Revolve Sales Growth Continues, But Investors Want More
The company’s bottom line took a big hit from a $40.8 million share repurchase tied to its IPO.
Revolve Group’s first quarterly report after its initial public offering showed the influencer-heavy company's continuing potential, as well as the pitfalls of being publicly held.
The e-commerce firm's second-quarter net losses to common stockholders tallied $28.1 million, or 57 cents a diluted share — reflecting $40.8 million spent to repurchase its Class B stock as the company went public.
Investors appear to have been caught off guard by the loss, and shares of Revolve fell 11.2 percent to $27.50 in after-hours trading. That's still well ahead of the $18 IPO price in June, but down from the $34 the stock stood shortly after it hit the market.
While Revolve is now a public company, cofounders and co-chief executive officers Michael Mente and Mike Karanikolas control 67 percent of the voting power at the firm and are, at least somewhat, isolated from much of the back-and-forth craziness of Wall Street.
And analysts on a conference call on the results were generally pleased with the quarter, congratulating management and welcoming them to the quarterly party.
The call — and Revolve as a public company — mark something of a new look at merchants for investors.
For one, Mente talked about Cardi B, Offset and Kendall Jenner — an unusual cast for the usually dry affairs. He also hit on Revolve's influencer collaborations, Song of Style with Aimee Song and the Camila Coelho Collection, a part of the business that is still new and could help the company keep up its growth trend, both in terms of sales and profit margins.
Without the stock buyback, Revolve's net earnings for the quarter rose to $12.7 million from $10.5 million a year earlier.
Sales for the quarter ended June 30 jumped 22.8 percent to $161.9 million — above the $159.9 million analysts projected. Revolve's active customer count increased 36.2 percent to $1.4 million as the number of orders placed rose 30.8 percent to 1.3 million.
But despite its growth, the company still faces all the usual big-picture challenges.
Karanikolas noted that foreign currencies shifted “about 5 to 8 percent against us” in its major markets making for “a really challenging macro environment internationally,” although not challenging enough to stall growth.
Jesse Timmermans, chief financial officer said the U.S.-China trade war — which recently saw President Donald Trump impose 10 percent tariffs on Chinese apparel imports as of Sept. 1 — would also take its toll.
“They're here,” Timmermans said of the tariffs. “Ten percent is better than 25 percent, but we are by no means immune to them. But we do have ways to manage through the tariff impact as we look ahead.”
He said the company has good relationships with its vendors in China and has diversified its supply. Additionally, over 70 percent of Revolve's products come from emerging or owned brands, meaning the e-commerce company won't feel as much pricing pressure.
“Our customer comes to us not to price compare, but to look at what's new and exciting,” he said.