Company Reports

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel—breadth of selection, scalability, and ubiquity of access—to reach a mobile-first, millennial and Gen Z audience. With the firm cycling through 300,000 styles on its Revolve and FWRD (luxury) marketplaces during 2023, and with roughly 1,500 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing more than $400 in after-return spending among its base of 2.5 million active buyers at year-end 2023.

No-moat Revolve showcased solid fiscal 2023 fourth-quarter marks, with $258 million in revenue and $0.05 in EPS outpacing our respective $242 million and $0.04 estimates before the earnings call. As we balance better-than-expected quarterly results, time value, and our tempered near-term forecasts (and given that we anticipate macro pressures will stretch further through 2024, with just 2% full-year sales growth and 3.1% operating margin), we don't expect any meaningful change to our $29 fair value estimate.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel—breadth of selection, scalability, and ubiquity of access—to reach a mobile-first, millennial and Gen Z audience across its online properties. With the firm cycling through 219,000 styles on its Revolve and FWRD (luxury) marketplaces during 2022, and with roughly 1,000 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing more than $500 in after-return spend among its base of 2.3 million active buyers at year-end 2022.

No-moat Revolve delivered solid fiscal 2023 third-quarter results, with net sales of $257.6 million topping our $248.9 million forecast, while diluted EPS of $0.04 matched our estimate. Although we intend to trim our near-term forecast, consistent with tempered fourth-quarter guidance, we plan to lower our $29.50 fair value estimate by a low-single-digit percentage as we view long-term prospects as largely intact.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With the firm cycling through 219,000 styles on its REVOLVE and FRWD (luxury) marketplaces during 2022, and with roughly 1,000 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing more than $500 in after-return spend among its base of 2.3 million active buyers, by our estimates.

No-moat Revolve’s challenging second-quarter results and tempered guidance sent the shares down 11% in afterhours trading, but we think the market is overly fixated on the near-term macro challenges, leaving shares deeply undervalued. Underpinning the reaction, management trimmed its fiscal 2023 outlook to a 52%-52.5% gross margin (down from 52%-53%) while projecting slightly higher operating costs for the balance of the year. We plan to adjust our near-term estimates into the guided range, and consequently expect to trim our $31 fair value estimate by a low-single-digit percentage. We maintain our midteens top line growth over our explicit forecast (after fiscal 2023).

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With the firm cycling through 219,000 styles on its REVOLVE and FRWD (luxury) marketplaces during 2022, and with roughly 1,000 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing more than $500 in after-return spend among its base of 2.3 million active buyers, by our estimates.

After digesting no-moat Revolve’s mixed fiscal 2023 first-quarter results, we plan to trim our $33.50 fair value estimate by a high-single-digit percentage, reflective of our less sanguine outlook for the year and into 2024. We now forecast a slight decline in net sales growth and 4.6% operating margin for the year, down from preprint estimates for 6.3% growth and a 5.7% margin. Despite a 3%-4% pullback on the print, shares offer a compelling buying opportunity at current trading prices (trading nearly 40% below our revised valuation), although a turnaround catalyst may not materialize until macro pressures subside.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With the firm cycling through 219,000 styles on its REVOLVE and FRWD (luxury) marketplaces during 2022, and with roughly 1,000 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing more than $500 in after-return spend among its base of 2.3 million active buyers, by our estimates.

After digesting no-moat Revolve’s fourth-quarter results and factoring in a tepid 2023 outlook, we plan to cut our $36 fair value estimate by a mid-single-digit percentage. This adjustment reflects a combination of lower gross margin guidance (to 52%-53%, down from 54% in 2022), elevated return rates, and lower projected full-price sales mix in 2023.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With approximately 50,000 stock-keeping units (SKUs) sitting on its REVOLVE and FRWD (luxury) marketplaces at any given time, and with 900 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing almost 40% of apparel wallet share among its base of more than 2 million active buyers, by our estimates.

Revolve reported mixed third-quarter results despite its $268.7 million in revenue and $0.16 in diluted EPS surpassing our $260 million and $0.12 estimates. While customer growth was encouraging, up 34% annually, mere 3% sales growth in October suggests vulnerability to a weak economic environment and has led us to re-evaluate our assessment of the firm’s business cycle sensitivity. It has become apparent that no-moat Revolve performs more like a mass apparel retailer than a luxury brand, with a sharp third-quarter deceleration in sales momentum and deteriorating profitability attesting to its cyclicality. We raised our Morningstar Uncertainty Rating to Very High from High earlier in the year and are now raising our cost of equity to 11% from 9% to reflect our change of view and lukewarm guidance; this should drive about a 20% contraction in our $46 fair value estimate. We still view the shares as undervalued, trading at about a 40% discount to our revised intrinsic valuation, but we don't expect sales growth to reaccelerate or meaningful margin leverage until macro pressures abate.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With approximately 50,000 stock-keeping units (SKUs) sitting on its Revolve and Forward (luxury) marketplaces at any given time, and with 900 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing almost 40% of apparel wallet share among its base of more than 2 million active buyers, by our estimates.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With approximately 50,000 stock-keeping units (SKUs) sitting on its Revolve and Forward (luxury) marketplaces at any given time, and with 900 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing almost 40% of apparel wallet share among its base of more than 2 million active buyers, by our estimates.

