Revolve Group, the online fashion retailer, reported sales slid 11.8 percent in the second quarter to $142.8 million from $161.8 million a year ago.
Revolve segment net sales were $126.9 million, a YoY decrease of 11.8 percent. Forward segment net sales were $15.9 million, a YoY decrease of 11.6 percent.
International net sales increased 3 percent YoY, outperforming the domestic net sales decline of 15 percent YoY. By territory, Western Europe showed strong growth in net sales YoY, partially offset by a more challenging comparison in Asia.
Diluted earnings per share (EPS) in the quarter were $0.20, up from a loss of ($0.57) per share (GAAP) and $0.18 in adjusted diluted EPS reported for the second quarter of 2019.
As previously disclosed, in early April 2020, the company took a variety of actions to align its cost structure with the significantly reduced consumer demand it was experiencing at the time, primarily through furloughs and temporary reductions to salaries, wages and hours.
Given the highly uncertain demand environment created by COVID-19, Revolve’s actions to temporarily reduce its cost structure were based on the assumption that business conditions would remain very challenging for the remainder of 2020. The company’s improving monthly trend in net sales during the second quarter meaningfully outperformed the underlying assumptions embedded in its reduced cost structure. The combination of top-line outperformance, effective cost controls and execution from Revolve’s team in driving operating efficiencies in areas such as fulfillment and performance marketing enabled net income and Adjusted EBITDA to increase YoY in the second quarter – despite the YoY decline in net sales and gross margin.
As a result of the better-than-expected net sales in the second quarter, the company has rolled back many of its COVID-19-related cost containment actions commensurate with improved net sales trends compared to its initial working assumption. In June, the company began the process of bringing back certain furloughed employees. In early July, the company reinstated salaries and wages for the majority of its actively employed corporate employees, other than its executive officers. Effective August 1, 2020, the company returned the majority of its furloughed employees to full schedule and salary. Effective August 16, the Board of Directors approved the return to full salary of each of the company’s named executive officers and resumption of director cash compensation.
“We delivered record EPS of $0.20, record operating cash flow of $54 million, and our fastest quarterly inventory turns in six years, during the most challenging economic climate in decades,” said Co-Founder and Co-CEO Michael Mente. “Our team has done a phenomenal job remaining extremely nimble throughout this highly uncertain and fluid environment, finding innovative ways to deliver operating efficiencies throughout the business and rapidly adjusting our marketing and merchandising strategies to stay connected with our customers.”
“Our top priorities for responding to COVID-19 are to protect our employees, customers and stakeholders,” said Co-Founder and Co-CEO Mike Karanikolas. “We executed well against these priorities, which is evident in our results for the quarter. Our Revolve segment inventory turned approximately 30 percent faster year-over-year, serving as a key driver of our strong cash flow, illustrating the effectiveness of our buying strategy to efficiently manage inventory dynamics in such an uncertain environment.
“We are confident that our agile team, flexible business model and strong balance sheet position us well to navigate through what continues to be an uncertain environment,” Karanikolas continued. “We believe these competitive advantages, coupled with our strong brand, differentiated technology and deep customer connection, position us to thrive over the long term.”
Photo courtesy Revolve Group
