Mixed Bag For 2019 Retail IPO Stars

The volatile, COVID-driven stock market has had a mixed effect on the retail IPO class of 2019. The big three initial public offerings — The RealReal, Chewy and Revolve — have either held their own against the storm or found some reason for optimism.

Chewy, which sells pet food, treats and accessories, was trading at $27.29 after going down by $0.73 at the March 10 close. That’s a 25 percent rise from its 52-week low price of $21.68. Even with the coronavirus crisis its shares dropped only 5.9 percent this year to date. Over the next year, according to one firm, Chewy, Inc. shares are expected to reach $35.91, up 31.59 percent from its current position.

“During the last week of February, Chewy fluctuated as investors seemed to momentarily view the stock as a sanctuary from the coronavirus-related issues affecting the broad market,” said The Motley Fool. “Chewy seems to offer protection against coronavirus fears that have afflicted retailers and other businesses that function as gathering places. Additionally, it should be resistant to a potential recession, as pet products are among the most recession-proof industries. Americans need to feed their pets whether the economy is good or not.”

Revolve, a high-end women’s apparel retailer, has had a tough year before the coronavirus crisis. After opening in March at $48, it was trading at $12 on March 10. Its problems started with its first earnings report in August 2019, after the company reported net losses. The whims of the market hit the company in Q3 when it posted solid numbers but still took a hit on the price. Quarterly sales grew 22 percent year over year, net profits rose 34 percent, and adjusted EBITDA grew 40 percent. However, the outlook for Revolve is largely positive.

“The business plans to launch a loyalty program in 2020. It will offer unique benefits to its members, including access to exclusive discounts and events,” according to Yahoo Finance. “The company’s loyalty program will use new technology and data on the spending habits of its customers to make more relevant product recommendations. This could catalyze the retailer’s sales performance and make it more competitive compared to sector peers that already have loyalty programs in place.”

Finally, luxury consignment eCommerce player The RealReal was hit not by a market sell off this week, but by a shareholder lawsuit. Rumors of faux luxury items on the site hit a shareholder group, which alleged that “false and/or misleading statements and/or failed to disclose that the Company’s employees received little training on how to spot fake items, that the Company’s strict quotas on its employees exacerbated product authentication issues, that consequently, the potential for counterfeit or mislabeled items to make it through Company’s authentication process was higher than disclosed, and that as a result, defendants’ statements about [The] RealReal’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.”

The RealReal ended Tuesday at $12.55. Before the lawsuit Wells Fargo was bullish on the stock. “We estimate the luxury resale market to be roughly $7 billion today and we believe that the only reason why the resale market isn’t already larger today is due to a lack of supply (almost $200 billion of inventory sitting in consumers’ closets but only 3% gets consigned annually),” Wells Fargo said. “We believe that The RealReal’s business model is key to unlocking greater supply in the marketplace.”