Revolve Group ended its ownership of French luxury label Alexandre Vauthier as it remains on the hunt for acquisitions that bear out in more profitable returns.
The decision was a drag on profitability in the recently ended second quarter. However, Revolve’s move to drop its majority stake in Alexandre Vauthier wasn’t a drawn out affair.
The company bought the business for $400,000 in the second quarter of last year, snapping it up out of receivership, according to a filing with the Securities & Exchange Commission this week. At the time, the deal was seen as a way for Revolve to further bolster its in-house brand offering by pushing it into the luxury fashion market.
While it owns FWRD, a luxury retailer, it had not owned a couture label prior to the deal.
Revolve Group said last June at the time of its purchase it planned on investing 6 million euros ($7 million) into the brand over a three-year period.
The company said in its SEC filing it bought the business through a French subsidiary called L.A. Rive Droite. Revolve Group held an 80 percent interest and designer Alexandre Vauthier held the remaining 20 percent of the subsidiary.
In April, Vauthier was reportedly dismissed from the label bearing his name.
Not long after, Revolve said it made the decision in its fiscal second quarter ended June 30 to stop funding L.A. Rive Droit, pushing it into insolvency and cutting Revolve’s ties to the business as of May 28, the SEC filing said.
Revolve reported this week it took a $2.4 million loss on the move, which bit into its earnings in the June quarter. Net income during this time tanked 35 percent from the comparable period a year ago to $10 million.
Revenue in the same quarter rose 9 percent from the year-ago comparison to $309 million.
Revolve on Opportunistic Plays
Revolve Group management isn’t dwelling on its move away from Alexandre Vauthier. Instead, it explained away the quick move as simply business.
“Our disciplined approach to capital allocation guided our decision to move on and shift our focus to other initiatives with higher ROI that we believe will maximize the overall returns on our investments over the long term,” Revolve Group CFO Jesse Timmermans told analysts Tuesday.
It’s also not shaken by the fact that things didn’t work out with Alexandre Vauthier as it remains in search of attractive acquisitions.
“I see that there are big gaps in our merchandising mix still,” co-founder and co-CEO Michael Mente said during the same Tuesday earnings call. “So we’re really strong in certain areas, but we know our customer shops for other needs in other zones. So I think that the right M&A opportunity could really integrate with what a customer comes to us for, but also we’re not necessarily providing just yet.”
It’s clear, Revolve wants to be everything to every fashion consumer. That desire is fueling the need to fill those merchandising gaps Mente mentioned, which leads to other “unlocks” in the way of cross-marketing and operational savings.
“I think our customer has a deep trust in us and we ultimately have to give her a broader offering, a more diverse offering and ultimately we can gain a greater share of wallet and bigger share of closet and there’s more mind share as well,” Mente said.
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