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Fashion Retailer Revolve Shares Slide On Q2 Earnings Miss, Operating Margin Contraction, Inventory Build Up

Revolve Group Inc RVLV reported second-quarter net sales growth of 27% year-over-year to $290.05 million, missing the consensus of $293.17 million. Domestic net sales increased by 30% Y/Y, and international net sales increased by 14% Y/Y.

EPS declined 48% Y/Y to $0.22, missing the consensus of $0.31.

The company stated that continued strong growth in active customers was a key driver of results, highlighted by quarterly growth of ~124,000 active customers in the quarter. Total active customers grew to 2.2 million, an increase of 39% Y/Y.

Gross margin expanded by 29 bps to 55.9%. The operating income declined by 41.5% Y/Y to $19.28 million, and the margin contracted by 776 bps to 6.7%.

Adjusted EBITDA declined 24.1% Y/Y to $26.88 million, and margin fell by 622 bps to 9.3%.

Revolve’s net cash provided by operating activities year-to-date totaled $24.44 million, compared to $66.56 million a year ago. Free cash flow was $21.93 million. The company held cash and cash equivalents of $237.9 million as of June 30, 2022.

Inventory was $208.5 million (+75% Y/Y) and an increase of 16% from March 31, 2022.

“We delivered these results despite macroeconomic conditions that became more challenging as the quarter progressed, creating cost pressures that impacted profitability, and also contributed to a moderating year-over-year growth trend in net sales in June that has continued into the third quarter,” commented co-founder and co-CEO Mike Karanikolas.

Price Action: RVLV shares are trading lower by 15.32% at $26.2 during the post-market session on Wednesday.

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