Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. brand authenticators who inspect thousands of items each day. "We had slideshows which helped you authenticate an item," Bobb said. Gustke will continue to serve as CFO until his departure, anticipated at the end of the year, or until a successor is found and will assist in the transition to his successor. Dozens of former employees most who were afraid to be quoted by name said the company's claim of expert authentication was not accurate. CNBC sent the scarf to Loro Piana, which confirmed the wrong tag was attached but the scarf was authentic. The RealReal is the worlds largest online marketplace for authenticated, resale luxury goods, with more than 25 million members. A report by Cowen Equity Research estimates $200 billion worth of U.S. luxury goods are available for resale, saying The RealReal is "the only platform currently that offers a vast product offering with 100% authentic luxury items. Weve brought more than 22 million members into our circular marketplace, educating them about the lasting value of luxury goods and driving a shift toward more conscious consumption, added Wainwright. Do womenreallywant to buy someone elses dress? our Subscriber Agreement and by copyright law. Asked for additional comment, Erin Santy, head of public relations, said, "What I provided is our final statement. "I'm comfortable when I go to buy something, I'm getting a fair deal, if not a steal.". Of nearly 1,400 reviews of the company found online, the top complaints are fakes, damage and poor customer service. ASP benefitted from strength in the Fine Jewelry category and strong demand in high-value handbags. Another former manager said The RealReal's authenticity claim should be revised. The RealReal also had a number of milestone achievements in its work to extend the life of luxury and create a more sustainable, circular future. This means some obvious problems with merchandise can be overlooked. Based on the strength of the shifts weve seen, like the nearly five-times greater demand for understated bags versus statement bags, we believe this will be a lasting trend.. With the holidays coming up, she also expects gift-able Gucci items that spark joy, like scarves, jewelry, and crossbody bags, to be popular. An internal chart from 2018 obtained by CNBC shows which products and items were being authenticated by copywriters. In this precise matter, the House has brought this lawsuit to reaffirm its commitment to protect consumers seeking to purchase Chanel products. Adjustments to reconcile net loss to cash used in operating activities: Reduction of operating lease right-of-use assets, Accretion of debt discounts and issuance costs. Other First Quarter Financial Highlights and Key Operating Metrics. The programs first collection, ReCollection 01, was created in partnership with A-COLD-WALL*, Balenciaga, Dries Van Noten, Jacquemus, Simone Rocha, Stella McCartney, Ulla Johnson and Zero + Maria Cornejo to collectively promote the importance of creating an afterlife for clothing. She said a manager had alerted her to the fake items she had published. Julie Wainwright, The RealReals founder and CEO, described the partnership as being rooted in sustainability. And when you have such a high volume that you have to get through and you're worried about hitting your goal, at the end of the day, I don't really think they cared whether it was real or not anyway.". About The RealReal, Inc. However, late Monday during the company's earnings call, Wainwright acknowledged that copywriters do authenticate certain items. There's some level of human error and opinion involved. Other factors that could cause or contribute to such differences include, but are not limited to, the impact of the COVID-19 pandemic and the recent social unrest on our operations and our business environment, any failure to generate a supply of consigned goods, pricing pressure on the consignment market resulting from discounting in the market for new goods, failure to efficiently and effectively operate our merchandising and fulfillment operations and other reasons. Give us a call at 1.888.737.4132 and well help you start selling, or simply print a free shipping label to send your items directly. Investor Relations Contact:Paul BieberHead of Investor Relations and Capital Marketspaul.bieber@therealreal.com, Press Contact:Erin SantyHead of Communicationspr@therealreal.com. "We write this letter to express our concern that in the course of those interviews, you may have used and disclosed The RealReal's highly sensitive, proprietary information you may have unlawfully taken from The RealReal.". Investors should also note that non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry. For $12 a month, get 24-hour advance access to sales and special invitations to monthly promotions. In the ready-to-wear category, the daily quota was 105 items for an eight-hour shift and 131 items for a 10-hour shift. This copy is for your personal, non-commercial use only. With a rigorous authentication process overseen by experts, The RealReal provides a safe and reliable platform for consumers to buy and sell their luxury items. Copywriters are expected to consistently reach their daily quotas.". Your cart expired. Get $25 site credit when you share your email, By joining The RealReal, you agree to the, By logging into The RealReal, you agree to the, Choose a password not used before or elsewhere. But she said she got even more suspicious when she saw a very similar dress from a lower-end brand on the site. