Revolve Group’s looking to aggressively take advantage of softness in some pockets of the market to fuel growth of its brands.
The fashion company’s co-founders and co-CEOs Mike Karanikolas and Michael Mente said as much when they shared insights on major marketing initiatives and expansions during the company’s quarterly call with analysts Tuesday.
At the top of the opportunities list is the luxury market. That’s particularly the case for Revolve Group’s luxury retailer FWRD.
“We view the luxury industry challenges as an exciting opportunity for Revolve to go on offense and invest in market share capture, supported by our consistent profitability and cash flow generation that sets us apart in fashion e-commerce,” Karanikolas told analysts, while citing the broader decline in U.S. luxury spending of 18 percent in March reported by Citi.
Mente also hinted at market competitors, some of whom may be struggling, as offering an upside for FWRD and Revolve.
“We believe there’s an opportunity to pursue the millions of effectively abandoned luxury customers that are up for grabs in the aftermath of the recent industry malaise,” Mente said.
Aspen Goes Permanent
The bullish take on luxury and how the company’s positioned gave management the confidence to make the Revolve & FWRD Aspen pop-up shop permanent.
Mente outlined the store’s performance in the company’s first quarter ended March 31 as being “incredible” and “exceeding our initial financial goals.”
That resulted in the company signing a multi-year lease for the location at 410 E. Hyman Ave.
The co-branded storefront has been viewed as a way for the born-online business to interface with consumers in real life, find new fans of the company, elevate Revolve and FWRD and innovate on brand relationships, Mente outlined.
“The incredible successes in Aspen have led us to explore other regions for our retail shopping experiences that offer similar potential compelling financial returns and for the elevation of our brands,” Mente said.
Aspen has been preceded by other tests over the years, including the Revolve Social Club on Melrose, which offered limited in-person shopping events, and a temporary FWRD shop on Melrose Avenue.
New Marketing Approaches
Revolve and FWRD retail remains very much in a test-and-learn phase, but digital marketing and events have helped build the business into what it is today.
Revolve continues to iterate on that front, most notably with last month’s Revolve Festival in Palm Springs taking place the same weekend as the Coachella Valley Music and Arts Festival.
This year’s version was scaled down from recent years. Executives described it as more intimate and exclusive.
The trimmer Revolve Festival budget bore out in a more successful event, the CEOs said.
“The marketing team delivered an incredible Revolve Festival event that generated a greater impact on our key metrics within the one-day format in 2024 than we had achieved over an entire weekend for last year’s Revolve Festival event,” Karanikolas said.
Added Mente: “What’s impressive is that we delivered our incredible Revolve Festival while spending millions of dollars less than in recent years and yet we delivered a greater impact than before.”
Greater efficiencies are now giving Revolve more room to “expand the marketing playbook,” Mente went on to say, with a “broader range of activations” slated for the current quarter.
Markdown Pullback
Further expansion into men’s and international are also part of Revolve’s growth playbook. Beauty, which saw first-quarter sales jump 34 percent, remains a fast-moving category with more brands expected to be added to the mix.
That comes after the company spent much of last year working through excess inventory with the help of markdowns. As a result, first-quarter net sales were impacted, slipping 3 percent to $270.6 million as the company lapped a year-ago quarter with higher than normal promotions.
The overall decline was driven by the FWRD business, which fell 15 percent to net sales of $41 million. Revolve, the company’s largest division, fell 1 percent to $229.6 million.
Revolve Group’s net income also narrowed in the quarter by 23 percent to $10.9 million.
Still, the work’s paying off with inventory, Karanikolas said, is “in a much better place.”
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