff to move customers off the couch to purchase. The environment just being incrementally weaker, I think is what we're trying to do, versus trying to discount your freshest product, which we think doesn't make sense. We're trying to weaponize older inventory to drive engagement and conversion of that more budget consumer.

Matt Koranda
Matt Koranda
Analyst at ROTH Capital

Okay. I'll leave it there, guys. Thank you.

Operator

Our next question will come from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Hey, good afternoon, team. Thank you for taking my questions. I thought it was really interesting to hear the average listing price coming through the peer-to-peer model was $60 or $80, I think you said. Is it fair to think that this supply funnel is skewing more to the more premium than what is coming through the clean-out bags? I just wanted to hear your thoughts there.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah, Bobby. Yes. The stuff coming through direct listings is definitely more premium. We're still making a lot of progress on premium core marketplace bags. As I noted, premium items is up 32% year-over-year. We're making a lot of progress in premium kind of across the spectrum. Yes, direct listings items are certainly higher priced. That's by design from an average listing price, because we don't accept certain low-quality brands. We don't allow you to price items below $20. We've put some guardrails in there, Bobby, again, to create conditions for an improving assortment as we continue to grow that part of the business.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Awesome. Just curious to hear on the peer-to-peer piece, have you seen the sell-through rates? Is it comparable to what the managed marketplace is seeing? Just any differences there? I would think that maybe the peer-to-peer, they're going to be asking for higher-

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

kind of maybe asking for more than what it's worth, and so it's slowing. Do you hear more there?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah. Sell-through is definitely slower in direct listings, but it's sort of consistent across, I think, other peer-to-peer Sites. Yes, sellers tend to overprice items relative to what the market clearing price data should be. Yes, the sell-through is slower, but I think we're-

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Got it

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

continuing to educate sellers. Yeah.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Got it. Maybe just wanted to hear, obviously, definitely a dichotomy between kind of the more stressed consumers versus the more affluent consumers that have kind of been gravitating to the site more recently. Just maybe wanted to hear, is there a different, and obviously you made the point of that older inventory, discounting that to engage those more stressed consumers, but just on the broader marketing plan, are there any other key distinctions between how you're targeting those two groups? Or is it kind of the same strategy throughout both?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah. The shift that's been consistent, I think, all year, has been away from the Google PMax customer who tends to have a lower acquisition cost, but definitely a lower LTV. I think the shift has been moving to more Meta, more Pinterest, and what's really working there is that those customers have significantly higher LTVs, but we're almost driving the CAC much lower than we would've thought six months ago. So the paybacks are strong in those channels. Customer acquisition continues to be robust. So that's part of what makes us feel really good about this shift to this more premium customer. Again, we need more premium supply to sort of feed that engine. Again, that more premium customer is growing at a much faster rate than our budget shoppers.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

What we're really seeing in June and through this portion of a weaker environment is really just this budget shopper. We just have to sort of navigate and transition through that.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Thank you.

Operator

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.

Dana Telsey
Dana Telsey
Analyst at Telsey Advisory Group

Hi. Good afternoon, everyone. In this environment where it seems like the focus is more on a wardrobe update than core replenishment with the products that you're talking, and obviously that lower income consumer, is there a difference between what you're seeing the lower income consumer spend on and category-wise versus what you're seeing your $100,000+ income spend on? What does this mean for the RaaS business, getting Steve Madden, Dolce Vita? Those are all-

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah

Dana Telsey
Dana Telsey
Analyst at Telsey Advisory Group

very frothy brands. Is there more there? Anything you're seeing by category. Thank you.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah. Dana, I don't have specific nuanced category data, but I think your instincts are right. It's definitely the customer who's doing better, in this K-shaped economy, is definitely buying for fun and delight and travel. We've seen a lot of that over the summer for holiday vacations and things like that. Whereas your budget shopper, and again, I think part of the discounting approach is to move some of the staples and sort of basics to that budget shopper, but you have to do that at a lower price than you did 12 months ago. It's very clear in the data, Dana, around the behaviors of the group that's doing well and the group that's not. I think we just need to keep inching the assortment and inching the buyer base up.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

We've been doing that over the last couple of years, but it's not all the way there.

Dana Telsey
Dana Telsey
Analyst at Telsey Advisory Group

Got it. On the RaaS part, are there other new brands that are coming in?

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Sorry, yeah.

Dana Telsey
Dana Telsey
Analyst at Telsey Advisory Group

Yeah.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Yeah. On the RaaS side, sorry. Yes. We're definitely focused on more elevated brands. We did something in the spring, a big push with Reformation. We're planning to do this with a number of brands in the fall. Yes, our RaaS strategy is really focused on those brands that serve the customer who is doing well, and I think we're definitely having some success there. We're going to keep doing more of that. RaaS is in a nice rhythm now of adding clients to the roster and getting those clients to be active. I'm feeling quite good about that momentum.

Dana Telsey
Dana Telsey
Analyst at Telsey Advisory Group

Thank you.

Operator

This concludes the question and answer session. I'll hand the call back over to James Reinhart for any closing comments.

James Reinhart
James Reinhart
CEO and Co-Founder at ThredUp

Well, thank you all for joining us today. Thank you especially to the ThredUp team for your continued hard work in this operating environment. Look forward to seeing you all on our next call. Thank you.

Operator

That will conclude today's call. Thank you all for joining. You may now disconnect.

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