Revolve Group’s unwavering in its resolve that tough times could serve as another turning point in the fashion company’s growth.
Co-founder and co-CEO Mike Karanikolas described to analysts last week a “progressively more uncertain” operating landscape since Revolve’s last financial update. However, executives see plenty of potential to poach more market share.
“We see considerable opportunity for further gains amidst the disruption in the luxury market as evidenced by the recent bankruptcy and liquidation of Canada’s iconic, premium department store chain, Hudson’s Bay,” Karanikolas said.
Hudson’s Bay sought to liquidate its business in March amid a particularly rough business environment for department stores. It’s now facing 17 bids on its real estate and intellectual property.
Revolve’s already made strategic plays. That includes last year’s purchase of a majority stake in Alexandre Vauthier and April’s announcement of a joint venture with Cardi B to launch her own clothing and beauty label.
The updates come after the owner of Revolve and FWRD reported a 10 percent jump in net sales to $296.7 million during the first quarter ended March 31. Net income grew 5 percent from a year ago to $11.4 million.
Revolve Group on Tariffs
Tariffs loomed over the company’s quarterly update, and for good reason.
“The macro environment is facing geopolitical and macroeconomic uncertainty, particularly with the implementation of significant and broad-based tariffs presenting considerable challenges for our sector,” Karanikolas said. “It’s very challenging to operate in an environment when applicable tariffs can change almost daily. Yet, our team is engaged, collaborating with brands and other partners daily to mitigate the impacts and we believe we are fully up to the challenge.”
Most of the company’s inventory is comprised of third-party brands, which will bear the brunt of the tariffs’ direct impacts. Last year 78 percent of Revolve Group’s inventory came from third-party companies.
The remaining 22 percent of inventory last year, consisted of mostly company-owned brands where Revolve imported the product into the U.S. Most of that 22 percent, or 72 percent, was sourced from China.
“We are actively engaged in cost-sharing discussions with our owned-brand manufacturing partners,” Revolve Group CFO Jesse Timmermans told analysts. “And while there is a longer lead time, we are also working to diversify our manufacturing sources outside of China.”
Trimming logistics costs and “selectively increasing prices” are also on the table.
“We successfully navigated through the global financial crisis, the first wave of Trump tariffs in 2018 and 2019 and the COVID-19 pandemic, in all cases, coming out stronger,” Timmermans said. “We are on even stronger footing today than we were during these previous cycles and we continue to have the financial discipline, balance sheet strength and long-term focus to support investing through this current cycle.”
New Paths to Grow
As the business braces for tariffs, it’s still moving forward with expansion on a few fronts.
Revolve Group is on track to open in the fall its store at The Grove in Los Angeles. That would mark its second door after Aspen. It’s also the first in a major trade area at a shopping center that sees heavy foot traffic from travelers and locals alike.
Once that door opens, the company will do what it does best: study the analytics and learn from that data before moving further on more physical retail.
“With Aspen and Los Angeles, we will have two unique destinations to leverage as we continue to test, learn and iterate as we drive towards our internal performance goals,” co-founder and co-CEO Michael Mente said. “We have no plans to further expand our retail footprint beyond Los Angeles until we fully optimize and achieve our internal success targets within our existing footprint.”
Meanwhile, Revolve Group plans to add to its company-owned brands roster.
Those labels continue to account for increased sales within the company’s Revolve segment and increased their year-over-year share of overall sales for the first time in over two years.
That’s seen as key given those brands provide higher gross margins than a third-party label.
Mente said company-owned brands “significantly outperformed” in the first quarter over third-party labels.
To that end, the company plans to launch more brands in the second half of this year and into early 2026.
“The team is strong,” Mente said. “We’re performing well, and we’ll continue to invest [in company-owned brands] because we see it as an exciting part of the business, both from a brand building and margin building perspective.”
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