Q1 2021 RealReal Inc Earnings Call
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time is once you get smart assistance. During the conference. Please press star zero on your Touchtone telephone I would now like to hand, the conference over to your hosts day, Mr. Paul Bieber.
Go ahead.
Thank you Mel and good afternoon, and welcome to the real real earnings call for the quarter ended March 31 2021.
Paul Bieber head of Investor relations of chemical markets that the real real joining.
Joining me today to discuss the results of our founder and CEO, Julie Wainwright, the Chief Financial Officer.
Hope you had a chance to read our press release of the stockholder letter that we distributed earlier today, both of which are available on our Investor Relations website.
Before we begin I'd like to remind you that we will make forward looking statements. During the course of this call.
Forward looking statements involve known and unknown risks and uncertainties on our actual results to differ materially you.
You can find more information about these risks uncertainties and other factors that could affect our operating operating results on our most recent periodic report on form 10-Q subsequent quarterly reports on form 10.
Yeah.
Excuse me.
And our most recent periodic report on form 10-K, and subsequent quarterly reports on form 10-Q, and in our earnings release from earlier today and the.
Our presentation will include certain non-GAAP financial measures from which we've provided reconciliations of non comparable GAAP measures in our earnings press release with that I will hand over to Julie for introductory remarks, and then we'll go straight to Q&A.
Thanks Scott.
After more than a year of navigating the challenges created by COVID-19 and it's great to say that we returned to growth in Q1, and also achieved our highest quarterly G. M. B in the company's history Q1 G. M. D increased 27 per cent year on year as the.
Significant improvement from the 1% year on year decline in Q4 of.
Our members increased by 1.5 million in Q1, we also added the greatest quarterly number of new containers. The date in Q1.
And as of April we have surpassed $2 billion in cumulative of Consignor Commission payout for perspective, it took us eight years to pay out the first 1 billion in commissions, but the second 1 billion happened in less than two years.
Tackling the challenges of the past year led to numerous innovations and strategic initiatives, which have us on.
US well positioned to build on our momentum and support long term crouse spin.
Specifically, we have significantly diversified our supply acquisition.
The expanded our retail footprint and brought millions of new members into the circular economy.
Thank our entire team for their dedication to delivering a superior experience to our community throughout these unprecedented times.
As we build on our recent momentum and March towards profitability, we remain focused on driving scale and operations efficiency gains.
The pandemic still limits our forward visibility. However, I returned to growth combined with the widespread vaccination distribution leaves us optimistic about the balance of 2021 and.
Importantly, I want to thank Matt He has been my partner managing the company from the last eight years raising over $1 billion on capital and taking us public.
That will be with the real well until we find his replacement and he wanted to share we have a successful transition with the next CFO.
Now back to the coronary results.
Now we're ready for the questions.
Thank you ladies and gentlemen, if you have the question at this time. Please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
First question comes from the line of Justin Post. Your line is now open you may ask the question.
Great. Thanks for taking my question I guess.
When I talk about DMV.
On a flat quarter over quarter and the guidance. How do you think about <unk> seasonality question. We can look back on prior years, but how are you thinking about that and then specifically.
How important the in home visits or are those going to be kind of ramping in <unk> or is the real benefit for that going to be in the back half. Thank you.
Yeah, I'll I'll take the first to start the second.
And on jewelry.
On the GMP guide for the second quarter of $320 million to $330 million is as you pointed out is roughly flat. That's that's basically consistent with the non COVID-19 period, we typically see a sequential flatness in the Q2 over Q1 as well as Q3 over Q2 with a kind of.
More hockey stick like the inflection in the fourth quarter each year.
With respect to in home Yeah. My question was asked and answered basically.
We introduced began reintroducing in home in March and then nationwide in April still very early days, but we're seeing good indications that there's a lot of pent up supply. So we'd expect to see that continue ramping throughout the balance of this year and be on frankly.
Got it and maybe one follow up so the the impact of that I mean is it going to be additive once you get that back up and running and could we look for better than normal sequential trends in the second half.
Well, we don't add the said hi.
Hi, This is Julie obviously, we don't know what normally is as we come out of COVID-19. So.
