Poshmark’s third quarter offered a mixed bag on Thursday, as the social selling resale marketplace showed notable growth in revenue, but also losses, with the latter amounting to $23.5 million. Wall Street, notably, barely cared.
The earnings report, the company’s first after announcing its sale to South Korean tech conglomerate Naver in October, showed an 11 percent increase in revenue over last year’s $79.5 million, with $88.4 million edging out analysts’ expectations. Active buyers also grew 13 percent from 7.3 million to hit 8.2 million, a record for the platform, while gross merchandise value ticked up 7 percent to $475.6 million. The company pointed out that its quarterly GMV steadily increased on a year-over-year basis over the past 19 quarters.
Yet its net loss more than tripled last year’s $6.9 million, with a per-share loss of 30 cents missing analysts’ expectation of 27 cents. The news, which might have tanked shares during another quarter, just shaved off 0.39 percent in after-hours trading.
Some of the uncertainty might be because Poshmark issued no forward-looking guidance, citing its impending sale. As for the deal itself, which is slated to close in early 2023, it will obviously make a material impact on the business — but not solely because it will delist Poshmark as its own publicly owned entity. As a subsidiary of Naver, it will be flush with new resources.
The company listed an array of growing operational and business expenses in its 10-Q filing, including marketing. That matters, considering marketing expenses accounted for 48 percent of revenue during the quarter.
“While we have seen fluctuations and uncertainty in user acquisition costs, partially due to Apple’s policy change that limits the ability of advertisers to collect user data, we will continue to invest in user acquisition and retention while the underlying user unit economics indicate the return on investment is strong,” Poshmark noted in the filing. In 2021, Apple launched a privacy update for iPhones that allows owners to reject user-tracking by third parties.
Executives didn’t hold a call with analysts, but in a statement, chief executive officer Manish Chandra said the results “exceeded our initial expectations, despite a tough consumer environment.”
Indeed, volatility in the retail and tech sectors have produced a wave of disappointing earnings reports in the face of inflation, ongoing supply chain disruptions and other issues. Such complications should actually work in Poshmark’s favor, however, as a resale platform that neither produces nor holds inventory. Meanwhile, as people curtail lavish expenses, secondhand goods would hold new appeal for shoppers, while others learn to see their closets as a source of income.
It’s no surprise then that Poshmark outperformed the market this year. But even so, it has struggled to maintain investor confidence, having only topped analysts’ forecasts once.
Chandra will have a new chance to prove his social selling resale model under Naver, which brings more resources and possibly more opportunities as well. The tech giant, known as South Korea’s answer to Google, owns several properties, including a search engine, social media and messaging channels and other tech-, media- and gaming-related businesses — including Zepeto, a sprawling metaverse that has been making notable in-roads in fashion.
What the tech conglomerate gets in return is an entry point into the U.S.’s $80 billion fashion resale market. So far, all public messaging frames Poshmark as an independently run subsidiary, but whether the new parent company will keep its hands off entirely is an open and fair question. Some pundits already wonder if Poshmark will become a pipeline of K-pop and K-fashion for North America.
Chandra has another vision in mind: He plans to expand on Poshmark’s global footprint, taking it beyond the U.S., Canada, India and Australia while, as a data-driven resale platform, it continues to invest in engineering and research and development.
“In October, we announced our acquisition by Naver Corp. and are excited to partner with them as we take Poshmark into its next phase of growth as we expand our platform, elevate our product and user experiences, and enter new and larger markets,” he said.