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The RealReal Stock Gains on First-quarter Sales Growth

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In a world of uncertainty — suddenly defined by inflation, war and supply chain woes — Julie Wainwright is seeing strength in the The RealReal Inc.’s resale model.

The company posted continued sales growth in the first quarter and stood by its outlook for the year, with Wainwright, who is founder, chief executive officer and chairperson, highlighting just how The RealReal is different from other players in the luxury space.

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“As inflation has ramped up and prices have increased in the primary luxury market, we believe The RealReal is a demonstrated value option, offering unique and highly coveted items within the luxury goods space,” Wainwright told analysts on a conference call on Tuesday. “Therefore, we believe we are positioned for a strong 2022.”

If luxury buyers do pull back in a broader economic slowdown, they can, in a sense, trade down from full-price luxury to resale, potentially boosting The RealReal. But the CEO said the real opportunity is to simply bring more buyers and sellers on board.

“The reason we’re confident about our growth is because of our low penetration rate overall,” she said. “So we have less than 2 percent of potential consignors in the U.S. and over 40 percent of our consignors that can sign with us are first-time consignors. That’s been almost since the beginning of time. We’re still introducing the market, introducing people to the whole value of consigning and that they have trapped value in their house. Once they start consigning with us, they tend to continue.”

Now The RealReal has to make that tendency profitable.

The reseller’s first-quarter net losses widened slightly, to $57.4 million from $56 million a year earlier. (Losses per share actually narrowed some, to 61 cents from 63 cents, reflecting an increase in the number of shares outstanding).

Adjusted losses of 47 cents a share came in better than the 51 cents analysts projected.

Total revenues for the quarter ended March 31 increased 48.5 percent to $146.7 million from $98.8 million a year earlier. Gross merchandise volume rose 31 percent to $428 million for the quarter.

“During the quarter, we delivered solid top-line growth despite COVID[-19]-related staff callouts in our authentication centers early in the first quarter,” Wainwright said. “Since supply drives demand, our return to normal staffing levels resulted in strong demand on our platform due to increased inventory. GMV was driven by fine jewelry and watches, high value handbags and strong growth rates in women’s apparel and shoes.”

She also said apparel has been gaining at The RealReal and running “contrary” to the e-commerce trends seen at other companies that have seen shoppers log off in favor of trips back to brick-and-mortar stores.

The RealReal’s active buyers increased 21 percent over the trailing 12 months to 828,000.

The RealReal is standing by its projections for the year calling for adjusted losses before interest, taxes, depreciation and amortization of $80 million to $100 million with revenues of $635 million to $665 million and GMV of $2 billion to $2.1 billion. The company also continues to project that it will post adjusted earnings before interest, taxes, depreciation and amortization in 2024.

Investors welcomed the results, sending shares of The RealReal up 10 percent to $4.85 in after-hours trading, a nice step back toward the nearly $12 price the stock started the year at.

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