For all the doom and gloom around LVMH Moet Hennessy Louis Vuitton SE and Kering SA’s disappointing starts to the year, Revolve Group has a different story to tell.
The fashion firm catering to Millennial and Generation Z consumers operates its namesake contemporary business, in addition to the luxury division FWRD.
Both were on the up in the first quarter of the year.
That performance is set against a dismal outlook for the broader luxury market that had Bloomberg Businessweek glumly calling the segment in “crisis” mode. Meanwhile, legacy brands such as Saks Global Enterprises continues to wind its way through bankruptcy court.
“Notably, at a time when the world’s largest multi-brand luxury retailer is closing most of its store locations, we are rapidly expanding our customer base attracting coveted new brand partners and having particular success in generating increased sales from high-value customers,” co-CEO and co-founder Mike Karanikolas told analysts during the company’s quarterly earnings update Tuesday.
For Revolve Group, the headwinds have simply picked off what were once competitors, leaving a playing field wide open for a digital-first business that has built brand equity that’s commanded high price points and an average order value in the first quarter of $298, up $3 dollars from a year ago or an increase of $39 from the first quarter of 2019.
“We think the opportunity in the high-value customer segment is very large for us over time, not just for FWRD but also Revolve,” Karanikolas said. “Revolve is a premium price point and a lot of our top tier shoppers shop significantly on Revolve as well. So we’re seeing strength across both websites with that high-value consumer.”
Buried within the company’s update was also a disclosure that it made an $11 million minority investment in a business in January. However, Karanikolas dodged specifics when pressed for details.
Growth Across the Board
For Revolve, the largest business by revenue, net sales increased 15 percent in the quarter compared to a year ago to total $293.2 million.
Its sister business FWRD generated revenue of $49.6 million in the quarter, which was a jump of 17 percent from the year-ago period.
While other brands are seeing compression and headwinds overseas, that’s not the story for Revolve Group.
The overall business notched a 20 percent gain in first-quarter international sales to $68.9 million.
Domestic sales were just as much of a growth story, with that business up 15 percent to $274 million.
Overall, the quarterly performance led to companywide net sales of $342.9 million, which was up 17 percent from a year earlier. Meanwhile, net income rose 21 percent from a year ago to $13.8 million.
Spending Money to Make Money
Adding to the run-up is the investments the company’s making in expansion. Notably, it’s moving forward on physical retail, with Miami now its next brick-and-mortar location set to open by year’s end. There was also the more recent launch of the Revolve clothing label as the company looks to solidify the brand name among consumers.
The brand’s launch is supported by what co-founder and co-CEO Michael Mente said he often runs into: customers who tell him they’re wearing Revolve.
“They can’t remember which brand they are wearing, but they know they bought Revolve,” he said during Tuesday’s call.
He added that the launch is the start of other “Revolve-oriented brands” that will push the business into other categories with higher margins over the next two to three years.
The brand’s rollout coincides with the company’s push into brick-and-mortar as it looks to leverage its owned brand portfolio and create what Mente called a “halo effect” companywide.
The Florida store that’s set to open later this year is in what Mente said is one of Revolve’s strongest markets domestically.
Meanwhile, in the fast-growing beauty segment, the company partnered with Cardi B on the launch of haircare brand Grow-Good Beauty, which lays claim to a less than one-hour sellout of all stock-keeping units in a March presale and its official April launch.
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