The luxury resale platform’s stock soared 30 percent Wednesday, after exceeding Wall Street estimates for revenue and profit in its third-quarter earnings.
Analysts point to its gross margin improvements, as well as its adjusted EBITDA loss of $7 million, down from a $28.2 million loss in the same period last year. The company is slated to reach profitability next year, and its latest report shows that it’s well on its way.
”We are very pleased with the potential progress that we can make and deliver on that commitment,” chief executive John Korryl said in the earnings call Tuesday.
In the third quarter, The RealReal’s gross merchandise value, a metric of sales, fell 8 percent due to its strategic elimination of lower-value products. Earlier this year, the company announced it would be testing new revenue streams such as on-site advertising and warranty return insurance. Neither will launch until next year, according to Korryl.
”[The RealReal] is making the necessary adjustments to improve profitability, and we’re starting to see these changes pay off,” Wells Fargo analyst Ike Boruchow wrote in a note Tuesday evening. “While this does come with a slow down in sales, margin improvements are hard to ignore.”
Inside The RealReal’s Big Reset
The luxury resale platform’s CEO John Koryl spoke with BoF exclusively about new revenue streams, consignment updates and other ways of reaching profitability after a decade of losses.