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Revolve (NYSE:RVLV) Misses Q2 Sales Targets, Stock Drops


Adam Hejl /
2022/08/03 4:21 pm EDT
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Online fashion retailer Revolve Group (NASDAQ: RVLV) fell short of analyst expectations in Q2 FY2022 quarter, with revenue up 26.8% year on year to $290 million. Revolve made a GAAP profit of $16.2 million, down on its profit of $31.5 million, in the same quarter last year.

Is now the time to buy Revolve? Access our full analysis of the earnings results here, it's free.

Revolve (RVLV) Q2 FY2022 Highlights:

  • Revenue: $290 million vs analyst estimates of $292.8 million (0.96% miss)
  • EPS (GAAP): $0.22
  • Free cash flow was negative $30.7 million, down from positive free cash flow of $52.7 million in previous quarter
  • Gross Margin (GAAP): 55.9%, in line with same quarter last year
  • Trailing 12 months Active Customers : 2.16 million, up 611 thousand year on year

"We delivered strong results in the second quarter, highlighted by record net sales that increased 27% year-over-year, gross margin expansion to record levels for a second quarter, and continued strong growth in active customers," said co-founder and co-CEO Mike Karanikolas.

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve Group (NASDAQ: RVLV) is a next generation fashion retailer that leverages social media and a community of fashion influencers to drive its merchandising strategy.

Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.

Sales Growth

Revolve's revenue growth over the last three years has been strong, averaging 27.1% annually.

Revolve Total Revenue

This quarter, Revolve reported a decent 26.8% year on year revenue growth, but this result fell short of what analysts were expecting.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.2% over the next twelve months.

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Usage Growth

As an online retailer, Revolve generates revenue growth by growing both the number of buyers, and the average order size.

Over the last two years the number of Revolve's active buyers, a key usage metric for the company, grew 14.4% annually to 2.16 million users. This is a solid growth for a consumer internet company.

Revolve Trailing 12 months Active Customers

In Q2 the company added 611 thousand active buyers, translating to a 39.3% growth year on year.

Key Takeaways from Revolve's Q2 Results

With a market capitalization of $2.12 billion Revolve is among smaller companies, but its more than $237.8 million in cash and positive free cash flow over the last twelve months give us confidence that Revolve has the resources it needs to pursue a high growth business strategy.

We were very impressed by Revolveā€™s strong user growth this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that Revolve missed analysts' revenue expectations and cash flow turned negative. Zooming out, we think this was a mixed quarter. But investors might have been expecting more and the company is down 7.88% on the results and currently trades at $28.5 per share.

Should you invest in Revolve right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.