The RealReal’s ‘Reset’ Aims for Smaller but More Profitable Business – WWD

The RealReal Inc. has seen a lag as it implements its higher-margin inventory turnaround strategy under a new chief executive officer.

For the second quarter ended June 30, The RealReal’s net losses totaled $41.3 million compared to $53.2 million in the same period a year ago. This compares to $82.5 million in net losses in the first quarter, including a $36.4 million restructuring change. Total revenue decreased 15 percent to $131 million from $154 million a year earlier.

For the second quarter, the company’s adjusted losses before interest, taxes, depreciation and amortization narrowed to $22.3 million compared to $28.8 million (or 18.7 percent of total revenue) in the same period a year earlier.

Upon taking helm as CEO of The RealReal in February, John Koryl implemented a series of changes to help get the company back on track, including cutting about 230 jobs and closing two flagships, in San Francisco and Chicago. Its focus now is on the right product mix.

“During the second quarter, we continued to transition away from company-owned inventory and consigned items that sell for under $100, which are not profitable for The RealReal,” Koryl explained in a press statement. “These actions resulted in higher average order value, a higher gross margin rate, reduced company-owned inventory, and a smaller adjusted EBITDA loss compared to the prior year. We view the shift to a higher gross margin rate as a structural change to our business model. Therefore, we believe the changes implemented in 2023 will reset the company to a slightly smaller but more profitable business. With this new margin structure, we expect to return to profitable top-line growth next year and we continue to project that we are on track to achieve adjusted EBITDA profitability on a full-year basis in 2024.”

The company maintained its belief that its higher-value “strategic shift” in inventory will pay off. This runs the gamut of changes, from a 2022 policy update to consignor commission rates, to the recent trial of on-site advertising, as a way to convert billions of website impressions. Analyst are watching how the company takes to the changes.

With a focus on high-margin consignment pieces, The RealReal’s gross merchandise volume decreased 7 percent to $423 million (down from $454 million). That being said, active buyers increased 11 percent to 985,000 (up from 889,000 a year earlier). Average order value was $537 (up 10 percent from $486). 

Shares of The RealReal closed at $2.17 per share per data from Yahoo Finance.

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