In a calculated move aimed at honing in on their primary domestic market, ThredUp, a prominent fashion resale marketplace, has strategically divested its European operations. This decisive action comes after ThredUp initially expanded into Europe in 2021 via the acquisition of Remix, a Bulgarian startup with a reach across central and eastern European markets.
In May, ThredUp appointed Florin Filote as the new general manager to lead its European unit. Eventually, Filote headed a management buyout of the business he oversaw. ThredUp’s core business, established in 2009, revolves around secondhand clothing and accessories. The company raised over $300 million in funding prior to its initial public offering (IPO) in 2021. However, similar to many startups that went public during that time, ThredUp faced financial challenges, seeing its market capitalization plummet from $1.3 billion during its IPO to a low of $60 million by last month.
ThredUp took a decisive turn during its Q2 2024 earnings announcement in August, where the company disclosed that it was considering selling Remix to focus exclusively on the U.S. market. The decision was influenced by a significant revenue decline in Europe, where earnings dropped by 18% year-on-year to $13 million, and gross profit decreased by 25% to $3.6 million.
During its Q3 earnings report last month, ThredUp revealed it had reached a non-binding agreement with Remix’s management for a buyout. This came amidst a broader positive momentum characterized by better-than-expected Q3 earnings, propelling the company’s shares to nearly $200 million.
In a recent filing with the Securities and Exchange Commission (SEC), ThredUp unveiled important transaction details, noting that Filote acquired 91% of the common stock in a newly formed entity, Remix US Holdings, for just €1 (one euro). ThredUp contributed an additional $2 million as a final cash investment to support Remix during its transition to independence. Despite the seemingly low purchase price, ThredUp retained a 9% stake in Remix and received a convertible promissory note worth €61.6 million ($64.7 million), covering its investment in Remix since the initial acquisition. This debt will be due in 2034 or upon a liquidity event such as an IPO or acquisition before then.
James Reinhart, ThredUp’s co-founder and CEO, emphasized that this arrangement benefits both companies. He expressed confidence in the Remix team under Florin Filote’s leadership, believing that the divestment would allow ThredUp to concentrate on innovating within the U.S. market.
The themes emerging from this development highlight ThredUp’s strategic decision to streamline its operations and improve financial outcomes by refocusing on its core market. The overarching trend signifies a broader industry challenge where startups that went public around 2021 are reevaluating and adjusting their operational scopes to stabilize and grow amidst diminished market valuations.
In summary, ThredUp’s divestment of its European arm to its local management was a calculated move to prioritize and strengthen its U.S. market operations. This transaction illustrated the company’s efforts to address declining European revenues and realign its focus toward better financial health and growth potential at home.