No-moat Revolve Group delivered mixed second-quarter results, as net sales of $290 million topped our $285 million estimate but diluted earnings per share of $0.22 missed our $0.32 forecast. While we are encouraged by the solid growth in active customers (up 39% annually to 2.2 million) and average order value (up 19% to $303) in the quarter, July’s mere 10% net sales growth leads us to deduce that demand may slow in upcoming quarters, dragging materially on profitability. We now expect 2022’s operating profit margin will roughly halve to 6.1% from 11.8% a year ago (against our prior forecast of 11.4%), with a recovery to 2021’s figure stretching out until 2024 as Revolve’s core customers, indexing younger and early in their careers and income progression, tightens their belts on nondiscretionary spending. Despite enviable price points, Revolve behaves more like an apparel company than a luxury brand during cyclical downturns, suggesting near-term turbulence. Therefore, with meaningfully slower sales growth and a protracted route to management’s long-term 14% adjusted EBITDA target, we expect to shave about 25% off our $61 fair value estimate. Nonetheless, we view the shares as undervalued.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With approximately 50,000 stock-keeping units (SKUs) sitting on its Revolve and Forward (luxury) marketplaces at any given time, and with 900 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing almost 40% of apparel wallet share among its base of 2.04 million active buyers as of the first quarter of 2022.

No-moat Revolve posted better-than-expected first-quarter results, with net sales of $283 million and diluted EPS of $0.30 healthily exceeding our expectations for $248 million and $0.27, respectively. The firm bucked normal seasonal trends with 18% growth from a quarter ago, with a record 201,000 active customer adds allowing the retailer to eclipse two million active buyers for the first time. While there were plenty of green shoots in the quarter, between meaningful customer growth (up 38% from a year ago), strength in average order volume (up 12.5% to $288), and a 21.7% increase in orders per customer, tepid sales and margin guidance for the rest of the year leads us to trim our $67 fair value estimate by a high-single-digit percentage. However, shares continue to look attractive, trading at a 35%-40% discount to our revised fair value estimate after a 12% sell-off post print.

The Revolve Group has carved out an interesting competitive niche in the attainable luxury category, leaning heavily into the strengths of the e-commerce channel--breadth of selection, scalability, and ubiquity of access--to reach a mobile-first, millennial and Gen Z audience across its online properties. With approximately 50,000 stock-keeping units (SKUs) sitting on its Revolve and Forward (luxury) marketplaces at any given time, and with 900 new styles launching weekly, the firm has positioned itself as an "online source for discovery and inspiration," capturing almost 40% of apparel wallet share among its base of 1.84 million active buyers as of year-end 2021.

No-moat Revolve Group posted stronger-than-anticipated fourth-quarter earnings, with $240 million in revenue, $0.39 in EPS, and 13.3% operating margins healthily outstripping our prior expectations ($220 million, $0.22, and 10%, respectively). While the initial market reaction was negative, with shares falling 4% post-print, we're encouraged by the strength of the luxury FORWARD marketplace, green shoots from the loyalty program rollout, and a larger role for in-person events in 2022. Consequently, we anticipate raising our $66 fair value estimate by a low-single-digit percentage on time value of money, with our forecasts for low- to mid-20% average annual sales growth (23%) and high-20% operating profit growth (27%) through 2026 remaining largely unchanged. We continue to view shares as attractive.

We're launching coverage of Revolve with a $66 fair value estimate, no-moat designation, and Exemplary capital allocation rating. The firm sits in an interesting "aspirational luxury" enclave in the fragmented global fashion market, benefiting from an ongoing skew toward e-commerce channels in the apparel category, the rising prevalence of mobile commerce, and ballooning growth in social commerce. With average price points north of $200 in its Revolve marketplace (which constitutes about 85% of sales), the retailer appears to have built some cachet around a treasure-hunt search experience that links nearly 2 million buyers and 900 emerging brands, with customers spending upward of 40% of their annual clothing budgets on the platform, by our estimates. Shares look attractive at about a 20%-25% discount to our fair value estimate.