UNIQLO And ZARA Have Already Arrived, But This Stock Has "Killed A Blood Path"?

In a world of consumerism, what kind of story can a clothing retailer use to impress Wall Street's picky investors?

When the traditional retail giants are selling on the strength line, the later generations of the retail business come up with different business models and concepts.

Not only in the Wall Street, but also in the face of consumers, clothing Zero business, this road is even more difficult. As before, hanging clothes in the physical shop "Ren Jun pick" has obviously been unable to work, and the global fast fashion retailers are also in deep cold winter unable to extricate themselves. Data from Moving, a North American moving company, show that 82% of the clothes in American wardrobe have not been worn for more than a year. And Morgan Stanley's survey is a direct call: buying new clothes can no longer bring happiness to Americans.

In fact, the company seems to have found its "shortcut".

The resale market is sunny.

The RealReal has a bright future?

The world's largest certified luxury goods supplier TheRealReal (NASDAQ:REAL) has just been listed in July last year. For this company's main business, investors can be understood as "only salted fish for second-hand clothing", and the company platform is once again certified for the sale of second-hand luxury goods provided by consumers.

Under the current tide of sharing philosophy, The RealReal's second hand luxury market is limitless.

According to the forecast of Thred Up, a second-hand clothing consignment website in the US, sales in the secondary market will reach US $51 billion by 2023, which is much higher than that of US $24 billion in 2018. In the Z generation, 1/3 will buy second-hand goods in 2019.

Meanwhile, the report of Thred UP and Global Data of retail analysis company also showed that by 2028, about 13% of the women's wardrobes could be secondhand, compared with 6% in 2018.

In addition, in the subdivision area of The RealReal, data show that last year, the size of the global luxury goods market was already close to US $25 billion, and it is still rising. Berenberg, a German financial institution, has also predicted that this category of product sales in the global market will continue to grow at a rate of 10% per year, perhaps two times higher than that of the first class luxury market.

Neil Saunders, general manager and chief market analyst at Global Data, points out that compared with the overall garment market, the growth of resale mode is amazing. As the market has its unique performance to satisfy consumers' preferences for various items, values and sustainability, we expect this high growth intensity to continue.

Neil Saunders said that The RealReal was the preferred investment target of the agency in 2020. It is expected that sales will continue to grow strongly and profit margins will also increase significantly. Taking into account a combination of factors, the analyst gave the company a "buy" rating and a target price of $23, which is expected to rise by nearly 60% in the next 12 months.

Other analysts at Wall Street seem to be optimistic about the prospect of the stock. The consensus rating is "buy", with an average target price of $25.4 and a rise of more than 70%.

The RealReal revenue continues to grow rapidly

　 Loss gradually narrowed

In fact, the sales growth of The RealReal also reflected this growth. The company's revenue growth in 2018 was 55%, and the revenue growth in the first three quarters of 2019 also reached 52% to $220 million 700 thousand. Meanwhile, the number of active buyers increased by 43% in the past year, and the average order amount was also rising. In the three quarter of 2019, the number of active buyers increased by 5% to 438 dollars.

The RealReal said in its 2019 luxury re sale report that 82% of consumers believe that "sustainability" is an important reason for their patronage of The RealReal.

However, investors need to be aware that this stock is still at risk. Businesses still face competition from online stores and physical stores. However, at this point, the market size of the current and future markets is expected to leave room for development of all kinds of market participants.

At the same time, although The RealReal sales grew faster, still in a loss range, the first three quarters of 2019, the loss per share was US $2.28. However, in the third quarter, the loss per share was only $0.30, and the company's profits were gradually improving.

　 Second hand luxury goods identified as The RealReal's largest "time bomb"

However, it should be noted that in its own aspect, the company is faced with the identification of second-hand goods. Previous reports show that The RealReal's internal documents show that not all products have been identified by experts, and employees are working under strict quota system, resulting in the sale of luxury goods on the website often fakes. The company's nearly 1400 online reviews show that counterfeit goods, defective goods and goods are not the most important three complaints.

A Cowen Equity Research report shows that the US $200 billion worth of luxury goods can be resale, and RealReal is the only resale brand that guarantees 100% genuine products. This commitment is the key to brand image, and several analysts say that once consumers no longer believe in the genuine luxury brands provided by the website, the valuation of the company will be impaired.

In fact, The RealReal has fallen by 47.47% since its listing in July 2019. The market does have doubts about the company's luxury certification process. This doubt also makes the company's share price under pressure. Investors should take this risk into consideration before making a decision to buy the stock.

According to the British financial intelligence Investing.com's earnings calendar, The RealReal will announce its fourth quarter of December 31st and the full year financial report for the last fiscal year on February, after 25 US shares.