I would say early indicators show that we're picking it up more units than we did prior to COVID-19. When we do our in home visits but that could be temporary and could go on the balance of the year and it's just hard to project right now and we tend to make more conservative projections of all I can say is that we're encouraged by the early sign.
<unk>.
Got it thanks, and good to see you back at growth rates again.
Thanks.
Thank you next question comes from the line of Albert Chen.
Your line is now open you may ask your question.
Hi, Thank you on the vendor program has been impressive what do you see ahead in terms of the vendor program of momentum and also capabilities.
Whether that be human capabilities or infrastructure that you're building and how might that manifests would just love your view on New York L. A as well and as we reopen what what is your hypothesis for.
Acquiring goods in those regions as well thank you.
Okay.
The law the multi question like vendor is has.
You know it is in the alternate channel for Us and we have both upgraded on management, there and are improving our technology, where we can add skew depth of which will launch on time in the summer.
Then there is you know important but it's still relatively small as a percentage of our total business and we don't expect it to gross that much more as our in home visits started taking up a graph you know theyre getting very aggressive.
On a in New York, we're not reporting on them separately, but I can say, we're very pleased with the progress in gross foreseen in both of those two critical regions.
So yeah.
You know vendor is isn't it a great channel for US just the close the loop, it's still not as strategic as getting back on home and working with our individual consignor.
On the capabilities with respect of vendor are tracking and we're continuing to work on them and over the course of the next quarter or so we expect to enhance our capabilities that would really be more customer facing.
Okay.
As we look forward to the to the reopening what what do you see happening with product mix.
Do you anticipate the apparel in U P. Ts will accelerate and do you. It looks like buyers of incentives will normalize based on your comments are there any thoughts are on seller incentives as well on the marketplace.
Well all incentives actually in the R&D salary day or normalized as we speak from the buyers on the consignor. The buyers are back to pre COVID-19 time, the same with confined areas. We're using consignor instead of only when we open neighborhood stores to introduce the idea of Dropbox now going forward that doesn't mean the occasional.
We wouldn't run small promotions that are normal for the business of Boise, where we need more of some type of product, but those have been normalized. So we're excited about that you know the question about when will the apparel return of parallel did show Crouse and Q1, it's just not growing at its still.
What part of the mix as it was prior to COVID-19 and also shoes are down but showing drought. So we don't know when it's going to return to normal we have a hypothesis, which could be totally wrong that of what we turned in the fall, but in the meantime, our alds are at an all time high it's just the mix and the baskets changed.
Thank you very much best regards.
Thank you.
The next question comes from the line of Michael Binetti from Credit Suisse. Your line is now open you may ask a question.
Guys. Congrats on the return to growth and thanks for taking our questions here can.
Can you I guess the the gross profit per order was was around flat, even though you saw a nice.
You did see a nice acceleration of <unk>. So I'm just trying to think through the model here, maybe a little bit more clarity on the roadmap to $200 per order and gross profit that you're pointing to on the shareholder letter by the end of.
The 22 anything beyond what you mentioned in the shareholder letter as far as of the biggest points of leverage from here I know you've got a lot of the automation that you've been talking about.
The last two years is in.
In place now and then I guess just backing up bigger picture on that we've talked about this a lot of can you help us revisit the past the profitability I think the early.
Framework that you were thinking about to get the company to breakeven on EBITDA with rough math 2 billion of G. N V and $100 gross profit per order or is that still the right framework or have some of the investments below the gross margin line change those dynamics.
Sure.
So on the gross profit per order, there's a decent amount of disclosure in the in the shareholder letter. So yes, roughly flat, we do expect that to increase this quarter modestly mostly due to buyer incentives coming down we don't know as Julie mentioned exactly what the what the L. B.
Trend is going to look like longer term, but roughly speaking <unk> and take rates are nearly perfectly inversely correlated because that'll be the goes up it is a little bit of additive to gross profit per order. So we think that's not going to be a major driver getting toward the 100 continuing <unk>.
<unk> leverage getting of the buyer incentives down and leverage over some fixed cost is mostly what gets us there by the end of 'twenty two as you point out with respect to the past the profitability, we're not in a position to update any longer term projections of we're still on so much. So so fluids the environment with COVID-19, but no.
