Shares of The RealReal (REAL -7.91%), which offers luxury consignment services, lost roughly a quarter of their value at one point in the first hour of trading on May 11. The stock managed to pare the steep initial decline some, as it was down by "just" 17% at 11 a.m. EDT. There were likely two factors behind the negative mood here: market trends and the company's earnings release after market close on May 10.
A good portion of The RealReal's business is handled over the internet, even though it has a handful of physical locations. So, in many ways, it can be viewed as something of a technology play even though, at the end of the day, it's really just a consignment retailer. Over the last couple of trading sessions investors have been selling technology names, with a notable decline today highlighted by the technology-heavy Nasdaq Composite leading the broader market's early morning drop. So, a portion of The RealReal's dramatic price decline is probably related to bigger-picture market psychology. But not all of it.
That's because The RealReal also reported earnings. Revenue came in at $98.8 million in the first quarter of 2021, up 27% from the first quarter of 2020. And sales beat Wall Street consensus estimates by a few percentage points. However, on the bottom line, the results weren't nearly as positive. The company lost $0.49 per share on an adjusted basis versus a loss of $0.39 per share in the year-ago period. Analysts, meanwhile, were looking for a loss of $0.46 per share. This is the fourth consecutive miss over the past year. Add that backdrop to the mood shift with regard to technology-related names, and it makes sense that investors dumped out of The RealReal today.
To be fair, The RealReal's consignor base is growing and the volume of goods it sells has been increasing. So it would be hard to call the quarterly update terrible. However, even the company admitted that it was still just working its way toward profitability. And the hope of future profitability just wasn't enough to keep investors interested in what The RealReal was offering today.