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in this earnings release. We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. For example, Prada handbags, wallets and pouches were sent to the authentication team, while shoes and garments were not. The case was eventually settled. SaaS, Android, Cloud Computing, Medical Device). At our 19 retail locations, including our 16 shoppable stores, customers can sell, meet with our experts and receive free valuations. ____________________________1 Based on data from The RealReals Sustainability Calculator, which quantifies the positive impact of consignment measuring the greenhouse gases, energy output and water usage saved by the resale of womens and mens items. Types of diversity represented in an organization, specifically of those who are founding members, currently the CEO, or have check-writing abilities in an investment firm. Weve helped our community earn billions of dollars in commission by monetizing the pieces theyre no longer wearing or using., The RealReal also announced today that Matt Gustke, Chief Financial Officer (CFO), has decided to leave the company. The CEO has said there are "no fakes on our site" and "every single item [is] authenticated.". Buyers who purchased in-store in Q1 generated AOVs approximately 2.6 times higher than online-only buyers. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Q1 store highlights included: In addition to engaging consignors through neighborhood stores, the company resumed at-home concierge appointments in select markets in early March and nationwide in early April with comprehensive safety protocols. What Does RealReal CEOs Departure Say About the Future of reCommerce? "The thing about authentication is that there's no formal training, so it's kind of like the wild West in a sense," Velez said. All Rights Reserved. The early performance of at-home concierge appointments is very encouraging and we believe is indicative of pent up consignor supply. By signing up you agree to our User Agreement and Privacy Policy & Cookie Statement. Adjusted EBITDA includes $1.0 million of COVID-related expenses. I'm looking to see what's next.". In a word, yes. He also would not respond to questions about the copywriters' duties and quotas. But people will think that that's all it needs. The changes are effective immediately. "I don't want you to risk purchasing fake product.". Parchment, who described her job as a team leader tasked with spotting mistakes, said the explosive growth of the company and demands on employees made it unbearable to work there. Wetzbarger was the face of the authentication department and appeared in numerous videos on the site that explained the steps of the company's vetting process, reassuring potential customers that all the items on the site were real. Itpays. The RealReal said it will refund the price of an item if there is a question about its authenticity and that it has a zero-tolerance policy for counterfeiting. Active, Closed, Last funding round type (e.g. These statements include, but are not limited to, statements about future operating results, including the amounts of our operating expense and capital expenditure investments or reductions and our strategies, plans, commitments, objectives and goals, in particular in the context of the impacts of the COVID-19 pandemic and the recent social unrest. Those may feel more appropriate for the current climate, and theyre also smart investments. "It's so much product. Over the past year, Matt and I have talked about his desire to leave the company to pursue other interests and we reached a mutual decision that this was the right time to make a change as The RealReal transitions to a new phase of growth.. And while its too soon to expect Guccis spring 2020 collection to be on The RealReal yetits only been in stores for a few monthsthe more pared-back, minimalist look jibes with a broader trend Skoda reported last month. Text "REALHELP" to 50347 to get in touch with one of our experts. Parchment and other former employees said that copywriters, who often examined the items, did not have sufficient training to spot fakes. Some of the most counterfeited brands in the world include Chanel and Gucci, according to a 2015 World Customs Organization Report. The head office of the company is located in San Francisco, California. All items are pre-owned and consigned to The RealReal. "I was disappointed to see a website like @therealreal selling an overpriced fake version of the shoe which I never even made in a