No fundamental changes I think to the extent that you saw forever elevated mix in terms of high price goods and of higher it would take a slightly higher amount of GMB, all other things equal but.
That's not necessarily our long term view so no no. We're on pace to speak of Okay. And then you mentioned in the shareholder letter of something.
Yeah. Some of the cash from the recent draw was you had it looks like you have some international investments in mind, maybe you could speak to what you think about it in the.
In the near term and maybe a little bit more over the medium term there.
Well in the near term, which we would put in we would define near term of the next six months.
No the put on hold and then the and the lack of volume returned to normal across Europe and the other countries. So are we.
We're taking we still have 2022 on our crosshairs for some international small expansion. It may it most likely move to the latter half.
Of that year and right now we're at but we're working on is more planning some development work, but I you know COVID-19.
With that back a little bit.
Okay. Thanks.
Yeah.
Thank you. Your next question comes from the line of Erinn Murphy from Piper Sandler. Your line is now open you may ask a question.
Great. Thanks. Good afternoon, I was hoping you could talk a little bit more about the neighborhood stores. I know you gave some encouraging metrics on how the buyer is engaging with that format can you just share a little bit more about what you're seeing in terms of brand awareness and what you're seeing in terms of the drop off of what kind of units as the consumer of dropping off when they are confining there and then just secondly on.
On the road map, the I guess, Matt in your debt.
Tier of your pending departure does that impact you know maybe the ability to secure a good pipeline of second half leases for that initiative.
On the neighborhood stores and they are exceeding our expectations, both with demand and also supply.
And at the stores that we've had open the longest are.
Yeah, well ahead of our expectations now.
I think its all we all know that but I'll just put it out that we're still operating with COVID-19 restrictions in every single market. So we still have limited.
The city in the store for either a buyer or consignor and even then we're seeing.
Incredible.
Reception to us having the small neighborhood stores that we're encouraged by that we're so encouraged that we're actually going to open three more than we originally planned this year, but then we're going to take a breath of and take a pause and measure the effect as we hopefully do pull out of any limitations of money.
Of those stores from both containers from buyers being in the store, but right now, they're exceeding our expectations and and they're exceeding our expectations and the even if we were on a non COVID-19 period. So that's really the best way the state it right now because we're still working under what we consider a restrictive on artificial circumstances.
Oh it looks good even then.
On the second question. The answer simple answer is now almost all of the leases of the 13 are already signed and I wouldn't expect average.
And the difficulty securing the future locations plus that's not going anywhere from <unk> for awhile.
Where is kind of new diner adds up here.
Thank you just get the here and then just secondly, I'm just with the announcement. This is more of this afternoon on shuttering the the Brisbane Center as we move through the summer how do you think about the opportunity in the back half to narrow some of the the losses from the expense base and maybe coming out of it.
Yeah, I can start with that yes, so on.
Unfortunately, with the the move into Arizona, which provides us with a lot of benefits in terms of the cost leverage over time, we made the difficult decision that we will close the the Brisbane, California location sometime at the end of the the third quarter.
So yes, we will be rolling off of some operating expenses, which are roughly equal to what the Arizona facility, although it's double the size of <unk>.
So well will be helpful. On as we start to leverage the Arizona facility, that's where we start to throw off some meaningful fixed cost leverage.
I just want to make it a couple of statements about that we did extend every employee in the Brisbane facility and offer to join US if they were in good standing and we're happy to say that we've had a higher than expected response.
And all of the experts are staying with the company in some capacity. So we actually are moving some core talent with US one when we do move into Arizona and I'll send the state of Arizona.
It did give us incentives to move there what's the state of California.
Really never and it's not really their focus so we just we're very excited about them, expanding and and making it a major ah.
Hiring focus for us in the future in Arizona, we're excited about the state.
Great. Thank you.
Thank you next question comes from the line of Edward <unk> from Keybanc Capital markets. Your line is now open you may ask a question.
Hey, good afternoon. Thanks for taking the questions I guess first on marketing expense I know you guys leverage of the first quarter now that your supply is more normalized can you give us the thought process on whether that should that leverage the occur from the balance of the year and then second Julia on these neighborhood stores.
