As other retailers turn to layoffs to cut costs, The RealReal has been staffing up after labor shortages impaired its ability to obtain inventory, executives said on Tuesday. Total Q2 revenue rose 47% year over year to $154 million, as gross merchandise value rose 30% to $454 million.
The resale site’s customers shifted to lower-priced items in the period, helping to send average order value down 7% to $486 in the last 12 months. In that time, the number of orders rose 39% and the number of active buyers rose 22% to 889,000.
Net loss narrowed to $53.2 million compared to $71 million in the same period last year, according to a company press release.
Speaking to analysts on Tuesday, The RealReal’s executives — who are still in search of a chief executive after founder Julie Wainwright’s abrupt departure in June — said they expected the late-pandemic surge in demand for apparel to subside eventually.
But that happened more quickly than they anticipated. In addition, customers switched from buying higher-end items like jewelry and watches to less pricey clothes and footwear, they said.
“Our top-line growth experienced some pressure during the second quarter due to a sales labor-related supply shortfall and a mix of product sold more reflective of our pre-COVID mix,” Chief Operating Officer Rati Sahi Levesque, who is also serving as co-interim CEO, said in a statement.
Measures to address the staffing shortfall have included boosting compensation in some areas and employing self-service technology for consignors, Levesque also said.
Despite exceeding its expectations for the quarter in some metrics, the company tempered its outlook for the full year due to its supply shortfalls and the shifts in consumer demand, while saying it’s on track to be profitable on an adjusted EBITDA basis in 2024. The lowered guidance is based mostly on transitory issues, including the company’s plans to rely less on inventory it purchases rather than consigns — which boosts sales but is less profitable; it doesn’t take into account further deterioration in the economy, according to Chief Financial Officer Robert Julian, also a co-CEO.
“We are not economists and we don't have a crystal ball,” Julian said, according to a Seeking Alpha transcript. “And so we don't know really what to expect in the second half of the year. Certainly, there's some uncertainty just broadly. But that's not really the primary reason that we have adjusted our topline.”
That could be ambitious, according to some analysts, who remain largely in wait-and-see mode.
“2Q was a tough quarter for [The RealReal], as several dynamics in the model changed fairly rapidly (including labor and mix headwinds that negatively impacted GMV),” Wells Fargo analysts led by Ike Boruchow said in emailed comments, adding that the Q2 report and company guidance “likely brought more questions than answers.”