Consumer closets may have gotten their fill of Revolve and FWRD last year.
The two brands’ parent Revolve Group Inc. reported Wednesday declines in both its namesake business and the luxury division FWRD as consumer appetite for the company’s dresses, tops and other apparel wanes.
Companywide net sales in the second quarter ended June 30 were off 6 percent to $273.7 million. Net income was sliced by more than half to total $7.3 million in the quarter.
“What we’ve seen is there’s a lot of caution in terms of their discretionary spending,” co-founder and co-CEO Mike Karanikolas told analysts Wednesday. “Last year they were feeling great and bullish about the future and very excited to engage in the world after the Covid lockups. Also, a lot of them refreshed their wardrobe…. So, we’re seeing a bit of a rebound the other way in the wardrobe refresh cycle and also where consumers are putting their dollars.”
Karanikolas reiterated what many CEOs, analysts and other industry watchers have noted in the way of more dollars shifting away from discretionary goods and over to experiences and services.
That’s particularly the case among the younger demographic and the more aspirational consumer the Revolve Group appeals to.
Revolve, FWRD Breakdowns
If performance could be summed up succinctly in the quarter, it’s that Revolve and the international market are faring better than FWRD and the domestic business.
Even still, Revolve, the largest source of revenue, fell 4 percent to $235.1 million in the second quarter. FWRD net sales were off 15 percent to $38.6 million.
Meanwhile, domestic sales slid 7 percent to $222.9 million. International offered the one bright spot with sales up 4 percent to $50.9 million.
Co-founder and co-CEO Michael Mente noted a general softening in fashion apparel and dresses, the latter being a big business for the group. In contrast, beauty, handbags and accessories continue to grow, Mente said.
For FWRD, in particular, the softening is in line with what’s being seen in luxury more broadly, Karanikolas said.
“Our outlook in the medium term is one of caution in the luxury zone, particularly for those aspirational customers that are reaching up, and that’s reflected in our inventory purchase plan,” Karanikolas said of FWRD.
What’s Being Done Now
Executives said multiple times on Wednesday’s call the business pressures are not viewed as long-term issues for Revolve or FWRD.
“We think the primary headwind is coming from the macro side, but at the same time our expectation is that we outperform the market,” Karanikolas said. “We believe we’re not at the level of outperformance we expect to be right now so we’re certainly looking inward to see what we can … do to accelerate things and make sure we connect better with the consumer. That includes offerings both on the marketing side and then also the merchandise side.”
The company has rolled out several initiatives to position itself for growth, outlining some in the quarterly call.
That includes cutting shipping costs by consolidating Canadian returns before heading to the U.S. U.K. returns are now held in market for local replenishment instead of being shipped to the U.S.
Revolve also continues to expand its use of AI and machine learning for merchandising and design.
On the hiring front, it appointed an executive to head its greater China business with the overall international market expected to generate at least a third of sales, if not nearly half, in the long-term. The company’s also opened hiring to beyond California and the U.S.
Revolve’s quarterly update also came with a separate announcement Wednesday of a $100 million share repurchase program Karanikolas called an “attractive and a creative use of our capital.”
Revolve Group has about $270 million in cash, with the two founders holding nearly 45 percent of the company’s outstanding common stock.
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