• Brett Schafer

Deep Dive: Poshmark

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  1. What do they do? Poshmark is an online marketplace where people can buy secondhand clothes from individuals, and individuals can sell clothes they don’t want/need anymore (among other use cases).

  2. History? It was founded in 2011 by a group of people, including current CEO Manish Chandra.

  3. Industry? Poshmark operates in the social commerce industry, which is estimated to be $600 billion within the next decade. Competitors include Etsy, Pinterest, Facebook, and many others.

  4. Management? Chandra is still the CEO and owns 7% of the company.

  5. Valuation? (As of recording) EV/sales at 10, EV/GP of 12, and EV/OCF of 30.

  6. Earnings? Sales up 28% in 2020, while OCF hit $84 million for an OCF margin of 32%.

  7. Balance Sheet? Should have $500 million in cash post-IPO. They don’t hold inventory so very asset-light balance sheet.

  8. Potential Competitive Advantages? We had network effects, niche, and social aspects of the platform.

  9. Future Growth Opportunities? We had international expansion, Pets/Toys, and Posh Parties.

  10. Highlights? We had the potential for a moat, high usage on a daily basis on the platform, and the great unit economics of the business.

  11. Lowlights? There are a ton of competitors, the ability for fakes to come on the platform, and the social component not being as good as management thinks were some lowlights we were considering.

*Chit Chat Money is sponsored by 7investing. Use our link or enter promo code “CCM” at check-out to get $10 off your first month of the service.

Disclosure: The authors and podcast guests are not financial advisors. Brett Schafer and Ryan Henderson are portfolio managers at Arch Capital. Clients of Arch Capital may hold securities discussed on this podcast.

#POSH #Poshmark

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