The RealReal can’t sustain its full workforce through a period of plunging consumer demand and market turmoil.
Luxury consignment retailer The RealReal is the latest company to reveal it is cutting back on expenses and headcount amid the COVID-19 pandemic. The firm, which employs more than 2,300, has laid off approximately 10 percent of its workforce and has furloughed another 15 percent as part of the cutbacks. The RealReal did not reveal where the layoffs will take place, but indicated that the furloughs will include employees across its e-commerce centers, retail stores, luxury consignment offices, sales organization and headquarters.
Furloughs have hit the retail industry hard—Macy’s, J.C. Penney, TJX, Gap, Nordstrom, Neiman Marcus and Ascena Retail Group are among many that have put their employees on unpaid leave for the foreseeable future.
The RealReal will cut 2020 expenses by approximately $70 million and reduce capital expenditure by approximately $15 million. Similar to others in the space, the company will reduce executive salaries and marketing investments, renegotiate vendor contracts and institute a hiring freeze as part of the cuts.
CEO Julie Wainwright said The RealReal was “on track to meet or exceed our Q1 guidance” prior to the pandemic. While gross merchandise value (GMV) saw strong preliminary Q1 gains of approximately $258 million—up 15 percent year-over-year—limited operations in the company’s warehouses in accordance with shelter-in-place directives have significantly impacted GMV since the outbreak. Since March 17, when San Francisco Bay Area shelter-in-place directives went into effect, and continuing into April, GMV has declined approximately 40 percent to 45 percent year-over year.
Overall, adjusted net loss is expected to be in the range of $38.9 million to $39.9 million.
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“This unprecedented crisis has significantly impacted our ability to operate at previously planned levels, stemming primarily from limited warehouse operations,” said chief financial officer Matt Gustke. “In response, we undertook a comprehensive review of our operations, including stress test scenarios. We took decisive action to reduce operating expenses and maximize liquidity.
“With these actions and approximately $303 million of cash, cash equivalents and short-term investments on the balance sheet at the end of March,” he added,” we believe we are well positioned to rebound strongly and fuel growth once the economy stabilizes, and we believe we are sufficiently capitalized to reach profitability.”
The company already had closed its four brick-and-mortar stores and 10 luxury consignment offices, including its most recently opened location in San Francisco, and is postponing the opening of its Chicago store.
While social distancing prevents The RealReal from carrying out its in-person White Glove appointments, the company has turned to virtual appointments to continue delivering personalized consignment consultations and support sellers in their homes. The consignment company says it has conducted “thousands” of virtual appointments since launching the service, and will likely integrate virtual appointments into its supply acquisition strategy going forward.
The RealReal has implemented numerous preventative measures to align with CDC and local government guidelines and ensure the health and safety of its employees and shoppers.
At its warehouses, the retailer is enforcing social distancing by way of staggered shifts, reduced staff on-site resulting in operations significantly below full capacity, taped-off six-foot boundaries, training and signage throughout every facility. The company is cleaning and sanitizing during every hour of every shift and dedicating equipment to individual use and providing personal protective equipment (PPE), including daily kits with gloves and a mask for every on-site employee.
Additionally, the company is providing a transportation allowance so employees can access private transportation to work, reducing exposure to public transit, and is consulting directly with a third-party medical expert to validate its approach and ensure every precaution is being taken to keep on-site teams safe.