The RealReal had good news for investors on Tuesday evening when it released its first post-IPO earnings report less than two months after making its NASDAQ debut in late July. The San Francisco-based luxury consignment site revealed that its revenue for the 3 months ending June 30 was up 51 percent to $71 million compared to this time last year, while its net losses were also on the rise, growing to $26.9 million versus the $18.9 million loss tied to last year’s second quarter.
As for the total value of the pre-owned luxury goods that it sold this quarter – from pricey Hermes Birkin bags and Phoebe Philo for Celine-era wares to buzzy streetwear goods from Supreme and Off-White, it grew to $228.5 million, up 40 percent year-over-year. For the year as a whole, The RealReal expects that it will sell goods valued at nearly $1 billion.
One area of concern for the company, which got its start in 2011 under the watch of founder Julie Wainwright, is department stores. It turns out, department stores are not just dragging fashion brands down, they are harming second-hand retailers, such as The RealReal, as well. According to the Wall Street Journal, “Chief Executive Julie Wainwright said department stores started discounting earlier in the year than they historically had,” thereby, reducing the number of used items purchased on its site and brick-and-mortar outposts in the 3-month period.
That shift, Wainwright says, “hit purchases of pre-owned women’s apparel the most,” and while pricing has recovered, “the pressure could intensify again heading into the holiday season if department stores get desperate.”
The company’s Q2 results come after Wall Street analysists issued optimistic forecasts for the resale pioneer. Cowen analyst Oliver Chen stated in a note to investors last month that “the company’s premium specialization yields a bigger and better customer experience,” and stated that the reseller, which is the largest online luxury resale platform, has key advantages that distinguish it from competitors in the multi-billion dollar luxury resale sphere. Chen pointed to the company’s “advanced supply gathering capabilities and reach; sophisticated logistics and fulfillment infrastructure and authentication; advanced data analytics; and high sales velocity and sell-through rates” as key points of distinction.
However, not all is on the up-and-up in the fashion tech space. As the WSJ noted, “Last week, shares of RealReal fell nearly 17 percent,” a drop that was spurred, at least in part, by “disappointing results from online luxury retailers Revolve Group Inc. and Farfetch Ltd.”
As Yahoo Finance asserted last week, luxury fashion platform “Farfetch's second-quarter earnings report, released on Aug. 8, featured another loss, a big acquisition, a decision to limit promotional activity, and a mediocre outlook. It also caused the stock to plunge more than 40% in a single day,” and that was after the post-IPO stock price cut in light of mounting “concerns about its slowing growth and widening losses.”
More than that, there are questions about profitability for the London-based site, which acts as a connector between retailers and consumers without ever holding an inventory. Farfetch, which is not yet profitable, “faces stiff competition from larger e-commerce marketplaces with dedicated luxury marketplaces (like Alibaba's Tmall Luxury Pavilion) and first-party e-commerce sites from luxury giants like LVMH,” per Yahoo. “Those headwinds could prevent Farfetch from ever achieving profitability.”
This month’s massive stock drop is the latest loss for FarFetch, which lost a key investor in July, when early partner Condé Nast dumped its $293 million stake in company amid what the London Times called “concerns over how the luxury marketplace is being managed.”
Revolve, a millennial-focused retailer, has similarly fared poorly as of late. Despite being one of the summer’s hottest IPOs, Revolve Group lost investors’ confidence this month, with its stock plunging a total of 22 percent – 15 percent on August 9, alone, in response to its first post-IPO earnings report, which revealed that while revenue was up 22 percent to $161.9 million. Of particular note: its net loss for Q2 amounted a total of $28.1 million, more than double the losses for the same 3-month period last year.
So, what gives? Forbes asserted this week that “while many pundits and operators remain focused on rapidly growing e-commerce revenue, the inconvenient truth is that e-commerce profits have been far more elusive.”
The RealReal seems to be faring best, at least from a stock price perspective. The 8-year old company is similarly not profitable, but its shares rebounding, rising as much as 20 percent to $20.42 in late trading on Tuesday.