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Revolve says social distancing has taken a toll on its business
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Revolve Group Inc. RVLV, -6.37% shares sank 8.1% in Thursday trading after the retailer said the coronavirus is weighing on sales during the current quarter.
Revolve is an e-commerce retailer targeting Gen Z and millennials.
“[T]he impact of COVID-19 and more specifically, social distancing, continues to have a significant impact on our business,” said Michael Karanikolas, co-chief executive of Revolve, according to a FactSet transcript. “Our inability to host large scale in-person events has a lagging and growing negative impact the longer we are in a COVID-19 sheltered state.”
“Soft” year-over-year sales trends in September continued to October, which had a high-single digit decline. Sales of dresses, the company’s largest category, declined and faces continued headwinds. Dresses usually account for about one-third of the business, the company said on the call.
Revolve reported third-quarter net income of $19.4 million, or 27 cents per share, up from $9.6 million, or 13 cents per share last year. Sales of $151.0 million were down from $154.2 million last year.
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The FactSet consensus was for earnings of 14 cents per share and sales of $159.0 million.
Average order value fell 16% to $232.
MKM Partners says Revolve is a “victim of the pandemic,” but says the company is controlling what it can to the best of its abilities.
“[W]e appreciate that rising COVID rates both domestically and particularly in Europe are increasingly hampering purchases of occasion-wear and will likely continue to do so into 1Q,” Roxanne Meyer, managing director at MKM, said in a note.
“We continue to see Revolve as well-positioned for a meaningful rebound to top-line performance post-pandemic as social events re-emerge, with growth in owned brands a key catalyst for sales and gross margin longer term.”
MKM rates Revolve stock buy with a $24 price target.
“[W]e do believe management is doing a good job proactively preparing inventory and marketing investments to realize pent-up demand as hopefully a vaccination scenario unfolds,” wrote Cowen analysts led by Oliver Chen.
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“Customer desire and engagement remain high and Revolve remains a leading new-generation fashion retailer, in our view.”
Cowen rates Revolve stock outperform with a $25 price target, down from $28.
BMO Capital Markets sees uncertainty in the future of margins.
“Margins were strong given higher full-price selling and lower markdowns,” wrote analysts led by Simeon Siegel.
“However, it is hard to know whether full-price sales were up because the company didn’t have clearance left to sell, or whether underlying gross margins are sustainably healthier.”
BMO rates Revolve stock market perform with an $18 price target.
Revolve stock has gained 12.3% for the year to date while the S&P 500 index SPX, -0.99% is up 9% for the period.