From a little bit more about your experience on the sell side there I know historically, they've kind of design for the people could buy items.
On the comments you share holder lateral of any interesting finding on the receptivity of consumers to shop on Amazon.
Thank you.
Okay.
Sure on the the <unk>.
Marketing side.
Yes, we do expect leverage going forward, it's not always going to be of straight line because of the cadence of our marketing spend is not in the like direct short term relationship to our G. M b expectations, but we do expect marketing expense to be slightly down quarter over quarter, this quarter and leverage on the full year.
Significantly even versus the pre COVID-19 baseline of 2019.
And notably in the quarter.
We saw a lever in Q1 substantial leverage on marketing and our buyer acquisition cost was down significantly. So we're pleased with where that's trending.
With the extra well yeah, I mean, you know it and it's just too early to tell what's happening in the stores I would say it all looks.
Very positive right now I'd like us to get out of COVID-19 restrictions and so we can add but people are let's just say there are still lines outside of the started again on people will wait them because they either one of the shopper can sign and it's all very encouraging and actually the some stores.
The way ahead on on their path to there on the profitability even under the most conservative terms so.
And it looks good having said that again, we're gonna do 13 and see what happens before we go crazy with it because we are still in uncertain times.
Thank you.
Thank you. Your next question comes from the line of Ice Road show from Wells Fargo. Your line is now open you may ask the question.
Hey, good afternoon, everyone. My I have two questions.
On the on the direct business on more.
I guess first one is on on the direct gross margins I understand the buyer incentives are there and its muddying the waters of bit the last quarter or two but where do you see the gross margin structure for the channel once you kind of move past, but maybe into the back half on beyond.
Uh-huh share so the the direct businesses as you know has inherently lower gross margin given that we have to recognize GMP as revenue on this case.
So we did see about 300 basis points of margin improvement quarter over quarter in indirect and we saw that in the <unk> businesses as well so they tend to trend together more or less we expect that to continue going up, particularly as the mix with indirect starts to move more.
More toward purposeful direct revenue, where we have bought inventory upfront on purpose rather than just out of policy returns. So we'd expect to see direct margins trend up overtime not necessarily on the straight line, but but several percentage points as we go.
Through the year.
I understand.
In terms of its impact confined in direct roughly equally.
Understood and then what was the one more on that I think of in the shareholder letter you mentioned, a large vendor transaction in the fourth quarter, which helped you on one two it should help the rest of the year can you give any more detail on that on the comment on what exactly that is.
Yeah.
Yeah sure.
So we made a our largest our largest ever vendor transaction in the fourth quarter of last year, but is it.
Broadly speaking it wasn't that large but it was significant for us.
We've begun selling through we're seeing good sell through.
Realizing the margins and the actually pretty high selling prices for those products.
And we will expect that to continue selling through the balance of the year and really will accelerate when we get the functionality on the website that we referred to earlier with recall depth and SKU, allowing to have multiple quantities behind the same image on on the site, which still doesn't exist that limits our ability to launch of surface all of those items onto the <unk>.
So sell through should accelerate once we enables the technology.
Got it thanks guys.
Thank you. Your next question comes from the line of Mike <unk> from Baird. Your line is now open you may ask your question.
Thanks, Good afternoon, Greg.
Great to see the in home of appointments back debt.
Relative to pre COVID-19 levels can you quantify the level of supply.
We're generating from that channel in the March and April period.
Then you mentioned in the shareholder letter on and on the call you're seeing evidence of pent up supply I was hoping you could expand on on that a bit just maybe any metrics you can share on the productivity of the handheld the appointments or kind of number of units or GMB youre generating kind of per appointment versus kind of where you were before.
So we just started really in Q in March.
The net it wasn't even something you could choose by looking at the website and then April.
We changed the website to make sure. It was in home in May 1st is when we're really going sort of full throttle on and offering them, meaning it's our first option, we're offering per consigned nurse, if they're comfortable prior to COVID-19.
And then home pick up the deal of between 17 and 20 units per pick up.
Now when we're going in it can be on average 30 units, but we don't know how long that's going to last so and we're still on a pretty small percentage of the M. For Q1, because again you couldn't choose it and if you were going to the website to type of meeting you couldn't choose and home you can only choose first of all felt that the rep.
