REAL Q1 Earnings Call: Supply Initiatives and Direct Channel Drive Margin Improvement

Secondhand luxury marketplace The RealReal (NASDAQ: REAL) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 11.3% year on year to $160 million. The company expects next quarter’s revenue to be around $159 million, close to analysts’ estimates. Its non-GAAP loss of $0.08 per share was in line with analysts’ consensus estimates.

Is now the time to buy REAL? Find out in our full research report (it’s free).

StockStory’s Take

The RealReal’s first quarter results were driven by new supply initiatives and operational improvements, as management focused on building a more profitable business model. CEO Rati Levesque highlighted the company’s “growth playbook”—a combination of sales, marketing, and retail strategies—to acquire new consignors and unlock high-value inventory. Notably, the introduction of AI-driven programs such as Athena and new service offerings like Get Paid Now contributed to increased operational efficiency and enhanced gross margin performance.

Looking ahead, management reconfirmed full-year revenue guidance and emphasized the resilience of its business model against macroeconomic uncertainty and tariffs. CFO Ajay Gopal noted that the company’s supply is sourced domestically, insulating it from tariff impacts, and suggested that higher primary market prices may even drive more buyers and sellers to the platform. Levesque stated, “We believe the RealReal has a stronger, more profitable, and more sustainable business model today than ever before,” but also acknowledged the need for continued execution on its core strategic pillars.

Key Insights from Management’s Remarks

Management’s remarks on the call centered on supply growth, operational efficiency, and new business initiatives. They outlined several key drivers behind the quarter’s margin improvements and the company’s approach to future opportunities and risks.

• AI-enabled process improvements: The Athena AI intake process reduced product processing times by about 20%, supporting faster inventory turnover and improved fulfillment center efficiency.
• Get Paid Now expansion: The Get Paid Now program, which allows select consignors to receive upfront payments for high-value items, continued to scale. Management said this channel is now “significantly more profitable” and expected to maintain gross margins near 20%.
• Retail and referral channel impact: A quarter of new consignors came through retail stores, while enhanced referral partnerships with stylists and closet organizers now drive over $1 million in incremental supply monthly.
• Diversification of supply channels: The drop ship initiative, initially piloted in watches and expanded to handbags, is intended to broaden access to high-value supply from business-to-business partners, with early traction reported in both categories.
• Technology-driven pricing: RealReal’s proprietary pricing algorithms, which integrate near real-time data from buyer engagement and primary market trends, are increasingly automating pricing and discounting decisions to optimize sell-through and margins.

Drivers of Future Performance

Management’s outlook for the next quarter and full year stresses the importance of consistent supply growth, operational cost discipline, and the ability to adapt to consumer and macroeconomic shifts.

• Supply-side resilience: The company’s primarily domestic supply base is insulated from tariffs and international disruption, and management expects continued growth in new consignors from both retail and referral channels.
• Profitability through technology: Ongoing investments in automation and AI, such as Athena and SmartSales, are expected to drive further improvements in operating expenses and gross margin.
• Macro environment uncertainty: Management acknowledged that unpredictable consumer demand and discretionary spending could be a headwind, though they believe the resale model’s value proposition may attract more buyers and sellers in a high-price environment.

Top Analyst Questions

• Ashley Owens (KeyBanc Capital Markets): Asked about the sustainability of direct channel gross margins; CFO Ajay Gopal explained margins should remain near 20% with little seasonal variation as the business mix stabilizes.
• Ike Boruchow (Wells Fargo): Inquired if the direct channel’s profitability could pressure overall gross margin; management said the impact would be limited due to the channel’s relatively small revenue share.
• Marvin Fong (BTIG): Sought more detail on drivers of average order value (AOV); CEO Rati Levesque cited higher fine jewelry and handbag sales as supporting AOV growth.
• Bobby Brooks (Northland Capital Markets): Requested specifics on new consignor growth; Levesque attributed gains to retail expansion, referral programs, and technology-enabling targeted outreach and ease of use.
• Mark Altschwager (Baird): Asked if current buyer and seller trends signal structural shifts; management indicated domestic supply and pricing algorithms provide flexibility, with potential to benefit from shifts in the broader luxury market.

Catalysts in Upcoming Quarters

In tracking The RealReal’s progress, the StockStory team will focus on (1) the scalability and profitability of new supply channels such as Get Paid Now and drop ship, (2) operational efficiency gains from greater AI adoption in fulfillment and pricing, and (3) continued growth in new consignors, particularly from retail and referral sources. We will also monitor any signs of changing consumer behavior or margin pressures stemming from shifts in discretionary spending.

The RealReal currently trades at a forward EV/EBITDA ratio of 29.2×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our free research report.

Stocks That Trumped Tariffs in 2018

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.