We remain constructive on the long-term growth of the secondhand luxury resale market. Following another beat-and-raise quarter, however, we reduced the position as consumer discretionary equities continued to face pressure and we sought to broaden the portfolio. Given the stock’s historical volatility, we expect there may be opportunities to rebuild the position if the risk-reward becomes more attractive.

The RealReal is a domestic omnichannel luxury resale retailer capitalizing on the second-hand fashion movement, which is growing almost twice as fast as traditional luxury. Despite concerns about traditional luxury retailers, The RealReal operates in a unique category that benefits from a shift towards second-hand merchandise. The company has successfully unlocked supply from customers, driving higher gross merchandise value, revenue, and adjusted EBITDA. With AI enhancing product authentications and listings, The RealReal is guiding for double-digit topline growth and adjusted EBITDA margin expansion in FY’26, positioning it well to capitalize on strong consumer trends.

The RealReal was our largest contributor to performance in the quarter. The company is the leader in online consignment of second-hand luxury goods and is well positioned to capitalize on secular growth trends within the expanding resale and circular economy. We also believe that RealReal has several strong competitive advantages, such as its 1M+ active buyer base (network effects) and an inbound processing/authentication infrastructure that would be very costly to replicate. RealReal’s second quarter results marked a transformational quarter for the company, with GMV and revenue rising by 14%. Importantly, the number of consignors on the platform in the quarter grew double digits to an all-time high. Supply unlock is crucial for what we believe to be a sustainable double-digit top-line growth rate going forward, as the company’s historical sell-through rate has been 90%.