Revolve Earnings: Sales Momentum Suggests Upscale Retailer Has Turned a Corner; Shares Fairly Priced

No-moat Revolve Group posted strong fourth-quarter earnings, with sales growth accelerating to 14% (from 10% a quarter earlier) as marketing investments and new categories build momentum. We're particularly impressed by the breadth of the turnaround, with double-digit sales growth across the Revolve and FWRD segments and in both US and international markets. That said, the quarter wasn't altogether positive, with 2025 guidance suggesting a lower gross margin range (52.2% to 52.7%) than our 53.2% estimate going into the quarter, while an uncertain tariff environment threatens further pressure as the year unfolds, given the firm's large but unquantified exposure to Chinese synthetic fabric manufacturing. We expect to raise our $30.50 per share fair value estimate by a low-single-digit percentage, and view the market's reaction—shares have shed 6%-7% of their value during Feb. 25 trading—as unduly harsh.