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Why Shares of The RealReal Tumbled Today

Timothy Green, The Motley Fool

What happened

Shares of The RealReal (NASDAQ: REAL) plunged on Wednesday despite the company reporting positive second-quarter results. Revenue surged by more than 50% for the online luxury goods marketplace, but the stock was dragged down by a broad stock market decline triggered by trade war and recession fears. The RealReal stock was down about 14.8% at 3:45 p.m. EDT on Wednesday.

So what

The RealReal reported second-quarter revenue of $71.0 million, up 51% year over year and nearly $0.9 million higher than the average analyst estimate. Consignment and service revenue rose 44% to $60.7 million, while direct revenue jumped 114% to $10.3 million. Gross merchandise volume, which is the total value of products sold through the marketplace, increased 40% to $228.5 million.

A keyboard with a red button with a shopping cart icon on it.

Image source: Getty Images.

Non-GAAP earnings per share using the post-IPO share count was a loss of $0.28, beating analyst expectations by $0.03. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was a loss of $20.9 million, while free cash flow was a loss of $32.1 million.

"As we continue to unlock supply, invest in our technology platform, and instill trust in our marketplace, we are revolutionizing luxury resale and delivering tremendous value to our consignors and buyers," said The RealReal CEO Julie Wainwright in prepared remarks included in the earnings release.

Now what

For the third quarter, The RealReal expects gross merchandise volume between $233 million and $239 million. For the full year, the company sees gross merchandise volume between $974 million and $988 million.

While The RealReal beat analyst estimates across the board, a plunging stock market dragged down shares of the online marketplace. Recession fears have ramped up, and it's hard to say how an upstart luxury goods marketplace will fare if the U.S. economy weakens.

The RealReal reported solid results, but it wasn't enough in this market environment.


Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com