Is Vinted minted to the tune of $9.2 billion?

Gen Z youngsters are under pressure from rising costs of everything from food to housing, as well as competition from artificial intelligence for their jobs. Second-hand clothing platform Vinted provides a useful hedge against those strains, which are prompting them to cut back on $6 lattes and casual meals and could soon be coming for beauty and fast-fashion spending. But a mooted share sale valuing the Lithuania-based company at about €8 billion ($9.2 billion), according to the Financial Times, looks like an expensive play on Gen Z shopping habits. 

The National Retail Federation, which represents US retailers, reckons youngsters will continue to spend on goods, particularly as we approach the holiday season. But I’m not so sure. As the costs of things they need increase, there’ll be less left over for the things they simply want, such as graphic T-shirts, chunky jewellery and wide-legged jeans.

That’s where Vinted comes in. It’s already claiming a portion of sales that would otherwise have gone to Associated British Foods Plc’s Primark and Inditex SA’s Zara. Instead of buying new, young people are purchasing from their peers. They’re also raising cash by selling garments they may have worn only a handful of times but have appeared in on their social feeds, and increasingly without paying transaction fees. Add in the end of duty-free shipping for small parcels in the US and Europe, and there may be less incentive to shop for cheap, new items on Shein and PDD Holdings Inc.’s Temu.

Buying used also makes it possible to trade up to aspirational designer labels, such as Ganni and Sezane. Add in the feel-good factor of being green, and the annual global market for second hand clothes could reach $367 billion by 2029, according to the Resale Report from ThredUp Inc. and GlobalData.

But an €8 billion valuation for Vinted — up from €5 billion the last time it sought investment a year ago — would be a chunky 8 times this year’s expected revenue of €1 billion, with the total sales through the marketplace forecast at €10 billion. That’s in line with the valuations of US rivals Poshmark Inc. and ThredUp when they listed, according to Bloomberg Intelligence analyst Poonam Goyal.

But shares of ThredUp have dropped more than 75% since peaking in March 2021, while Poshmark was sold to South Korea’s Naver Corp. in 2022 for about 3.5 times 12 months trailing revenue. Shares in RealReal Inc., which resells high-end goods, have rallied this year, partly because buyers priced out by the luxury giants are turning to second-hand Louis Vuitton bags and Burberry trench coats. Even so, it trades on just 2.6 times its anticipated next 12-month sales.

Valuations have collapsed because resale sites have yet to demonstrate that they can generate consistent profits. Here, Vinted may be different. It makes money not by taking a cut from sellers but by charging buyers a small “protection fee,” so that if a product turns out not to be as advertised, the buyer can decline it and receive a refund. Vinted has its own shipping company, Vinted Go, makes money from selling advertising, and is testing a payments service.

The company is also about to move into the US. The American online resale market was worth $22 billion in 2024 and could almost double to $40 billion by 2029, according to ThredUp and GlobalData. And the US is where the squeeze on young people is the most pronounced, exacerbated by the impact of tariffs and the resumption of student-debt repayments.

But making money is still a challenge. Net profit roughly quadrupled in 2024 to €76.7 million. Assuming earnings before interest, tax, depreciation and amortisation roughly double this year, as they did in 2024, to about €320 million, at an enterprise value of €8 billion the company would trade on 25 times Ebitda — that’s twice Inditex’s multiple. True, the Spanish giant isn’t expanding so quickly, but it has a long track record, online prowess, and network of enviable stores. Its also aiming to grow its business in the US, and its biggest brand, Zara, has moved into resale.

So Vinted must continue to grow its sales and become more profitable to avoid being another online flash in the pan. This won’t be helped by subsidising shipping between customers in London and New York, a strategy it’s successfully used in the past when expanding into new markets, to kickstart its US business until Americans start selling to other domestic customers. 

While Gen-Z takes advantage of the discounts available on Vinted’s second-hand platform, the proposed valuation offers no such concession to prospective investors in the business.