flat version," Muaddi wrote on her Instagram page. Pros: Edit Lists Featuring This Company Section, Inside The RealReal, Cost-Cutting Was a Tough Sell Even as Losses Mounted, The RealReal, Target Show Struggles in Retailing. "It is expected that copywriters will reach their daily quota during their shift," a document marked "updated Feb. 1, 2019" stated. So I would go in and do it myself, praying that it was authentic. San Francisco Bay Area, Silicon Valley), Operating Status of Organization e.g. The RealReal has retained the services of an executive recruitment firm and a search for a new CFO is underway. The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands): (1) We exclude employer payroll tax expense related to employee stock-based transactions because we believe that excluding this item provides meaningful supplemental information regarding our operating results. Get this delivered to your inbox, and more info about our products and services. every single item has already been inspected, The RealReal is an online luxury consignment store that differentiates itself by saying everything is 100% real. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. And it's overwhelming. Being on the inside of becoming an industry leader and building a massive movement to grow the circular economy and reinvent luxury resale has been immensely gratifying. We stand by our authentication process and will always work with our customers to make things right," the company said in a statement. Made out of real gold? The company is on track to operate a total of 10 neighborhood stores by the end of Q2, having opened stores in Brooklyn, N.Y.; Newport Beach, Calif.; and Greenwich, Conn., in Q1 and kicked off Q2 expanding to Texas with locations in Austin and Dallas. The company returned to growth in Q1, recording its highest quarterly gross merchandise volume (GMV) to date, with Q1 GMV increasing 27% Y/Y, a significant improvement from the 1% Y/Y decline in Q4. Just a few years ago, most luxury brands stayed out of the consignment and resale conversation. Chanice Parchment said she felt it was important to speak out. Ad Choices. After Meltzer complained, a RealReal employee admitted in a text message to her that it was "obviously a major error.". We make selling effortless with free virtual appointments, in-home pickup, drop-off and direct shipping. We make every effort to accurately authenticate the items we receive, arming our authenticators with tools and technology as well as authentication guides. But those who do this type of work say fakes are becoming more and more difficult to spot. Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Changes in operating assets and liabilities: Proceeds from maturities of short-term investments, Capitalized proprietary software development costs, Net cash (used in) provided by investing activities, Proceeds from issuance of convertible senior notes, net of issuance costs, Taxes paid related to restricted stock vesting, Net cash provided by financing activities, Net increase (decrease) in cash, cash equivalents and restricted cash, Payroll tax expense on employee stock transactions, Non-GAAP net loss attributable to common stockholders, Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted, Non-GAAP net loss attributable to common stockholders per share, basic and diluted, Purchase of property and equipment and capitalized proprietary software development costs, Buyers who purchased in-store in Q1 spent 4.4 times more compared to online-only buyers; and. "In general, I don't think many companies can say 100%. For $12 a month, get 24-hour advance access to sales and special invitations to monthly promotions. And in 2016, she told CNBC, "There's no fakes on our site.". Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Sign up for free newsletters and get more CNBC delivered to your inbox. Financial OutlookWe anticipate Q2 GMV will be in the range of $320 million to $330 million, representing 75% to 80% Y/Y growth. Honoring heritage brands and extending the lifecycle of luxury items. Nearby locations are based on IP address. The latest fashion news, beauty coverage, celebrity style, fashion week updates, culture reviews, and videos on Vogue.com. Wendy Meltzer prides herself on knowing fashion. The company assumes no obligation to update such statements. What is The RealReal's commission structure? Learn How to Spot a Real Telfar Bag from our Experts. Receive up to 85% of each items sale price. 20% off with Apple Pay! I have Prada dresses, so I know the quality.". ", In response, The RealReal said in court documents that "Chanel's objective is not to police the market for counterfeit goods, but rather to stifle the legitimate secondary market by harassing (The RealReal) with meritless litigation." Consignment and Service Revenue was $75.1 million, an increase of 15% Y/Y. Issues with authentication were also raised in a lawsuit filed last year by Chanel Inc. against The RealReal. Completely counterfeit. Meltzer said it was inexcusable that The RealReal sold her a scarf that was mislabeled. "I would say I'm extremely savvy," she said. