Wow! That is serious permanent damage.
Consigning/buying with The Real Real TRR
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Did anyone else notice this? It’s likely part of the reason for the TRR chaos:
No doubt. Always chaos when there's a change in leadership.
I wonder, too, how much the opening of all the brick and mortar stores played a role as well. That's a lot of overhead, likely much more than either purchasing or renting large warehouse space.
Great information, thank you! I read it briefly, couldn't understand how did they lose that much, on the other hand, very recently I was browsing their website, I saw they made a huge mistake, it was an unforgivable and very easily noticeable mistake that any established company should not have made, so I kinda of believe they didn't manage their business well.
I will never EVER buy a single thing from this company (let alone sell after having read these comments). Bought a pair of earrings that were grossly misrepresented - absolutely disgusting residue that was never cleaned off, and rusty posts - not disclosed and not represented in photos. Fortunately I was able to send them back but they refused to remove a restocking fee for the return.
Did anyone else see this? It talks about a lot of things covered in this thread.
Yep, pretty much nails it. Hopefully leadership can turn TRR around because I still think the second hand/consignment model is a good one, and one of the best ways to shop. It's taught me how to tell quality from hype and allowed me access to things I never would have been able to afford otherwise. Likewise to hone my aesthetic and keep my closet lean and functional.
I certainly identify with the magazine writer. the only and last time I consigned with them was in 2015 when I cleared out my Wall St closets, big brand designer names etc, Hermes bag, belts, and fur coat. A young woman came out to review and take everything her. She said back then that about 60% of their consignors were boutiques and wholesalers and the other 40% were ppl like me looking to clear out their closets. TRR has always needed a constant and stead supply of inventory from dept stores and boutiques, and waiting for individuals was always challenging. good times back then
this is an interesting read
https://www.wsj.com/articles/the-re...fit-11661513400?mod=Searchresults_pos1&page=1
Chief Financial Officer Robert Julian, who joined in October, said the company has historically focused too much on increasing total transaction values and not enough on selling the goods that bring in the most profit. He also serves as interim co-chief executive, along with Rati Sahi Levesque, the company’s president, following the June resignation of founder Julie Wainwright from the CEO post.
Mr. Julian’s strategy includes selling more goods on consignment, meaning secondhand items from customers’ closets, and fewer goods purchased through wholesalers. “I would say there’s been massive changes in terms of how we look at the business, how we analyze the business, what we consider to be our key metrics and key indicators,” Mr. Julian said.
Robert JulianPhoto: The RealReal
The San Francisco-based company, which was established in 2011, sells items such as Hermès bags and Rolex watches online as well as through 16 bricks-and-mortar stores in cities including New York, Chicago and Los Angeles.
During the second quarter, 28% of revenue came through direct sales from wholesalers and other vendors, 63% came from consignment and the remainder came from charging buyers for shipping. Gross margin on the company’s direct sales was 14%, compared with 85% items sold on consignment, Mr. Julian said.
The RealReal has boosted sales since its initial public offering in 2019, but profit has remained elusive. During the second quarter, revenue jumped 47% from a year earlier to $154.4 million, while gross merchandise value, measuring total transactions, increased 30% to $454 million. The company reported a net loss of $53.2 million, compared with a net loss of $70.7 million a year earlier.
Its stock price has plummeted this year as investors have shifted away from unprofitable companies. Shares of the RealReal have declined by around 80% since the beginning of the year, closing Thursday at $2.38.
The RealReal sources most of the consignment goods it sells through its sales staff, who meet with clients in their homes or at company stores to help customers pick out items to consign. It also allows clients with secondhand wares to ship the items to the company or drop them off at one of its 16 stores or three consignment offices.
The company takes possession of the items it sells, but doesn’t record consignment goods as inventory that it owns. Instead, it generates revenue by taking a percentage of the proceeds on transactions between buyers and sellers, called a take rate. Last year, The RealReal’s take rate on consignment items was 34.7%, down from 35.7% in 2020.
Goods purchased directly from wholesalers or other vendors do count as inventory.
