We're Resale Buyers as Strong Economics Drive Growth; Inditex and Swatch Attractive in Branded Space

Apparel resale remains the quickest-growing channel in apparel, with the confluence of elevated mobile commerce volume, robust home delivery infrastructure, competitive pricing, and sustainability concerns driving more than 3 times the sales growth of the retail apparel industry, by our estimates. While we forecast resale figures to represent only 10.6% of global apparel purchases by 2031, we expect a $301 billion global addressable market in that year, offering plenty of headroom for publicly traded players like no-moat Poshmark and no-moat The RealReal. We believe that the market is overselling near-term pressure, with a mix shift towards services spending, surge in brick-and-mortar sales, lapping stimulus benefits, and inflationary pressures dragging on short-term results. Longer term, we expect that favorable unit economics, with resale sellers shaving as much as 70%-75% off their effective clothing replacement cost, broader acceptance of the channel, and a viable route to operating profitability (with strong incremental operating margins), will see the market catch up to our $18 and $13.30 fair value estimates for Poshmark and The RealReal, which trade at 40% and 75% discounts to our intrinsic valuations, respectively.