The RealReal (REAL) Posts Record Sales, But The Losses Keep Growing

The RealReal (REAL) reported record sales for its second quarter, with gross merchandise value (GMV) reaching $617 million, a 22% increase from the previous year. Total revenue grew 17% to $193 million, with consignment revenue increasing 15% and Direct Revenue, the company's owned inventory channel, growing 26%. Profitability also improved, with gross margin reaching 74.4% and Adjusted EBITDA margin jumping to 7%.

However, the company's GAAP losses widened, with a net loss of $27 million, or 14.1% of total revenue, compared to $11 million in the prior year. The increase is attributed to an $18.6 million non-cash adjustment due to the change in fair value of warrant liability, which is unrelated to the business's performance. On a non-GAAP basis, net losses per share narrowed to $0.01 from $0.06.

Hedge fund ownership of RealReal increased to 47 funds, while short interest sits at 15.29% of the float. The forward P/E of 40.98 suggests the market expects significant future earnings growth. However, the company's operating and accounting stories appear to be moving apart, with GMV, margins, and guidance improving while GAAP losses widen due to the non-cash warrant charge.