The RealReal this year set a goal of achieving $100 million in adjusted earnings before interest, tax, depreciation and amortization in 2025. In 2021, that figure stood at a $126.9 million loss. The company plans to hit its profitability goal by increasing revenue at a faster rate than expenses, Mr. Julian said. Analysts, who said the plan is feasible but ambitious, said they expect the company to report net income by 2027.
The biggest lever the company can pull to improve its profitability is putting a lid on fixed costs, Mr. Julian said. Expenses have increased as the RealReal has expanded by adding staff, opening new locations and setting up the infrastructure necessary to operate an e-commerce business, he said. Operating expenses during the second quarter rose 8% from a year earlier to $138.7 million.
A RealReal store in Manhattan in 2020. Photo: Nina Westervelt/Bloomberg News
“There are a lot of infrastructure costs that they need to operate their business,” said Tom Nikic, a senior vice president of equity research at financial firm Wedbush Securities Inc. He noted the RealReal authenticates its products, which involves staff, facilities and security.
Mr. Julian said he aims to keep fixed costs increasing no faster than inflation. In 2021, 62% of the company’s operating expenses were considered support functions, and therefore primarily fixed costs, the RealReal said during an investor presentation in March.
The company’s push to generate a profit comes amid uncertainty about the overall economy. It is one of several retailers that recently lowered financial guidance for the year. Department-store chains Macy’s Inc. and Nordstrom Inc. this week cut their outlooks, citing risks of a steeper downturn.
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The RealReal now expects an adjusted Ebitda loss of between $100 million and $110 million this year, compared with previous guidance of an adjusted Ebitda loss between $100 million and $80 million. The company on an earnings call this month attributed the revision to challenges sourcing consigned goods, as well as shifts in consumer demand toward lower-priced, everyday apparel and away from higher-end items such as jewelry and watches.
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Sean Dunlop, an equity analyst at research firm Morningstar Inc. said he doesn’t expect the RealReal to see a significant decline in demand in 2022.
The market for online consignment clothing has become more competitive, said Oliver Chen, a managing director at investment firm Cowen Inc. In addition to publicly traded consignment retailers such as Poshmark Inc. and ThredUp Inc., consumers also sell secondhand luxury goods through e-commerce giant eBay Inc. “Anyone who resells Gucci” is a competitor to the RealReal, Mr. Chen said.
Write to Kristin Broughton at [email protected]
https://www.wsj.com/articles/the-re...fit-11661513400?mod=Searchresults_pos1&page=1
The RealReal CFO Aims to Limit Costs, Boost Margins to Turn Profit
Luxury consignment retailer works to keep expenses steady while increasing sales of higher-margin products, says finance chief and interim co-CEO Robert Julian
Kristin BroughtonAug. 26, 2022 7:30 am ETChief Financial Officer Robert Julian, who joined in October, said the company has historically focused too much on increasing total transaction values and not enough on selling the goods that bring in the most profit. He also serves as interim co-chief executive, along with Rati Sahi Levesque, the company’s president, following the June resignation of founder Julie Wainwright from the CEO post.
Mr. Julian’s strategy includes selling more goods on consignment, meaning secondhand items from customers’ closets, and fewer goods purchased through wholesalers. “I would say there’s been massive changes in terms of how we look at the business, how we analyze the business, what we consider to be our key metrics and key indicators,” Mr. Julian said.
The San Francisco-based company, which was established in 2011, sells items such as Hermès bags and Rolex watches online as well as through 16 bricks-and-mortar stores in cities including New York, Chicago and Los Angeles.
During the second quarter, 28% of revenue came through direct sales from wholesalers and other vendors, 63% came from consignment and the remainder came from charging buyers for shipping. Gross margin on the company’s direct sales was 14%, compared with 85% items sold on consignment, Mr. Julian said.
The RealReal has boosted sales since its initial public offering in 2019, but profit has remained elusive. During the second quarter, revenue jumped 47% from a year earlier to $154.4 million, while gross merchandise value, measuring total transactions, increased 30% to $454 million. The company reported a net loss of $53.2 million, compared with a net loss of $70.7 million a year earlier.
