Shares of high-end on-line consignment retailer The RealReal (NASDAQ: REAL) fell sharply on the open of buying and selling on Nov. 10, shortly dropping 13.5% of their value. By 10:30 a.m. EST or so, the stock had pared that loss a bit however was nonetheless decrease by practically 5%. The corporate’s after-the-close earnings launch on Nov. 9 was the large driver right here.
The RealReal supplies a platform by means of which customers can promote undesirable luxurious items. Within the face of the COVID-19 pandemic, with individuals caught at residence, extra customers have been shopping for on-line. However that hasn’t translated to elevated gross sales for this firm. To place some numbers on that, The RealReal noticed a year-over-year income enhance of 11% within the first quarter, which wasn’t materially impacted by the pandemic. After which the underside fell out, with a 21% income decline within the second quarter. That was a interval throughout which many different on-line retailers had been seeing elevated gross sales pushed by bodily retailer closures, social distancing, and other people working from residence.
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The third quarter, which the corporate simply reported, did not do a lot to assist the story right here. Administration tried to place a optimistic spin on issues, noting that gross sales elevated 16% sequentially from the second quarter. Nonetheless, gross sales had been nonetheless 4% under the identical interval in 2019. Income fell 5%, resulting in crimson ink of $0.49 per share in contrast with a lack of $0.30 in the identical quarter of the prior 12 months. No marvel buyers had been a bit downbeat. The RealReal seems to be one of many few on-line retailers that hasn’t seen a profit from the broader COVID-19-related on-line gross sales increase.
It is exhausting to say precisely what is going on on with the corporate’s enterprise due to the advanced retail setting created by the coronavirus. With gross sales beginning to come again, it may merely be that purchasing luxurious items wasn’t what customers had been occupied with as COVID-19 ravaged the world. Or it might be that on-line gross sales of consigned luxurious items is one thing of a distinct segment market that might be exhausting to scale as a result of luxurious consumers need extra pampering than a web site can present. That final truth is an fascinating one to contemplate, on condition that The RealReal simply opened one other bodily retailer through the third quarter. Lengthy-term buyers want to think twice concerning the large image right here.
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