The RealReal shows strength of its secondhand luxury model in first post-IPO report
RealReal Inc. stock soared after earnings indicated that even when luxury goods are sold at a discount, The RealReal’s secondhand goods are still in high demand.
The RealReal REAL, -6.15% reported sales in line with expectations during its first quarterly announcement post-IPO. Gross merchandise volume (GMV) rose 40% year-over-year to $228.5 million.
Shares were up in Tuesday after-hours and in Wednesday premarket, though they fell about 5% in early trading alongside many others after concerns about global economic data.
The RealReal stock began trading on June 28.
“We view the positive after-market stock reaction reflects some easing of investors’ concerns on higher promotions in the luxury space weighing on The RealReal’s growth trajectory,” Cowen analysts led by Oliver Chen wrote.
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“We acknowledge that average order value (AOV) was flat year-over-year due to earlier-than-expected promotions in the luxury space. However, management highlighted promotional trends in 3Q appear similar to prior years and they expect AOV in 3Q to improve year-over-year.”
Analysts say they’re “encouraged” by the loyalty of the customer base and its progress in automation.
The RealReal’s Chief Executive Julie Wainwright said department store discounting isn’t new for the company and it has already seen a fast recovery. The impact is felt more in women’s clothing.
“I would say if department stores get desperate in September, October, we might have some of that tension, again that will be offset by high seasonality,” she said on the earnings call, according to a FactSet transcript.
“[T]his this is one of the beauties of having product diversity because we don’t see it on fine jewelry, watches, men’s and streetwear, and even women’s handbags,” she said.
Cowen rates The RealReal outperform with a $32 price target.
“While 2Q AOV was modestly below expectations due to increased promotional activity across the industry, management believes the company is partially insulated from periods of aggressive discounting given its category diversification, and the inverse relationship between pricing and active buyer growth,” wrote Stifel analysts in a note.
“As the leader in the luxury consignment space, we believe The RealReal has strong growth potential and ongoing investments in automation should drive operating leverage in pricing and fulfillment.”
Stifel rates The RealReal shares buy with a $30 price target.
The RealReal shares have fallen 37.6% over the past month while the S&P 500 index SPX, -1.89% is down 4.4% for the period.
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