The “new normal” at The RealReal is a step back to pre-COVID-19 times — minus founder Julie Wainwright.
On Tuesday, The RealReal gave its first quarterly update to investors since Wainwright stepped down as chairperson and chief executive officer in June.
While search firm Spencer Stuart has been hired to find a replacement, president and chief operating officer Rati Sahi Levesque and chief financial officer Robert Julian are serving as co-interim CEOs.
And the picture they painted of the company was optimistic — they stood by the longer-term profitability goals recently set out — but they also said consumers had given up some of their pandemic spending habits. That, along with some luxury good supply difficulties, made for something of a challenging quarter.
Net losses for the second quarter narrowed to $53.2 million, or 56 cents a share, from $70.7 million, or 78 cents, a year ago. Adjusted losses before interest, taxes, depreciation and amortization likewise narrowed to $28.8 million, or 18.7 percent of revenues, from $32.9 million, or 31.4 percent of revenues, a year earlier.
Revenues for the three months ended June 30 increased 47 percent to $154.4 million from $104.9 million. Gross merchandise value increased 30 percent to $454 million.
Investors took a bearish stance and sent shares of the company down 14.1 percent to $2.62 in after-hours trading.
Sahi Levesque told analysts on a conference call that second-quarter results were “solid,” although “top-line gross merchandise volume growth was slightly lower than expected.”
“We experienced some downward [GMV] pressure due to a sale-labor shortfall and a change in product mix,” Sahi Levesque said. “First, from the supply side, we entered the quarter needing more salespeople and this hiring challenge was exasperated by a higher-than-normal attrition in our sales force.”
The company addressed the issue by hiring, backfilling sales roles, increasing compensation in key markets and relying on technology that helps consignors self-serve.
That will help with the supply issue, but the company also saw changes on the demand side of the resale equation.
“Starting in the first quarter and accelerating into the second quarter, there was a shift in consumer demand,” Sahi Levesque said. “The shift was from higher-priced items like buying jewelry and watches to lower-priced items like ready-to-wear and shoes. While high value continues to perform, the second-quarter mix more closely mirrored our pre-COVID[-19] product mix as consumers go back to the office, travel more and attend events. Therefore, the higher proportion of GMV coming from apparel and shoes resulted in improved take rates year-over-year but also a reduction in average order value.”
That’s not the only part of the business going back to its pre-pandemic posture.
Julian told analysts that the direct part of the RealReal business, fed by owned inventory, was taking a step back.
While the lower-margin direct business tended to make up 15 to 20 percent of the business in 2019 and before, that had risen to 34 in the first quarter.
“In [the second quarter], we had reduced it and we started talking about deemphasizing that and sequentially, it reduced from 34 percent to 28 percent of our total revenue,” Julian said. “By the time we get up to the end of the year, it should be in the low 20s. And eventually, what we’d like to do is return back to the 15 percent to 20 percent.”
Just where the business heads from here will also depend on who comes in as CEO.