Revolve sees third-quarter profit surge despite net sales dip

By

Jennifer Braun

Published
Nov 13, 2020

Youth-focused online fashion retailer Revolve Group Inc. reported a 2 percent decrease in sales for the third quarter on Thursday, but still managed to increase profits, year-over-year.

For the third quarter ended September 30, 2020, the California-based retailer, which went public in June of last year, announced net sales of approximately $151 million, down from 154.2 million reported in the same period in the previous year.

The company’s Forward segment saw growth of 9 percent, reporting sales of $20.5 million for the quarter, while the namesake Revolve segment saw its sales tumble 3.6 percent to $130.6 million. 

The e-commerce retailer widened profits to $19.4 million for the quarter, compared with $9.5 million from the year-ago period. 

“Strong execution on our merchandising and operational initiatives led to another quarter of record results. Despite the challenging backdrop and short-term pressures, we continued to drive efficiencies throughout the business in the third quarter, leading to higher margins and record profitability,” said co-founder and co-CEO, Mike Karanikolas. 

“Our efforts resulted in record net income of $19 million, exceptional operating cash flows of $14 million, and record Adjusted EBITDA of $24 million, which increased 66% year-over-year. A key driver of our significantly increased profitability was our highest-ever gross margin for a third quarter, which reflects a high percentage of net sales at full price and improved inventory dynamics.”

Looking forward, Covid-19 has continued to have a negative impact on the company’s financial results into its next quarter. 

For the month of October 2020, net sales declined by a high single digit percentage year-over-year, demonstrating altered customer shopping and purchasing behaviors influenced by the Covid-19 pandemic.

Still, the company said that the sales of its “at home” categories such as beauty products and clothing styles for active lifestyles have remained strong. In particular, categories such as beauty, accessories, intimates, sweaters/knits and swimwear remained strong in the third quarter.