The holiday quarter brought a little joy to Poshmark after a tough year, its first as a publicly traded company. But it wasn’t enough to excite investors, particularly since its first quarter outlook disappointed analysts, sending the stock down after hours.
Poshmark’s fourth-quarter net revenue of $84.2 million topped $80 million to $82 million in its own forecast — as well as analyst expectations of $80.6 million — marking a 22 percent year-over-year jump. Gross merchandise value, at $490.8 million, beat the $387.2 million from the fourth quarter of 2021, marking a 27 percent rise.
But the company reported a loss of 19 cents a share, above estimates predicting 18 cents a share. It also forecast first-quarter revenue at $86 million to $88 million, coming in lower than estimates projecting $90.5 million. At press time, shares were trading down more than 6 percent.
But Poshmark sees strength in the numbers. It beat its own guidance for the quarter ending in December, it pointed out, and touts the popularity and “stickiness” of its platform.
For the full year 2021, the company reported that social interactions of 44.6 billion soared over the previous year, representing growth of 47 percent. Stacked buyer cohort retention, which is how the platform conveys customer retention, slid above 2020 levels, coming in at 104 percent versus the previous 102 percent. Its stacked seller cohort retention came in at 112 percent in 2021, ticking slightly up from the 111 percent the year before.
“We had a great quarter,” Manish Chandra told WWD. He framed the performance as a strong finish to a historic year, with record GMV and revenues. “The growth accelerated from the third to fourth quarter.…We beat both revenue and EBITDA from what we guided back in the third quarter.”
Adjusted earnings before interest, taxes, depreciation and amortization was negative $4.7 million, down from $4.8 million in the fourth quarter of 2020, and adjusted EBITDA margin was negative 5.5 percent in the fourth quarter of 2021.
Chandra called it “a great quarter, wrapping up a very sort of interesting and powerful year.”
Its third quarter was beset with problems, principally from Apple’s IDFA privacy update for iPhones, which virtually eliminated user-tracking in iOS. The company hasn’t completely put that behind it, but according to Chandra, it’s made significant progress, adjusting marketing and seeing social media platforms learning to adapt as well.
On the earnings call, the first for new chief financial officer Rodrigo Brumana, the CFO explained that Poshmark “began adjusting our marketing spend in the middle of the third quarter, and start[ed] to see the positive impact on October GMV growth, which continued throughout the fourth quarter.”
These adjustments included a deeper focus on “upper funnel strategy,” with tweaks to its mix of channels. For instance, it shifted more to TV during the holidays, partnered with a K-pop band and focused more on certain social media channels.
“We’ve definitely allocated more to TikTok and Snapchat as two channels that are showing as very attractive and a more attractive value proposition,” Chandra explained. “I would say Facebook and Instagram have been improving, but are not quite at the pre-IDFA levels in depth to adjust their performance.”
The business sees a major benefit of being a peer-to-peer platform with an inventory-light model, as supply chain woes continue to wreak havoc in the broader retail scene. Challenges in the West Coast are apparently shifting to East Coast ports, while China contends with more COVID-19-related complications amid rigid restrictions in the face of new outbreaks.
The company also puts a lot of faith in newer features like Trends on Poshmark, which blends human curation and data-driven intelligence to make shopping by trends better, faster and more efficient. In addition to new categories, like pets and electronics, it’s focusing on platform updates to make buying and selling easier, in order to keep retention high. More international expansion may be on the way before long, with new markets in English-speaking countries possibly opening up.
Chandra didn’t make any announcements, but he did seem to subtly signal a potential new direction for the company.
“We’re ultimately a community platform, and so we see the world evolving around what we think of as micro communities,” he said on the call. “When you think of electronics we don’t think of just as products but we think of communities that gather around those products. It could be the gaming community, it could be people who are sort of looking at specific kinds of hobbies around that.”
This is a very similar theme that comes from metaverse companies like Decentraland, which very much sees itself as a social channel. They happen to share this self-image as community-driven platforms clocking interests like hobbies.
Poshmark may see a role for itself in virtual fashion and NFTs. It’s already dabbled in that, with an NFT drop in December in honor of its 10th anniversary, and it noted the activity from its user base.
Community members were bidding up on it, “And one of the Poshers actually ended up buying the first NFT that we launched ever from Poshmark, which has special privileges and other things associated with it. So we’re definitely looking into this space,” Chandra told WWD.
“It’s a very interesting space, and it’s an area that people are spending a lot of time and energy, both brands and individuals,” he elaborated. “So for us, nothing to comment, in terms of near term. But when we think about the future of shopping, and we think about future of commerce, we think of it as really at the cross section of three trends: Number one is online. Number two is social. Number three is sustainable. And we feel we’re sitting at those three trends.
“If you add a fourth one, it is really all about digital.”