Revolve (NYSE:RVLV) Reports Sales Below Analyst Estimates In Q1 Earnings, Stock Drops

Radek Strnad /
2023/05/03 4:15 pm EDT

Online fashion retailer Revolve Group (NASDAQ: RVLV) fell short of analyst expectations in Q1 FY2023 quarter, with revenue down 1.37% year on year to $279.6 million. Revolve made a GAAP profit of $14.2 million, down on its profit of $22.6 million, in the same quarter last year.

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Revolve (RVLV) Q1 FY2023 Highlights:

  • Revenue: $279.6 million vs analyst estimates of $290.1 million (3.63% miss)
  • EPS: $0.19 vs analyst estimates of $0.14 (31.9% beat)
  • Free cash flow of $47.7 million, up from negative free cash flow of $12.3 million in previous quarter
  • Gross Margin (GAAP): 49.8%, down from 54.5% same quarter last year
  • Trailing 12 months Active Customers : 2.42 million, up 383 thousand year on year

"We achieved excellent progress on rebalancing our inventory position and generated exceptional cash flow in the first quarter, despite a macroeconomic environment that became increasingly challenging as the quarter progressed, leading to deceleration in our net sales momentum," 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 24.9% annually. This quarter, Revolve reported a rather lacklustre 1.37% year on year revenue decline, missing analyst expectations.

Revolve Total Revenue

Ahead of the earnings results the analysts covering the company were estimating sales to grow 10.6% 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 in dollars.

Over the last two years the number of Revolve's active buyers, a key usage metric for the company, grew 24.4% annually to 2.42 million. This is a fast growth for a consumer internet company.

Revolve Trailing 12 months Active Customers

In Q1 the company added 383 thousand active buyers, translating to a 18.8% growth year on year.

Key Takeaways from Revolve's Q1 Results

With a market capitalization of $1.47 billion Revolve is among smaller companies, but its more than $283.3 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was comforting to see that Revolve’s user base is growing. On the other hand, it was worrisome to see that the revenue growth was quite weak and missed analysts' revenue expectations. Operating income also missed expectations. Overall, this quarter's results were not the best we've seen from Revolve. The company is down 8.35% on the results and currently trades at $18.33 per share.

Revolve may have had a tough quarter, but does that actually create an opportunity to invest 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.