Revolve Consumer Feeling Pinch of Economy

Revolve’s consumer party may have slowed somewhat as the economy weighed on shoppers — but founders Michael Mente and Mike Cornikolas said they’re still going strong and planning the next phase of the e-commerce player’s growth.

These include a new push to make men the leading category, a greater focus on beauty, plans for a Web3 mobile game with Muus Collective and more.

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Co-CEOs Mente and Karnikolas founded Revolve in 2003, and in an interview with WWD, they clearly prided themselves on their ability to invest in the business and do so judiciously in good times and bad (although the company’s party-heavy image).

Like almost every brand outside of luxury, Revolve is grappling with a consumer that feels peak inflation and a growing recession.

“We certainly have a lot of affluent customers, but overall household income doesn’t index much above the U.S. average,” Kornikolas said. “She’s certainly very sensitive to the U.S. economy. When consumer sentiment is low and people don’t feel good about things, it certainly weighs on us.”

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Revolve is known for its going-out looks and festive wear — and it doesn’t look like it’s going away anytime soon — but Mente said the company is expanding its reach by laying the groundwork for growth in men’s, which is currently a small business. , and beauty.

The company’s own lines are also growing, Mente points to Remy Bader’s collection featuring an expanded size range.

“We’re expanding the core of where we are,” Mente said. “We’re really proud that we can continue to make these investments while the environment is challenging.”

Co-CEOs also see a competitive advantage.

“I love it when I hear people are cutting back and slowing down,” Mente said. “We are able to invest while being disciplined and profitable.”

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Still, the company’s third-quarter net income fell 28 percent to $12 million from $16.7 million last year. Adjusted earnings before interest, taxes, depreciation and amortization fell 18 percent to $17.7 million. Free cash flow, however, grew more than sixfold to $8.6 million, bolstering the company’s balance sheet.

Sales for the three months ended Sept. 30 rose 10 percent to $268.7 million to $244.1 million as the company’s active customer base grew 34 percent, or 84,000, to 2.2 million. That counts as slow growth for a company targeting expansion of 20 percent.

Sales at the Revolve business rose 9 percent to $222.1 million, while the more designer-oriented Fwrd business rose 17 percent to $46.6 million.

Inventories are down from the summer — weighing in at $213.3 million at the end of the quarter, up 2 percent from June and up 50 percent from a year ago.

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The company is actively working to get inventory in line with current consumer demand and the economy, and Cornikolas said it will continue to right-size and start to come down.

Investors feel good after seeing the results.

After a 6.6 percent decline in Wednesday’s regular trading session, the company’s shares rose 11 percent to $24.69 in aftermarket trading.

And while Wall Street and the market make up their minds about how they feel, Revolve is busy ramping up in the new digital world.

The company signed a strategic partnership with Griffin Gaming Partners-backed entertainment studio, Muus Collective Inc.

The duo will “create a fashion-focused Web3 mobile gaming experience that aims to revolutionize how consumers engage with fashion.”

Launching next year, the game will feature “digital playable renderings of select fashion and beauty items from Revolve and Fwrd.”

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