Revolve Consumer Feeling Pinch of Economy

Revolve’s customer base may have shrunk some as the economy weighed on shoppers — but founders Michael Mente and Mike Karanikolas say they’re still going strong and looking to become the next e-commerce player.

This includes a new push to build a larger category for men, more beauty-oriented, plans for a Web3 mobile game with Muus Collective and more.

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Mente and Karanikolas, who serve as chief executive officers, founded Revolve in 2003 and in an interview with WWD were clearly proud of their ability to invest in the company through good times and bad. and the ability to do it discreetly (the image of the company is heavy though).

Like almost every brand outside of luxury, Revolve is struggling with consumers who are feeling the rise of inflation and sensing a looming recession.

“While we certainly have our share of affluent customers, the family income is not above the U.S. average,” Karanikolas said. “He’s very sensitive to the US economy. When consumer sentiment is down and people aren’t feeling good about things, it really weighs on us.

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Revolve is known for its outerwear and festival wear – and it doesn’t look like it’s going to give it up anytime soon – but Mente says the company is expanding its range by laying the foundation for men’s growth, which small business today. , and beauty.

The company’s own lines are also growing, with Mente pointing to Remi Bader’s collection that features plus-size models.

“We’re expanding our base,” Mente said. “We are very proud that we can continue to make these investments if the environment is difficult.”

Partners find a competitive advantage.

“I like it when I hear people slow down and slow down,” Mente said. “We can invest but still be in control when it comes to making a profit.”

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However, the company’s third-quarter revenue fell 28 percent to $12 million from $16.7 million a year earlier. Earnings before interest, taxes, depreciation and amortization fell 18 percent to $17.7 million. Free cash flow, however, increased more than sixfold to $8.6 million, strengthening the company’s balance sheet.

Sales for the three months ended Sept. 30 rose 10 percent to $268.7 million from $244.1 million as the number of active customers rose 34 percent, or 84,000, to 2, 2 million. This is considered slow growth for a company targeting 20 percent expansion.

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

Stocks decreased compared to the summer – totaling $213.3 million at the end of the quarter, a 2 percent increase from June and a 50 percent increase from a year ago.

The company has been working hard to get inventory in line with current customer demand and the economy, and Karanikolas said it will continue to be the right size and begin to decline.

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Investors seemed to feel better after seeing the results.

After falling 6.6 percent in regular trading on Wednesday, shares of the company made a U-turn in after-hours trading, rising 11 percent to $24.69.

And while Wall Street and the market have decided what they really feel, Revolve is struggling to navigate the new digital world.

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

The couple will create a “fashion-centric Web3 mobile gaming experience that aims to change the way consumers interact with fashion.”

Launching next year, the game will include “playable digital interpretations of select fashion and beauty brands from Revolve and Fwrd.”

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