Its stock price has plummeted this year as investors have shifted away from unprofitable companies. Shares of the RealReal have declined by around 80% since the beginning of the year, closing Thursday at $2.38.
The RealReal sources most of the consignment goods it sells through its sales staff, who meet with clients in their homes or at company stores to help customers pick out items to consign. It also allows clients with secondhand wares to ship the items to the company or drop them off at one of its 16 stores or three consignment offices.
The company takes possession of the items it sells, but doesn’t record consignment goods as inventory that it owns. Instead, it generates revenue by taking a percentage of the proceeds on transactions between buyers and sellers, called a take rate. Last year, The RealReal’s take rate on consignment items was 34.7%, down from 35.7% in 2020.
Goods purchased directly from wholesalers or other vendors do count as inventory.
The RealReal this year set a goal of achieving $100 million in adjusted earnings before interest, tax, depreciation and amortization in 2025. In 2021, that figure stood at a $126.9 million loss. The company plans to hit its profitability goal by increasing revenue at a faster rate than expenses, Mr. Julian said. Analysts, who said the plan is feasible but ambitious, said they expect the company to report net income by 2027.
The biggest lever the company can pull to improve its profitability is putting a lid on fixed costs, Mr. Julian said. Expenses have increased as the RealReal has expanded by adding staff, opening new locations and setting up the infrastructure necessary to operate an e-commerce business, he said. Operating expenses during the second quarter rose 8% from a year earlier to $138.7 million.
“There are a lot of infrastructure costs that they need to operate their business,” said Tom Nikic, a senior vice president of equity research at financial firm Wedbush Securities Inc. He noted the RealReal authenticates its products, which involves staff, facilities and security.
Mr. Julian said he aims to keep fixed costs increasing no faster than inflation. In 2021, 62% of the company’s operating expenses were considered support functions, and therefore primarily fixed costs, the RealReal said during an investor presentation in March.
The company’s push to generate a profit comes amid uncertainty about the overall economy. It is one of several retailers that recently lowered financial guidance for the year. Department-store chains Macy’s Inc. and Nordstrom Inc. this week cut their outlooks, citing risks of a steeper downturn.
Advertisement - Scroll to Continue
The RealReal now expects an adjusted Ebitda loss of between $100 million and $110 million this year, compared with previous guidance of an adjusted Ebitda loss between $100 million and $80 million. The company on an earnings call this month attributed the revision to challenges sourcing consigned goods, as well as shifts in consumer demand toward lower-priced, everyday apparel and away from higher-end items such as jewelry and watches.
Newsletter Sign-up
WSJ | CFO Journal
The Morning Ledger provides daily news and insights on corporate finance from the CFO Journal team.
Sean Dunlop, an equity analyst at research firm Morningstar Inc. said he doesn’t expect the RealReal to see a significant decline in demand in 2022.
The market for online consignment clothing has become more competitive, said Oliver Chen, a managing director at investment firm Cowen Inc. In addition to publicly traded consignment retailers such as Poshmark Inc. and ThredUp Inc., consumers also sell secondhand luxury goods through e-commerce giant eBay Inc. “Anyone who resells Gucci” is a competitor to the RealReal, Mr. Chen said.
Write to Kristin Broughton at [email protected]
Interesting, and I can see that there wouldn't be enough "private" closets to draw from (although Dora Maar is doing a pretty good job of doing just that—and the site is much more attractive). Although, everything I've purchased from them clothing-wise (and I've been a customer since they've started up) has always seemed pre-worn. Not in bad shape, but certainly not current end of season stuff from boutiques with tags.
Most likely. Any sales over $600 from any platform, you're supposed to get a 1099. eBay is fighting tooth and nail to reverse the legislation or to at least have Congress up the limit. Going from $20K to $600, what does that tell you? "Make billionaires pay their fair share" my ass . . .
Just spoke to TRR. They state they will be in compliance with the law which means filing 1099 for every person at $600.00 or more.
Same with PayPal
Same with PayPal