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Total Revenue was $98.8 million, an increase of 27% Y/Y. All Chanel went to the authentication team, but for Lady Dior it was only handbags. Matt and I have worked closely together over the past eight years and I have a deep appreciation and high regard for his counsel and leadership as we raised capital, scaled our business and took The RealReal public, said Wainwright. Website, Shopping on their website, Value, Selection, How fast the bag was delivered, Cons: ", On its Facebook page, The RealReal proclaims "with an expert behind every item, we ensure everything we sell is 100 percent real.". Copywriters said they had little training on how to spot fakes and were hired to write descriptions of the items to post on the website. Luxury consignor The RealReal Inc. said its chief executive is stepping down Tuesday, becoming the latest online retailer to replace its founder at a time of upheaval in the shopping industry. Got a confidential news tip? The RealReal's chief authenticator, Graham Wetzbarger, abruptly left in October. Today, Gucci is announcing a multi-prong partnership with TRR, including a special Gucci e-shop stocked with consignors items as well as merchandise brought in directly from Gucci. Similar charges were not adjusted in prior periods as they were not material. "Completely counterfeit. The RealReal began as a small family private business run by CEO Julie Wainwright who decided to enter a luxury consignment industry out of her apartment. Use of this site constitutes acceptance of our User Agreement and Privacy Policy and Cookie Statement and Your California Privacy Rights. As a sustainable company, we give new life to pieces by thousands of brands across numerous categoriesincluding women's and men's fashion, fine jewelry and watches, art and homein support of the circular economy. In the wake of this report, RealReal shares plunged as low as $18.46. Trailing 12 months active buyers reached 687K, an increase of 14% Y/Y. The statement said, in part, "Unlike most resale companies, The RealReal takes possession of all items and physically evaluates every one to authenticate it. Broadly speaking, there isn't any formal training or certification for authenticators who handle luxury items in the industry. We do all of the work for consignors, including authenticating, using AI and machine learning to determine optimal pricing, photographing and listing their items, as well as handling shipping and customer service. "Daily quotas are set depending on the category the copywriter is in. Forward Looking StatementsThis press release contains forward-looking statements relating to, among other things, the future performance of The RealReal that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. That's when she took her complaint to Diet Prada, a popular Instagram account that calls out fake items. New buyer growth accelerated to 34% Y/Y versus 21% Y/Y in Q4. | Source: Investors and analysts can access the call by dialing (866) 996-5385 in the U.S. or (270) 215-9574 internationally. Consignment Event - Limited Time - Denver, CO, Consignment Event - Limited Time - Houston, TX, Consignment Event - Limited Time - La Jolla, CA, Consignment Event - Limited Time - Westchester, NY, Consignment Event - Limited Time - Westlake Village, CA. Emily Bobb, a former copywriter who worked at the Secaucus warehouse, said she tried her best to authenticate items, with limited training. Gucci is at the forefront of driving the fashion industry to become more sustainable, so having them recognize the role of resale and The RealReal in creating a more sustainable future is really powerful, Wainwright says. The epicenter of runway news, street style, and emerging trends. We calculate Adjusted EBITDA as net loss before interest income, interest expense, other (income) expense net, provision (benefit) for income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, employer payroll tax on employee stock transactions, and certain one-time expenses. In a statement to CNBC, a Chanel spokesperson said, "Chanel would like to reassure its clients about the fact that they are, of course, completely free to resell, give or offer any item they have purchased at Chanel. Bobb posted a photo from the CNBC interview on her Instagram account. "So instead of the top-tier authenticators taking a long time, a sufficient amount of time to review each piece, most pieces were being handled by the copywriters, and only very, very high-value items, it seemed, were being authenticated by the actual lead authenticators," she said. "It was very surprising because I was under the impression, even as an employee, that every item was authenticated by an expert. Two days after the interview, she received a letter from a law firm representing The RealReal warning her that she was bound by a non-disclosure agreement she signed when she took the job. Greta Stehr, a former luxury manager in Los Angeles