Vinted’s price markup rests on limitless growth
Corrects second paragraph to clarify Vinted has over 100 million members across 22 markets not 16 million users across 16 markets as previously stated. The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
LONDON, Sept 9 (Reuters Breakingviews) -Second-hand clothes are in vogue. That’s the message from U.S. private equity shop TPG’s interest in buying a stake in Vinted at a 5 billion euro valuation, as reported by the Financial Times on Friday. To justify the toppy rating, the company will have to keep growing at a breakneck pace.
Vinted was born in 2008 when Milda Mitkute, one of the co-founders, was moving house and had too many clothes to take with her. Today, the company has 100 million members across 22 markets including Spain, France, the United States and Canada, who use its slick app to buy and sell garments. Vinted generates revenue by charging shoppers a small “buyer protection fee”, as well as other sources like charging sellers to get their wares displayed more prominently. The top line soared 61% last year to 596 million euros.
The mooted TPG valuation looks rich at more than 8 times 2023 sales. Publicly listed comparable The RealReal REAL.O, which specialises in designer items, has an enterprise value that is less than 1 times revenue, according to Breakingviews calculations.
There are ways to justify the difference. Over the past three years, Vinted has managed to deliver an average 60% annual growth in sales, roughly double RealReal’s equivalent rate of expansion. TPG may also be encouraged by forecasts for the broader second-hand apparel market, which King Research expects to grow at around 15% each year until 2031.
Still, Vinted has a long way to go. Perhaps TPG is enticed by the company’s shift into higher-value goods like electronics and luxury items, which may generate higher revenue and could warrant a valuation multiple closer to eBay’s EBAY.O. Still, that would just be 3 times trailing sales.
The e-commerce marketplace model also contains a litany of cautionary tales. RealReal’s shares have collapsed by over 90% since their peak in 2021 and last year its revenue declined. Other players as diverse as Farfetch, Zalando ZALG.DE and Just Eat Takeaway.com TKWY.AS have also suffered in public markets. A common theme is the struggle to keep expanding beyond an early hardcore of dedicated users. To avoid this fate and earn its rich valuation, Vinted needs to stay as fashionable as the products listed on its site.
Follow @aimeedonnellan on X
CONTEXT NEWS
U.S. private equity firm TPG is in talks to buy a stake in second hand clothing site Vinted at a 5 billion euro valuation, the Financial Times reported on Sept. 6.
TPG is seeking to acquire several hundred million euros worth of existing shares in the business, the FT added citing people familiar with the matter.
Vinted was founded in 2008 and was last valued at 3.5 billion euros in 2021. The Financial Times previously reported that the fashion site had hired Morgan Stanley to explore possibilities for its capital structure.
Marketplace businesses that have suffered after listing https://reut.rs/4gjgq1W
Editing by Liam Proud and Streisand Neto
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