I wrote last year about how poorly DTC companies were performing in the public markets. Unfortunately now, with some key exceptions, it’s worse.

Here’s a representative sample of public DTC brands, the same as last year.

  • Allbirds (Footwear). Down 98% from peak. Market cap: $100mm
  • Blue Apron (Food). Acquired for 95% less than peak. Market cap: $100mm
  • Smile Direct Club (Teeth aligners). Down 100% (bankrupt). MC: $0
  • Warby Parker (Eyewear). Down 76%. MC: $1.6B
  • Bark (Pets). Down 93%. MC: $220mm
  • Honest Co (Eco-products). Down 83%. MC: $378mm.
  • FIGS (Scrubs). Down 90%. MC: $824mm
  • Stitchfix (Clothing). Down 98%. MC: $318mm
  • Purple (Mattresses). Down 95%. MC: $197mm
  • Rent the Runway (Clothing rental). Down 98%. MC: $26mm
  • HelloFresh (Food): Down 93%. MC: $1.2B
  • Hims (telemedicine). Down 36% from peak but 56% up(!) from De-SPAC price. MC: $3.3B

As of this time last year, most DTC stocks were down 85-90% from peak. Now, if anything, it’s closer to 90-95%.

But last year, DTC brands were not unique–nearly all stocks were down. NASDAQ, for example, was down 23% from its 2021 peak.

But today, NASDAQ is at an all time high. Why is DTC different?

It’s because even though the market flipped two years ago to rewarding profitability in addition to growth, most public DTC businesses can’t seem to make the transition. They just don’t make money.

Here are the net income profiles of the companies mentioned above for 2023:

  • Allbirds: -$153mm
  • Blue Apron: -$111mm
  • Smile Direct Club: ? (Bankrupt)
  • Warby Parker: -$63mm
  • Bark: -$46mm
  • Honest Co: -$39mm
  • FIGS: $23mm
  • Stitchfix: -$122mm
  • Purple: -$121mm
  • Rent the Runway: -$114mm
  • HelloFresh: $19mm
  • Hims: -$26mm

Figs and HelloFresh are the only companies to have been (barely) profitable in 2023. Most companies’ net income margins were -10% to -90%.

One company to positively call out is Hims, which lost $26mm last year but in the last 2 years has cut its losses 75% while growing revenue 220%. Hims will very likely grow into meaningful profitability and so is worth $3.3B.

Similarly positive is Oddity, which IPO’d and made $59mm in 2023. Oddity’s market cap is $2.5B. Hims and Oddity are among the only DTC businesses trading near or above their IPO prices.

But many others are in real trouble. How did we get here?

Most public DTC businesses were VC funded and prioritized growth at all costs. This was fine when it’s what the market rewarded.

Now that investors are focused on profitability, I suspect that many of these businesses are, counterintuitively, too large for their own good. Fueled by VC, they overshot their market size and are spending too much on ads and team to maintain a revenue scale that’s inconsistent with making money.

It’s going to be painful, but I predict many of these companies are going to have to shrink meaningfully–likely outside of the public markets–in order to become sustainably profitable brands. Investors know this and are valuing them accordingly.