Route to Profitability Looks Viable for The RealReal, but Competitive Position Remains Shaky

The luxury apparel resale space has been chronically underserved, with an inefficient network of brick-and-mortar boutiques capturing the bulk of sales over the last decade. The market that arose from that model was heavily fragmented, bound by retail catchment area, and featured high frictional costs, high commissions, and slow turnover—a far cry from other asset classes like cars, homes, and collectibles, which have long enjoyed more effective used marketplaces. The RealReal exists to serve this end market more efficiently, with white-glove inventory sourcing, faithful authentication protocols, and an online platform leading to step-change improvements in platform depth, turnover, and vibrancy. We view the company's strategy as relatively sound, and appreciate its efforts to restructure its looming 2025 debt to assuage bankruptcy concerns.