Revolve Group, Inc., the fashion retailer focused on Millennial and Gen Z consumers, reported net sales were $279.6 million in the first quarter ended March 31, a year-over-year decrease of 1 percent against a very difficult prior-year comparison. The growth represents a four-year compounded annual growth rate (CAGR) of 19 percent since the first quarter of 2019.
Active customers increased by 84,000 during the first quarter of 2023, growing to 2,424,000 as of March 31, 2023, an increase of 19 percent year-over-year.
Revolve segment net sales were $231.7 million in the quarter, a year-over-year decrease of 3 percent. FWRD segment net sales were $48.0 million, a year-over-year increase of 5 percent.
Domestic net sales decreased 5 percent year-over-year and international net sales increased 16 percent year-over-year.
Gross margin was 49.8 percent of sales, a year-over-year decrease of 468 basis points, primarily reflecting a lower mix of net sales at full price in the first quarter of 2023 as compared to the first quarter of 2022.
Net income was $14.2 million, or 19 cents per diluted share, for the quarter, a year-over-year decrease of 37 percent. The comparison was said to be impacted by the lower gross margin and an increase in operating expenses year-over-year, partially offset by an increase in other income due primarily to insurance reimbursement.
Adjusted EBITDA was $15.0 million in Q1, a year-over-year decrease of 52 percent.
“We achieved excellent progress on rebalancing our inventory position and generated exceptional cash flow in the first quarter, despite a macroeconomic environment that became increasingly challenging as the quarter progressed, leading to a deceleration in our net sales momentum,” said co-founder and co-CEO Mike Karanikolas.
“Supported by our strong profitability and cash flow that truly stand out within the fashion e-commerce sector, we are continuing to innovate and leverage new technologies while executing several important growth, brand-building and efficiency initiatives that we believe will further strengthen our foundation for profitable growth over the long term,” said co-founder and co-CEO Michael Mente.
Net cash provided by operating activities was $48.8 million and free cash flow was $47.7 million. Strong cash flow generation reportedly benefitted from favorable working capital movements, including a meaningful decrease in inventory during the first quarter. The cash flow metrics were said to be the second highest for any first quarter for the company, yet trailed the record first quarter cash flow from the prior-year period primarily due to lower net income year-over-year. The strong cash flow generation has further strengthened the balance sheet and liquidity.
Cash and Cash Equivalents as of March 31, 2023 was $283.3 million, an increase of $48.6 million, or 21 percent, from December 31, 2022 and an increase of $12.7 million, or 5 percent, from $270.6 million as of March 31, 2022. The balance sheet as of March 31, 2023 remains debt free.
Inventory as of March 31, 2023 was $190.2 million, a decrease of $25.1 million, or 12 percent, from December 31, 2022, and an increase of $10.9 million year-over-year, or 6 percent, from the inventory balance of $179.2 million as of March 31, 2022.
The company said it believes it is making continued progress in its efforts to balance its inventory, highlighted by a meaningful reduction in the spread between inventory growth rate year-over-year and the net sales decline year-over-year in the first quarter of 2023 on a sequential-quarter basis when compared to the fourth quarter of 2022.