for The RealReal, said she saw that firsthand during an employee tour of the Secaucus warehouse in 2015. Units per transaction (UPT) decreased 4% Y/Y. Average Order Value (AOV) was $474, an increase of 6% Y/Y. More information about factors that could affect the company's operating results is included under the captions Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2020, a copy of which may be obtained by visiting the company's Investor Relations website at https://investor.therealreal.com or the SEC's website at www.sec.gov. It's both an art and science. Continue reading your article witha WSJ membership, Copyright 2022 Dow Jones & Company, Inc. All Rights Reserved, Walmart BST Sales Event - School supplies for as low as 25, Back-to-School Event: Extra 25% off sitewide - JCPenney coupon code, Save 15% or more on the Best Buy deal of the Day, Up to 40% off + additional 20% off all markdown styles with Nike coupon code, Summer Sale: 50% off select styles + free shipping. Investors should, however, understand that stock-based compensation and the related employer payroll tax will be a significant recurring expense in our business and an important part of the compensation provided to our employees. ", "We had such a big number to hit every single day, 10 hours a day, four days a week, you know? As a sustainable company, we give new life to pieces by thousands of brands across numerous categoriesincluding women's and men's fashion, fine jewelry and watches, art and homein support of the circular economy. There's not a roboticism to it. When the scarf arrived at her home, Meltzer said she discovered the price tag attached to it belonged to a women's coat from Loro Piana. I think maybe they've just gotten too big and are not willing to put the time to really check each item," Garcia said. We'll be in touch shortly to help you get started or call us at 888.737.4132. In contemporary ready-to-wear, it was 128 items for an eight-hour shift and 160 items for a 10-hour shift. SAN FRANCISCO, May 10, 2021 (GLOBE NEWSWIRE) -- The RealReal (Nasdaq: REAL)the worlds largest online marketplace for authenticated, resale luxury goodstoday reported financial results for its first quarter ended March 31, 2021. "The fakes are getting really good. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies. Your data is not sold. The RealReal will post a stockholder letter on its investor relations website at https://investor.therealreal.com/financial-information/quarterly-results in lieu of a live presentation and host a conference call at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to answer questions regarding its first quarter financial results, the stockholder letter and the supporting slides. The algorithm parameters are: user's rating, number of resolved issues, number of company's responses etc. Trademarks are owned by their respective brand owners. The RealReal is the worlds largest online marketplace for authenticated, resale luxury goods, with more than 20 million members. "And then when the dress arrived, it's like what you hear about when you order on the internet expectation versus reality. Resale through The RealReal has saved approximately 896 million liters of water and 18,732 metric tons of carbon from its inception through March 31, 2021.1 At the end of Q1, the company expanded its efforts beyond resale and repairs, launching upcycling program ReCollection to give new life to items that cant live on in their current state. "I have never been in a corporate environment like that before.". The passcode for the call is 8157017. We have hundreds of in-house gemologists, horologists and brand authenticators who inspect thousands of items each day. Maybe they should switch to something else," the former manager said, adding that copywriters should not be authenticating any items. We do all of the work for consignors, including authenticating, using AI and machine learning to determine optimal pricing, photographing and listing their items, as well as handling shipping and customer service. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. What can we help you with. The stock closed Tuesday down nearly 11% at $19.37. CNBC read nearly 1,400 online reviews of the company and found that fakes, damaged items and mistakes are top complaints. ", "You can go get a Cartier bracelet that looks exactly like the real thing," Velez said. Non-GAAP net loss per share attributable to common stockholders, basic and diluted is a non-GAAP financial measure that is calculated as GAAP net loss plus stock-based compensation expense, provision (benefit) for income taxes, and non-recurring items divided by weighted average shares outstanding. And it didn't really seem to be the case when we saw what was actually happening," she said. "I was pretty excited," Garcia said. Companies are selected automatically by the algorithm. After more than a year of navigating the tough challenges created by COVID, we are incredibly pleased to report our return to growth.
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