The Ratings Game: RealReal says supply chain impact of COVID-19 is over as the company looks ahead to the holidays

The RealReal Inc. is over the pandemic, saying in its third-quarter earnings that the effects of COVID-19 on the company’s supply chain are a thing of the past and a strong holiday season lies ahead.

“Based on what we know today, we believe the operational and supply impacts to our business from COVID-19 are effectively behind us, and we are well-positioned for a strong holiday season,” said Chief Executive Julie Wainwright in an earnings release statement.

“Additionally, we believe The RealReal’s unique business model is largely insulated from supply chain shortages and certain of the inflationary impacts many retailers are experiencing.”

The RealReal, Inc.

is an online and brick-and-mortar marketplace for authenticated luxury consignment. The RealReal sells consigned clothing, fine jewelry, watches, fine art and home decor.

On the call, Wainwright said the company wasn’t impervious to higher shipping costs and labor challenges, like many other companies in the retail space. But shipping diversification and automation at its facilities are helping.

Read: Supply-chain delays now could lead to discounts for shoppers down the line, analysts say

Some of Wainwright’s comments echo those made by ThredUp Inc.
another secondhand retailer, with both companies emphasizing the benefits of their independence from traditional supply chain channels.

Both companies reported better-than-expected third-quarter results late Monday. The RealReal says gross merchandise value (GMV) rose 50% year-over-year to $368 million.

See: ThredUp is lowering prices to attract customers who are paying more for other goods due to inflation

“We are encouraged by supply trends inflecting with at-home appointments reaching above the pre-pandemic levels and a rebound in consumer demand for women’s apparel items, which drives higher engagement,” wrote Cowen analysts led by Oliver Chen.

“We believe RealReal is well-positioned from a supply perspective ahead the holiday season, which should in turn yield new and existing buyer consumption.”

Cowen rates RealReal

stock outperform with a $19 price target, cut from $23.

Wainwright said on the earnings call that 30% of the company’s consignors come from its neighborhood stores. Still Wedbush analysts are cautious about the path ahead.

“RealReal’s GMV growth potential is well-understood, but given heavy losses thus far in their history, the main question is when/if they can ever be profitable,” analysts said.

Wedbush rates RealReal stock neutral with a $16 price target, up from $14.

Also: Michael Kors is bouncing back and Versace is in vogue, driving optimism for Capri

Wells Fargo analysts are more optimistic, noting the company’s momentum. Analysts there rate Realreal shares overweight with a $24 price target.

“While the traditional retail industry has been adversely affected by multiple ‘disruptors’ over the past 10-to-15 years (off-price, fast fashion, e-commerce), we believe that resale is the next big ‘disruptor’ in the retail industry. Furthermore, we think that the luxury market is one of the most attractive sub-sectors for secondhand goods (high-value brands at accessible price points),” analysts said.

Wells Fargo put the value of the luxury resale market at $7 billion.

“Given that the market is currently dominated by brick-and-mortar consignment shops, we believe that RealReal’s robust digital platform will allow it to take share over time.”

RealReal shares soared 14.2% in Tuesday trading, though shares have tumbled 19.8% for the year to date.

The S&P 500 index

has gained 24.7% for the period.

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