Online fashion retailer Revolve Group (NASDAQ: RVLV) reported Q3 FY2022 results beating Wall St's expectations, with revenue up 10% year on year to $268.7 million. Revolve made a GAAP profit of $11.9 million, down on its profit of $16.6 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) Q3 FY2022 Highlights:
- Revenue: $268.7 million vs analyst estimates of $257.7 million (4.26% beat)
- EPS: $0.16 vs analyst estimates of $0.07 ($0.09 beat)
- Free cash flow of $8.61 million, up from negative free cash flow of $30.7 million in previous quarter
- Gross Margin (GAAP): 52.9%, down from 55% same quarter last year
- Trailing 12 months Active Customers : 2.24 million, up 571 thousand year on year
"We delivered another profitable quarter with double-digit growth in net sales in the third quarter of 2022, despite the increasingly challenged macro environment," 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 26.1% annually.
This quarter, Revolve beat analyst estimates but reported an mediocre 10% year on year revenue growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 6.97% 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 18.1% annually to 2.24 million users. This is a solid growth for a consumer internet company.
In Q3 the company added 571 thousand active buyers, translating to a 34% growth year on year.
Key Takeaways from Revolve's Q3 Results
With a market capitalization of $1.74 billion Revolve is among smaller companies, but its more than $244 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
We were very impressed by Revolve’s strong user growth this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, revenue growth is overall a bit slower these days. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. The company is up 5.31% on the results and currently trades at $23.4 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.