We have let's say, we're now operating in home if you're comfortable so we expect to see that accelerate its still a pretty small number even in April because it was in the transition where.
Where it was evident on the website that you could actually book of in home of appointment and people are getting much more comfortable as they're getting vaccinated.
Yes, it's still relative to pre COVID-19 still substantially lower volume as the share of the appointments and consignor volume now so long way to go.
Thank you and if I could just follow up on the marketing front could you could you speak to the decline in the buyer acquisition costs on the drivers there I know it's early in the neighborhood stores is that moving the needle or are you seeing efficiencies in other areas.
Oh, well I mean, you know really what happened last year, and where we're coming into sort of an odd time, because usually in Q1, we spend pretty heavily to get prepare for the spring cleaning till it gets people thinking about spring cleaning cleaned out the closet. So we had done that.
In March of last year, and spending that are normal levels and this year. We took we're taking a more back end approach and.
So meaning that we didn't know what was going to happen to the COVID-19. So we actually reduced debt consciously given the fact that spring the spring cleaning phenomena may not be happening during COVID-19, but we saw better results and so I would say, it's an ongoing testing situation with marketing, but we do as.
Matt indicated we do expect them to be significantly more efficient than last year. Overall, because then we cut marketing completely went on when our facilities were shut down and we spent.
And last quarter in Q4 of them more heavily than normal to prepare us for per our strong Q1, which actually worked so you know it's going to be one of those uneven yes, because of but overall the trend will be of a significant reduction in the acquisition costs just to pick up on the price.
The jewelry mix of last year.
We didn't really reduce our marketing spend until we had already made it through the month of March even though we had of half of the month, where the you know.
The business was disrupted significantly so some pretty inefficient spend in the second half of March we got that that freebie, but the.
Beyond that just the stores are absolutely, helping a meaningful share of a nuc and signers and on a significant number of new buyers are coming through our stores and we're always testing and optimizing our media mix and the team is great at finding new and innovative ways to stay one step ahead of of the curve. So I think they'll continue to do that as we go.
Throughout the year on beyond.
Very helpful. Thank you.
Thank you. Your next question comes from the line of Lauren Chung from Morgan Stanley. Your line is now open you may ask the question.
Great. Thanks.
Inventory was up quite a bit at the end of the quarter of both of your beard and sequentially. Despite the strength of an indirect revenue could you just help us think about sort of the drivers there and then how how you're expecting that to trend through the rest of the year.
Yeah sure. So I think we had about $50 million of inventory. So it's still pretty small numbers overall in the Grand scheme of things for a business of our size.
Not the majority of on but a significant amount was that large vendor transaction at the end of the fourth quarter and other similar types of purchases that until we have.
The certain technology on the site that allows us to merchandise the products in a more scalable way the sell through is going to be a little bit slower just because we only have a small fraction of the inventory actually available to to purchase at any point in time.
But that should normalize once the technology is available and I wouldn't expect to see inventory growing anywhere near that range as we get into the back end of year.
Okay, Great and then is there is there any sort of high level commentary you can give about trends that you're seeing in april or or quarter to date them versus maybe what sort of the merger of <unk> broadly run rate was.
The thought about that in the context of guidance, but now we're in kind of silly numbers as we're lapping lapping COVID-19 and the growth rates in the in a short term basis of sort of sort of a meaningless.
So we're almost we're spending more time looking at what our performance looks like versus the pre COVID-19 period in 2019.
And I would say that it's looking very very encouraging and positive with some acceleration versus the the equivalent period in 2019. So we're very optimistic about the short and long term future.
Okay. Thanks, so much.
Yes.
Thank you and next question comes from the line of Simeon Siegel from BMO Capital. Your line is now open you may ask the question.
Thanks, Good afternoon, everyone I'm, sorry, if I missed the spin and understanding the moving pieces of mix, but any help on what youre expecting for take rate going forward and then.
To go back of the stores for a second great to see the heightened productivity how are the ivs and frequency of those shoppers before they started using the stores you're trying to think through the the lift you're seeing as they become omni and if they were what type of customers. They were for it. Thank you.
