Revolve Clothing has hired Bank of America Merrill Lynch to advise it on future growth strategies, including raising funds to take advantage of expansion opportunities to continue to drive financial growth. The online retailer is said to be eyeing an initial public offering and reportedly considers itself a strong candidate for entering the public markets, a source close to Revolve said.
The Cerritos, Calif.-based retailer expects 2017 sales of over $1 billion and the company’s average annual growth rate is 33 percent.
“For a company of that size, growth profile and profitability, the logical next step would be an IPO,” said the source. “Revolve is in a great position to do an IPO. The business move [raising capital from investors] is focused on strengthening the company’s foundation to ensure a smooth, profitable and impressive public offering, should it opt to pursue that in the future.”
An early proponent of influencer marketing, Revolve harnessed the energy of rising social media stars when it bowed in 2003. The bet has paid off, with the likes of Camila Coelho, Shay Mitchell, Chiara Ferragni and Jamie Chung participating in events and campaigns. While the company reportedly envisions physical stores in its future, the Revolve Social Club on Melrose Avenue in L.A., used mainly for events and VIP hangouts, is a place where influencers can be stroked by the firm.
Mike Karanikolas, cofounder and cochief executive officer of Revolve, declined to discuss potential business developments, saying only, “We have the most valuable customer base in the world — the Millennials — and we are relentless in our pursuit of them. Our primary focus will always be on providing the best possible experience for our customers. We’re constantly looking for new and exciting brands that will excite our customer.”
That includes reaching clients outside the U.S. One retail expert said that Revolve, which now engages in cross-border selling, plans to optimize the international experience for consumers with fully localized web sites.
Besides new geographic regions, Revolve is ramping up new categories. The e-commerce site is going big with beauty, whereas it had previously only dabbled in the area. “Beauty is going to be night and day when pre- and post-expansion are compared,” said the expert. Revolve is said to be looking at other categories where the selection could be improved upon, but nothing will be as dramatic as the beauty makeover.
Another top priority, said the source, is building Revolve’s portfolio of owned brands, since the exclusive collections give the company more control over the finished product and a better understanding of the customer. Revolve in 2015 acquired Alliance Apparel, which was manufacturing Lovers + Friends and NDB at the time. After the acquisition, Alliance launched Grlfrnd Denim and L’Academie on Revolve.
Revolve is reportedly considering different levels of investment, but would only sell a minority stake. Karanikolas and his partner, Michael Mente, would continue running the company. “They’re looking for an investor that can bring something to table,” the source said. “As with any investment relationship, they’re looking for a thought partner that shares a common vision and also brings different experiences and ideas.”