The Revolve Group is dodging the coronavirus while in quarantine — at least in part.
That’s because the fashion e-tailer has perfected its spin on work-from-home chic, date-night-in looks and other comfortable attire that makes stay-at-home orders more bearable. Many of which were in high demand during the most recent quarter.
“While the COVID-19 pandemic has created significant headwinds for many companies, including Revolve, I am very proud of how the organization has responded,” Mike Karanikolas, cofounder and co-chief executive officer of Revolve, said in a statement. “Our competitive position and our recent business results give me continued confidence in our long-term future.”
Revenues for the quarter ending March 31 were $146 million, up from $137 million during 2019’s first quarter. Profits, meanwhile, sank to $4.1 million during the three months, compared with $4.9 million the same time last year, reflecting in part higher marketing expenses.
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“We began the first quarter strong with net sales for January and February combined increasing by more than 20 percent year-over-year and with our inventory turning approximately 20 percent faster year-over-year before the COVID-19 impact led to a significant decrease in net sales in the final weeks of March,” Karanikolas said. “Importantly, early in the second quarter, our efforts have helped drive improved net sales trends with sequential improvement in the year-over-year net sales declines for each of the past four weeks.”
Karanikolas told analysts on Wednesday evening’s conference call that it’s important to look beyond the immediate numbers. He pointed out that while revenues were down 50 percent in the last two weeks of March, compared with March 2019, with the coronavirus spreading around the world, the declines have lessened each week since. In the first ten days of May, the year-over-year declines had fallen to 25 percent.
That was enough to release the bulls on Wall Street.
Shares of Revolve, which closed up 3.24 percent Wednesday to $14.96 a share, surged more than 15 percent during after-hours trading.
The Los Angeles-based company, which was founded in 2003, went public in June 2019. The platform is a favorite among Millennial and Gen Z shoppers, many of whom were perhaps less concerned about sticking to a budget while hunkering down at home.
Categories such as loungewear and beauty performed the best during the quarter. Moving into the second quarter, beauty sales rose 122 percent in April, compared with the same time last year.
“A lot of the beauty business is driven by reorders,” Karanikolas said. “That beauty business is really, really favorable for us because of a lack of markdowns and reduced return rates.”
Even so, Revolve is known for its festival attire, Instagram-friendly backdrops and use of influencers. A number of festivals, travel plans and other special occasions, including the Revolve Festival, were canceled or postponed this year — events that incentivized consumers to buy more.
Not surprisingly then, sales of dresses — a lucrative category for Revolve, one that represents about a third of the business — were down during the quarter. In addition, while online traffic has increased in recent weeks, conversion rates have been slower.
“Consumers have been hesitant to pull the trigger,” Karanikolas said on the conference call.
To help curb costs, the company drew down on its revolving credit facility, furloughed staff, reduced inventory receipts for the back half of the year and instituted executive pay cuts.
For now, the e-commerce site remains optimistic, saying it’s well positioned for the future.
“Our brand connection with customers continues to grow stronger, and we believe the pandemic will further accelerate the shift to consumer spending online,” said cofounder and co-ceo Michael Mente. “We are confident in our ability to manage through this environment and thrive over the long term.”
He continued that “2020 is anything but a normal year. The concept of online shopping has never been more relevant than today. We believe there will be an acceleration of e-commerce that is benefiting capital-efficient companies like Revolve.”