Well, we have some information in the shareholder letter, we're still getting a high percentage of new new Consignors and new shoppers to the stores. So I, there and on inefficient the basis for <unk>.
Acquiring consignor, so actually accretive for us so we're pretty excited about seeing that.
Yeah and on the a O V. I mean in general of stores added are adding significantly to our a M. The next almost half of the reason our ANV is at an all time high is due to the impact of the stores because people do spend more and they spend less.
Less sort of less units per but they spend more dollars per unit at the store share how does that on to both Sean on stores.
In terms of what we see broad rush of of course of everything everyone's a little difference of averages or sort of a little misleading, but generally speaking as Julie said about half of the people who interact with the stores are new to us altogether, but those who are interacting with the store after having worked with US previously online their store activity is pretty close to purely incremental to their own.
We're all activities. So their online activity continues at the frequency and the dollar volume than it was before they start interacting with the stores. So that's a significantly accretive for the that segment of the folks both on the buyer side on the consumer side.
With respect to take rate, we just don't know at this point in the short term, we're seeing quarter to date <unk> continued to be very high so take rates going to be a comparatively load versus pre COVID-19.
More or less offset so I just keep focused on gross profit dollars per per order over.
Over time, we think it's going to normalize but to what degree and exactly when is hard to say.
Great. Thanks, a lot guys best of luck of the year.
Thanks.
Thank you next question comes from the line of Susan Anderson from B. Riley. Your line is now open you may ask a question.
Hi, Good afternoon, Alex leg on for Susan My question is just on the first look subscription where customers can view items of day in advance how big is that subscription service relative to your consumer ecosystem and any details you can provide on consumers of utilized debt such as their consumer spending habits on when do you think.
Net service could be a meaningful portion of your revenue going forward.
It is our most engaged customers, it's still a pretty small number but.
We havent you know loops that one sort of just took a backseat during COVID-19. So we're going to take a look at it and see really the the value of really aggressively marketing. It. It's one of those things that if people do sign up for first select they tend to be very very frequent buyers you know maybe three to six Ty.
On a year.
Some up some by every month. So it's still small amount has some statistics on it its still small but they're meaningful.
Yeah.
No.
First look as a direct revenue line is very small it's immaterial currently theres a number of people who have access to first of all of who arent paying members of our VIP can signers et cetera. Overall, the first of the people to participate in the first look or about 20% of our GMB and there's some that's hasn't really changed over time, that's some disclosures.
Our in our S. One so small number of people who are very important.
Thanks, and then I guess just to follow up on it's great to hear about your offering relocation assistance for the Brisbane employees.
And we've seen some some companies having trouble finding employees and theyre offering hundreds of dollars just to get up on the sign up have you seen or have you had any challenges finding employees to work on your authentication centers and then are you expecting any meaningful wage.
Wage costs to materially impact the rest of the year I've.
Got it I'll start with that and then I'll kick it over to Matt on all of our experts and expert in the extra suite training the training kind of them were having absolutely no problem recruiting there is and.
Pushed back a little bit at at our Perth facility not a large percentage I would say that what we do of openings in Perth, and what we hear and this is anecdotal only that the government's paying them too much not to work. So an anecdotal comment do we think we have to change our wages you know where were really good wage a pair of in general.
Our starting wage is $17 an hour and what we're hearing of some people would rather stay home. So you know I would say that.
I really do hope the government does.
Stop subsidizing the season, the workers I think theres something to the low unemployment the interesting time.
Well, it's an interesting time, but you know the.
Look we have of high retention rate of our experts we transfer in fact, our Arizona facility actually has is fully staffed with expert so it really kept us recruiting hourly employees and honestly most of the employees when they really think about it the combination of benefits.
And having a paying job that they can count on and building of career, we hope will win over staying at home because of $17 an hour isn't enough to get out of bed, but but there is enough anecdotes that makes me feel that the government's overpaid to be honest.
But do we have to raise our way just now we don't have to do that we think it's all going to equalize. So if you think of how many people or person that about 725, we have 50 openings. We've never had that many opening so on the Grand scheme of things you know, we're fine, but we've never had that many openings and had to recruit that hard to fill.
