The kids are all right — or at least they’re still spending.
Revolve Group Inc., which bills itself as “the next-generation fashion retailer for Millennial and Gen Z consumers” turned in a stronger-than-expected top line for the third quarter.
Sales rose 20 percent to $356 million for the quarter ended Sept. 30 — better than the 16.9 percent analysts counted on, according to Yahoo Finance. Sales at both divisions moved in lock step with the corporate average, with Revolve up to $306.8 million and Fwrd tallying $49.2 million.
The company’s active customer count rose 18 percent to 3.2 million for the trailing 12 months. Those shoppers delivered Revolve a 19 percent increase in orders, although the average order value slipped 5 percent to $292, a decline the company said was “primarily attributable to initial sales of Grow-Good beauty products at much lower price points.” Grow-Good, which launched in the spring, is part of a joint venture with Cardi B.
Michael Karanikolas, cofounder and co-chief executive officer, told analysts on a conference call: “Our strong top-line results and the momentum in our customer base in recent quarters is especially noteworthy in an environment where many in our industry have seen softer trends. We believe that it shows our investments are delivering results and reflects the team’s disciplined execution against our key growth initiatives.”
Karanikolas also pointed to continued improvement in the company’s return rate, which decreased by more than 2 percent from a year earlier.
He pointed to category diversification as “a big driver” of the shift, along with other initiatives that have helped the company cut return rates in eight of the last 10 quarters.
The improvement in returns helped “absorb the impact of higher fuel surcharges on our logistics costs this quarter,” he said.
Those shipping costs prevented the revenue increases from translating well on the bottom line.
Net income fell 27 percent to $15.5 million for the quarter and adjusted earnings before interest, taxes, depreciation and amortization dipped 7 percent to $23.5 million.
Investors traded shares of the company down 4.8 percent to $20.50 in after-hours trading on Tuesday.
Michael Mente, cofounder and co-CEO, said in a statement: “Our strong top-line growth and customer engagement metrics are a reflection of our brand strength and a result of our investments in brand building, physical retail expansion and key partnerships, including the recent launch of Revolve Los Angeles and our inaugural Revolve Magazine, our new joint venture with Donatella Versace, and recently announced expanded partnerships with Kendall Jenner and Dwyane Wade.”
Revolve spent 14.3 percent of sales, or $50.8 million, on marketing in the third quarter, up from 13.7 percent, or $40.4 million, a year earlier.
The company said that increase reflected a rise in “performance marketing and brand marketing investments to support various growth initiatives, including our first namesake label, Revolve Los Angeles, within our owned brand assortment.”
Revolve is going to keep spending to put itself in front of consumers and plans to devote 16.9 percent of sales to marketing in the fourth quarter.
