Thirty Three Threads is offering equity at a $36 million valuation. This price is much higher than most crowdfunding offerings, but that’s because Thirty Three Threads’ revenue is much higher than most. The company generated more than $15 million in revenue last year, so its $36 million valuation is just over a 2x revenue multiple. That’s a very reasonable multiple, particularly for a company with a long operating history and numerous patents. Balancing the overall high price against the company’s strong revenue, the price score for Thirty Three Threads is middle of the road.

Thirty Three Threads is composed of three brands: a grip socks brand for women, an athleisure brand for women, and a sock brand for men. It’s not clear which brand drives the bulk of Thirty Three Threads’ revenue or whether each contribute equally, so we’ll assume that the company sits equally in the sock and athleisure markets. 

The global sock market was valued at $42.2 billion in 2018 with moderate growth expected through 2025. Athletic socks specifically compose a small share of that market, less than 20%. However, the athletic socks segment is expected to expand the most rapidly with a projected CAGR of 6.7% between 2019 and 2025. 

The athleisure market is large and expanding. It was valued at $300 billion in 2018 with strong growth expected in years to come. Athletic wear has transformed from clothing worn solely while working out to many millennials’ and Gen Z’s go-to wardrobe for day-to-day wear. This phenomenon has been particularly true during the pandemic when leggings and soft sweatshirts became a daily uniform. 

With both the sock and athleisure markets expanding in response to a global trend, Thirty Three Threads sits at the intersection of valuable categories. While the COVID-19 pandemic hurt Thirty Three Threads in several ways, one silver lining of the outbreak was increased consumer demand for the types of products that the company sells. Therefore, Thirty Three Threads’ market rating is strong.

Thirty Three Threads was founded by Joe Patterson and his wife Christina in 2004. Patterson had several years of experience in sales at the time of Thirty Three Threads’ founding. He led the company for 15 years until November 2019 and remains as the chairman of the company’s board. 

These days Thirty Three Threads is led by Gill Hong, a seasoned athletic wear executive who most recently served as the executive vice president, chief merchandising officer, and head of international for Lands’ End. Hong has also held senior leadership roles at Oakley, LL Bean, Nike, and Speedo over the course of her over 30 year career. She is deeply experienced in consumer athletic brands, international merchandising, product design, sourcing, and much more — all extremely relevant to Thirty Three Threads. 

Hong’s background is almost exactly what investors would dream up for the ideal CEO of Thirty Three Threads. Her significant expertise is supported by former CEO Joe Patterson’s long history of managing the company. Therefore, Thirty Three Threads’ team rating is above average.

Athleisure is an explosive category with new brands entering the market very frequently. Most athleisure products look about the same: leggings in various colors, sweatshirts and crop tops, sports bras, socks, etc. Thirty Three Threads’ athleisure brand, Tavi Noir, falls into this same pattern. Products look very similar to most things found at Athleta, Lululemon, Fabletics, or a number of other women’s athletic brands. The main difference is that neither Thirty Three Threads nor Tavi Noir are major brand names with years of recognition, so they automatically fall behind market leaders. 

Thirty Three Threads has a bit more differentiation from competitors with its Toesox brand, which seems to have been the company’s original property. Toesox are heavily patented and do seem to be the leading grip socks for workouts like pilates, yoga, and barre. 

Overall, Thirty Three Threads’ differentiation is a mixed bag. Its Toesox are distinct and superior to competitors. However, its other products are difficult to distinguish from those of Lululemon and other leaders. Therefore, Thirty Three Threads’ differentiation rating is moderate. 

Thirty Three Threads stands out for its sheer quantity of annual revenue, which is at a level rarely seen in crowdfunding offerings. The company generated more than $15 million in revenue for the fiscal year ending in June 2020 and turned a net profit of $699,695. Notably, this traction includes very few e-commerce sales. The bulk of Thirty Three Threads’ revenue comes from domestic wholesale, leaving a large opportunity for future expansion into higher-margin DTC revenue streams. 

The strength of Thirty Three Threads’ revenue gives the company a very high rating on performance. However, investors should note a key caveat not reflected in that figure. Because Thirty Three Threads’ fiscal year runs through June 2020, 2020 revenue figures only reflect about three months of the COVID-19 pandemic. The pandemic has undoubtedly hit Thirty Three Threads hard, since much of its sales come from in-studio purchases at hundreds of locations. Those locations have likely been closed for most or all of the last year, putting a dent in Thirty Three Threads’ revenue. There is a strong chance that revenue data for 2021 will underperform 2020.

Thirty Three Threads seems to be a company in transition, and one that was hit hard by the pandemic. The company’s 15-year CEO departed in November 2019, leaving its new executive only months to onboard before COVID-19 shut down all of the company’s retail partners (boutique fitness studios). Thirty Three Threads took out a paycheck protection program (PPP) loan to sustain itself through COVID-19, and it’s not clear yet how much the pandemic impacted financial performance. 

These troubles aren’t positive signs for a company that already seems to struggle with differentiation and building a lucrative e-commerce business. Many boutique fitness studios are closing due to the pandemic or are struggling to compete with the boom in high-quality at-home fitness devices like Peloton and Mirror. Thirty Three Threads needs to adjust rapidly to a more online-shopping-centric future to separate its revenue from these struggling businesses. While the company’s CEO has impressive experience in retail merchandising, she may not be the best-suited to steer the company toward this DTC future.

Thirty Three Threads is a profitable business (at least as of June 2020) with a long operating history and deep experience in retail sales of fitness apparel. The company generated more than $15 million in revenue last year, and products are available for sale in hundreds of stores worldwide. Athleisure and athletic socks are growing markets, and Thirty Three Threads is well-positioned to nab a slice of those pies. 

While Thirty Three Threads is likely facing a difficult period in its history due to the pandemic’s impact on boutique fitness studios, the company is led by a seasoned CEO with deep expertise in building fitness brands. Gill Hong’s past executive roles at Nike, Oakley, Lands’ End, and more have granted her years of experience navigating the ups and downs of global apparel businesses, which is undoubtedly an asset during this volatile time. It’s particularly encouraging that Hong is participating in this crowdfunding round with a sizable amount of her own personal capital, giving investors a strong sign that Hong is confident about the future of Thirty Three Threads. 

Thirty Three Threads is an athleisure and specialized fitness apparel company producing grip socks for yoga, pilates, and barre alongside a broader portfolio of women’s sporting clothes and men’s athletic socks. The 15-year-old company generated more than $15 million in revenue in 2020 and turned a profit. It’s led by one of the most experienced CEOs that we’ve seen from a crowdfunding company lately.  

On the other hand, Thirty Three Threads has been hit hard by the pandemic, as most of its apparel is sold through boutique fitness studios that were closed for much or all of the last year. The pandemic highlighted Thirty Three Threads’ lack of revenue diversification. A stronger e-commerce channel would have sustained Thirty Three Threads during the lockdown, but the company has not yet devoted significant energy to online sales. Therefore, Thirty Three Threads has been rated a Neutral Deal. 

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