All of them because they tend to be really good jobs versus the other jobs in the area.
That's really helpful. Best of luck rest of the year.
Thank you.
Thank you and next question comes from the line of Marvin Fong from <unk>. Your line is now open you may ask a question.
Great. Thank you for taking my questions.
Just a couple of maybe out of high level.
Youre not disclosing supply units anymore, but maybe you can just give us some qualitative.
Assessment on how supply units are tracking versus G. M b.
Do you feel like it's in balance now with demand any commentary there would be great and then second question just as I try to unpack guidance and you know sequentially flat just curious and I know we've asked about stimulus in the past, but do you do you feel like stimulus in the first quarter.
All of them had any impact on that might explain some.
Some of the flatness going into the second quarter.
Any commentary there would be great. Thank you.
No I mean, I haven't tackled some of it I mean, the truth is we'd have no indication that the stimulus that impacted our business at all it really is our ability to generate supply and then and we've always been saying the tends to be true of and that's hard pressed the separate supply incoming from demand and stimulus now we were you know we did we.
We're in quite a whole last year, because we had a complete shutdown of the state of California our per.
The supply acquisition that was prolonged and then Nashville, COVID-19 fears of slowed that down however, I'm happy to say that we are getting back to a nice balance and where if we have more supply we could sell it through but everything feels like it's moving in the right direction right now in the very its very positive time for the comes.
<unk>.
Yep, Yep and supply and demand are always very tightly correlated and our business. So we haven't really had the comment that to the extent that we see supply and demand trends diverged. Then we'll go back to providing some level of transparency and supply of metrics, but the there. They are in perfect harmony of the moment with respect to the guidance again I'll just point back to the the.
Quarter over quarter cadence of the floor.
This is perfectly typical of our business.
And notably we're just just getting started with the resuming garden guidance.
Of the characterize the like our willingness to even put it out means it's high confidence at this point.
Gotcha. Thanks, so much for the color really appreciate it. Thank you both.
Thank you operator.
Let's make this our last question.
Alright perfect. Thank you. Your last question comes from the line of Aaron Kessler from Raymond James. Your line is now open you may ask the question.
Great. Thanks, guys, maybe first on the gross profit per transaction kind of the 22022 of kind of a target of a $100 should we think of that as kind of a base case kind of aspirational case or kind of what are the biggest factors I know you've talked about before but kind of what are the biggest factors in terms of achieving this and kind of what's the probability weighted.
You think we can get.
Around that number by the end of 'twenty two thank you.
The biggest factors haven't really changed it's a O V in take rate and their relationship together. So if he had the.
The product of one than the other.
Since the Arctic dollars per order of our per unit.
Turn rates do come in there that they've been very stable lower during the COVID-19 are normalizing.
What's left is predominantly shipping expense.
We have seen substantial leverage and expect to continue seeing leverage over time short term, we have buyer incentives have been an offset to progress there, but we expect to see those normalize.
As well on the rest of it you'll get from scale leveraging certain fixed costs that are that are in cost of goods. So our confidence of getting there by the end of next year is high.
Got it and then just quickly on a follow up on it sounds like going out we're kind of free dresses et cetera are we starting to see the pick up on that now we've seen some mixed data points. So far in on one of the companies recently said March was a big move.
In the quarter for more going out where are you starting to see that trend as well.
Well the perils up its just not as up as much as fine jewelry handbags.
Which is so so of apparel it has recovered into growth mode, but.
But we are the mix has shifted to more high value items.
Got it great. Thank you.
Thank you.
No further questions at this time I would now like to turn the conference back to MS. Julie Wainwright Ma'am.
Oh, so that concludes our Q1 I'm happy to say what a difference of your makes them. There is a lot of positive enthusiasm and the employees and the team and we are seeing people excited to shop the site shop in the stores. We're hoping this continues in the end of.
Honestly, it's all about getting people vaccinated at this point in the government stopping with their care of packages.
So where we're excited it looks right now it looks like a totally different view than then we had the a year a year ago on and it feels like we're getting back end of our stronger than ever. So thank you for your time.
And we appreciate it and we'll talk again soon.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you also participating you may now disconnect.
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Yes.
Yes.
Uh huh.
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Good day.
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