As the coronavirus zaps fashion spend, The RealReal has announced a mix of layoffs and furloughs.
In a Securities and Exchange Commission filing today, the San Francisco-based company said it is laying off 10% of its workforce, with an additional 15% to be placed on unpaid leave. Excluding the furloughs, The RealReal has cut overall annual payroll expenses by 15%, including executive pay cuts.
Due to the coronavirus pandemic, The RealReal has temporarily shuttered its stores and luxury consignment offices. (The company has four stores in New York, Los Angeles and San Francisco, as well as six separate luxury consignments offices.) As a safety precaution, the company said it is enforcing social distancing in its e-commerce centers, with staggered shifts, reduced staff and cleaning/sanitization during every hour of all shifts. The retailer said it is also providing daily kits with gloves and face masks for all on-site employees.
According to the SEC filing, The RealReal has seen a decline in gross merchandise volume of between 40% to 45% year-over-year since March 17, when shelter-in-place orders began impacting the company’s Bay Area warehouses. With sales down, the luxury consignment retailer has taken additional steps to preserve liquidity, including reducing marketing investments, renegotiating vendor contracts, slashing discretionary spending and delaying the opening of a Chicago outpost. Through these actions, The RealReal expects to save more than $70 million in operating expenses and $15 million in capital expenditures for 2020.
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“Given the unknown duration of the pandemic, we’ve focused on reducing operating expenses and preserving liquidity to weather the near-term challenges and ensure we are well positioned to capitalize on the significant opportunity in front of us,” CEO Julie Wainwright stated. “I am confident the strength of our balance sheet, customer satisfaction, healthy traffic trends, and buyer and consignor repeat rates, along with continuing progress in technology initiatives that support efficiently scaling our operations, will position us to bounce back quickly once the economy stabilizes.”
In recent years, the fashion resale market has seen big gains — growing 21 times faster than traditional retail, according a study conducted by online thrift shop ThredUp in partnership with retail analytics firm GlobalData. The resale market — worth $24 billion as of 2019 — is expected to hit $51 billion by 2023, according to the report, which hadn’t taken into account the pandemic.
In June 2019, The RealReal became the first player in the resale market to go public, raising $300 million in an initial public offering. The company trades on the Nasdaq under the ticker “REAL.” Shares were initially priced at $20 — but ahead of market open on Wednesday, shares had fallen to below $8.
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