The RealReal Looks to Consign Its Way to Near-Term Profitability

With its stock trading at about $1.35 per share — after falling over 90% in the past two years — it could be argued there’s not a lot more downside for luxury resale marketplace The RealReal.

In fact, for context, The RealReal’s shrunken market value is about 30% smaller than the $196 million annual loss it just posted.

And yet, John Koryl, the beleaguered digital retailer’s newly appointed CEO — only the second person to hold the top job since founder Julie Wainwright’s sudden departure last summer — told investors those money-losing days were numbered.

“I have no illusions that The RealReal’s path to profitability will be achieved overnight, or with only minimal effort,” Koryl told investors on the company’s Q4 earnings call Tuesday afternoon before cutting to the bottom line: “But based on what I’ve seen in my first month … I am confident we can achieve profitability in the near future,” he added.

This, despite the fact that profitability has evaded the San Francisco-based luxury reseller and retailer since its trading debut in June 2019 — and for about a decade prior to its going public.

Achieving profitability is not only the company’s focus, Koryl said — it was his forte, pointing to the turnaround skillset he had honed during his time spent at Canadian Tire and Neiman Marcus.

“I have built a 30-year career finding efficiencies and driving profitable growth at eCommerce businesses,” he said, later assuring investors and analysts that “I believe I have the knowledge and experience within a retail-tech environment to effectively lead the company through this process.”

A Smidge of MoJo

According to President and Chief Operating Officer Rati Levesque, turnaround steps put in place last fall can be seen contributing to gains in several key Q4 metrics, including revenue that was up 10%, GMV rising 13%, orders up 15% and active buyers ticking up 20%.

“The first key [turnaround] initiative was to update our commission structure, which we implemented in November of 2022,” Levesque said. “The goals were to optimize take rate, limit the consignment of lower value items and increase the supply of higher value items; we’re closely monitoring the impact of our recent changes, and we are encouraged by the early results.”

At the same time, she said the interim leadership team — which will stay on in their COO and CFO roles — also worked to improve efficiencies and cut costs, including a 7% workforce reduction and a rationalization of its real estate footprint that saw the closure of two flagship stores, two neighborhood stores, and two luxury consignment offices.

“We closed underperforming stores and will continue to thoughtfully assess our store fleet to optimize our retail footprint,” she said, adding that the company “continued to be optimistic about brick and mortar retail” as a way to scale supply and promote the brand but would be disciplined in opening and closing stores to efficiently manage our costs.

“We’re especially encouraged that the changes we made during the year, in particular shrinking the direct business and growing the profitable consignment business, were evident in our fourth quarter results,” CFO Robert Julian told investors. “It’s important to note that the revenue growth was a combination of profitable consignment revenue growing 27% and unprofitable direct revenue shrinking 27%,” he added.

In short, Koryl said, people should look at The RealReal as a “bifurcated business,” where two-thirds of its business is still growing.

“The overall growth rate is really two different stories. The good consign business, the profitable consign business is growing very healthily, and the unprofitable direct business is shrinking.”