Pain in luxury e-commerce and tariff talk may be headwinds for some fashion companies, but don’t include Revolve Group on that list.
The Cerritos-based fashion retailer, which owns the Revolve and FWRD businesses, is finding opportunities in some competitors’ challenges.
Revolve Group notched a 4 percent year-over-year gain in companywide net sales to end the third quarter with $295.6 million. Net income in the quarter ended Sept. 30 jumped 97 percent to $21.2 million, largely driven by recovery of an insurance claim.
Revolve, the largest business by revenue, had sales of $254.6 million in the third quarter. That was up nearly 5 percent from the year-ago period.
Meanwhile, the company’s luxury e-commerce business, FWRD, had sales of nearly $41 million in the quarter, which was an increase of about 3 percent from the same time last year.
It’s what’s happening in the broader luxury segment that appears to be more than buoying FWRD’s business.
In September, the company added Dries Van Noten to its assortment and it’s so far “performed incredibly well,” co-founder and co-CEO Michael Mente told analysts earlier this week. Talks with additional luxury brands to sell on FWRD continue, including what Mente said were “initial inventory commitments from a coveted brand” the company’s been “courting for over a decade.”
Luxury’s Woes = FWRD Upside
In August, luxury e-tailers SSENSE and LuisaViaRoma filed for the U.S. equivalents of bankruptcy protection in Canada and Italy, respectively. Meanwhile, Saks Fifth Avenue has attempted to fend off chatter around a possible restructuring for the department store retailer.
Mente characterized luxury as being “extremely dynamic” in a polite way of outlining the troubles of some, while adding it’s paved the way for FWRD’s opportunity.
“Adding to the industry malaise, luxury brands large and small, have been frustrated by extended payment terms from a prominent luxury department store chain in the U.S., which has been reducing investment amidst declining sales and significant debt obligations,” Mente said. “We continue to view these challenges within the luxury sector as an exciting opportunity for Revolve and FWRD to remain on offense and invest in market share capture, supported by our consistent profitability and cash flow generation that sets us apart.”
The lack of inventory freshness among some luxury competitors who have been unable to write orders is another factor, added co-founder and co-CEO Mike Karanikolas.
“These very, very weak competitors still have a lot of inventory from previous seasons,” he said during the company’s earnings call. “But, as we go season to season with a lack of new deliveries [at challenged retailers], we’re quite optimistic that we will accelerate and gain share as the lack of refresh in our competitors is quite obvious and more customers are coming to us.”
Growing Fashion House
Part of Revolve Group’s successes is that there’s never been a single driver of its growth.
While luxury may be in expansion mode, it’s not the only division riding high.
Executives have said repeatedly that adding more company-owned brands is part of the go-forward strategy due to their boost to margins.
In October, Revolve and FWRD launched the SRG brand in collaboration with Sofia Richie Grainge. It rolled out to claim the highest amount of sales in its first week than any other company-owned label collaboration in Revolve Group’s history.
Brands such as SRG will play into Revolve’s push into physical retail to help differentiate its stores from competitors by having exclusivity on its in-house labels.
The opening of a permanent Revolve store at The Grove is coming and Mente confirmed the company is in talks with “Tier 1” landlords in “key markets.”
“We are laying the groundwork now to ensure we will be in a position to move quickly if and when a compelling opportunity should arise in the geographic areas we are most focused on pursuing next,” Mente said.
Karanikolas tempered the sentiment acknowledging the company, given its roots in digital, still has plenty to learn when it comes to brick and mortar.
Said Karanikolas: “We recognize that it is a long journey ahead for us to be [physical retail] experts, but I think we’re culturally built for this.”
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