Online fashion retailer Revolve Group reported sales grew 3 percent in the second quarter, its first positive quarter since the fourth quarter of 2022. Earnings more than doubled.

“I’m thrilled with our team’s performance that fueled a strong second quarter, highlighted by a return to top-line growth and a more than doubling of our net income year-over-year,” said Co-Founder and Co-CEO Mike Karanikolas. “Key contributors to our strong results were significantly improved marketing efficiency and greater efficiency in our logistics costs, helped by the first year-over-year decrease in our return rate in more than three years.”

“It is gratifying to see our team’s hard work on growth and efficiency initiatives deliver strong positive results on the top and bottom lines,” said Co-Founder and Co-CEO Michael Mente. “Beyond the numbers, we continue to make great progress on longer-term initiatives that we believe further reinforce our foundation for profitable growth in the years to come, including growing our active customer base, expanding our international presence, increasing our share of wallet through adjacent product categories, leveraging AI technology to even further elevate the customer experience, and exploring physical retail as a new way to connect with the next-generation consumer.”

Additional Second Quarter 2024 Metrics and Results Commentary 

  • Trailing 12-month Active customers grew to 2,577,000 as of June 30, 2024, an increase of 5 percent year-over-year.
  • Net sales were $282.5 million, a year-over-year increase of 3 percent.
  • Gross profit was $152.6 million, a year-over-year increase of 3 percent.
  • Gross margin was 54.0 percent, an increase of 7 basis points year-over-year, driven by margin expansion in the Revolve segment, which was partially offset by a year-over-year decline in the Fwrd segment.
  • Net income was $15.4 million, a year-over-year increase of 111 percent.
  • Adjusted EBITDA was $20.5 million, a year-over-year increase of 97 percent that primarily reflects a year-over-year increase in net sales and gross profit combined with increased year-over-year efficiency in our marketing investment and selling and distribution costs, partially offset by year-over-year growth in general and administrative expenses in the second quarter of 2024 that outpaced our growth in net sales.
  • Diluted earnings per share (EPS) was $0.21, a year-over-year increase of 110 percent.

Additional Net Sales Commentary

  • Revolve segment net sales were $245.5 million, a year-over-year increase of 4 percent.
  • Fwrd segment net sales were $36.9 million, a year-over-year decrease of 4 percent.
  • Domestic net sales were $225.1 million, a year-over-year increase of 1 percent
  • International net sales were $57.4 million, a year-over-year increase of 13 percent, driven by growth in nearly all major regions.

Cash Flow and Balance Sheet
Net cash (used in) provided by operating activities was $(24.7) million in the second quarter and $13.7 million in the 6-month year-to-date period ended June 30, 2024 and free cash flow was $(26.7) million in the second quarter and $10.0 million in the six-month year-to-date period. The reduced cash flow provided by operating activities year-over-year for the six-month year-to-date period in 2024 primarily reflects growth in the company’s inventory balance to support a return to top-line growth compared to a declining inventory balance in the first half of 2023 when the company focused on rebalancing its inventory position.

Stock repurchases were $1.9 million for the second quarter ended June 30, 2024, exclusive of broker fees and excise taxes. The company repurchased 118,998 shares of its Class A common stock during the second quarter at an average cost of $15.83 per share, with $59.5 million remaining available under the company’s $100 million stock repurchase program as of June 30, 2024.

Cash and cash equivalents as of June 30, 2024 were $244.7 million, a decrease of $24.6 million, or 9 percent, year-over-year from $269.3 million as of June 30, 2023. The company’s balance sheet as of June 30, 2024 remains debt free. The year-over-year decrease in cash and cash equivalents compared to June 30, 2023 primarily reflects the company’s cash flow generated from operations that was more than offset by $40.5 million in stock repurchases since establishing its $100 million stock repurchase program in August 2023.

Inventory as of June 30, 2024 was $234.3 million, an increase of $29.0 million, or 14 percent, from June 30, 2023.

Results Since the End of the Second Quarter of 2024
Net sales in July 2024 increased by a mid-single digit percentage year-over-year, a sequential improvement compared to the year-over-year trend reported for the second quarter of 2024.

2024 Business Outlook
Based on information available to us as of August 6, 2024, the company is providing the following guidance for the full year ending December 31, 2024 and the third quarter ending September 30, 2024.

Image courtesy Revolve