Revolve (RVLV) Q2 Revenue Up 9%

Revolve Group (RVLV 1.42%), an online fashion retailer known for its youth-driven strategy and influencer partnerships, released its second quarter fiscal 2025 results on August 5, 2025. GAAP revenue was $308.97 million, exceeding GAAP expectations by $11.3 million. GAAP earnings per share were $0.14, edging past the GAAP analyst forecast of $0.13. However, this represented a decrease from the prior year's GAAP diluted EPS of $0.21. Overall, The quarter showed solid top-line growth and notably improved non-GAAP free cash flow. GAAP net income declined, reflecting higher taxes and non-operating costs, but operational measures improved. Management cited ongoing success with owned brands, investments in technology and customer experience, and continued customer growth, with active customers up 6% year-over-year to 2,743,000.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

The company operates a digital-first business selling apparel, footwear, accessories, and beauty products, targeting millennial and Generation Z consumers. Its platform features both third-party luxury brands and an expanding portfolio of owned brands. Owned brands are critical for profit margins and exclusivity, as the substantial majority of these products are exclusive to the company's site and enjoy higher markups.

Recent business priorities have included expanding the assortment of owned and exclusive brands, enhancing the technology platform (including investments into artificial intelligence for merchandising and customer support), and deepening customer engagement through influencer partnerships and premium customer experiences. To succeed, the company depends on effective data-driven merchandising, rapid response to fashion trends, marketing network efficiency, technology leadership, and high service standards with fast shipping and easy returns. Balancing inventory and promotional activity remains a key driver for margin stability.

Quarter Highlights: Financial and Operational Performance

This quarter, the company continued its trend of GAAP revenue growth. GAAP net sales rose 9% to $308.97 million from $282.46 million year-over-year, Both segments—Revolve and luxury platform FWRD—showed similar growth, with net sales increasing 9% and 10% year-over-year, respectively. The U.S. market contributed $241.6 million in GAAP net sales, a 7% increase, while International GAAP net sales were $67.3 million, up 17% year-over-year.

This was a slight improvement from last year’s 54.0% GAAP gross margin. The margin gain primarily reflected a higher mix of owned brand net sales, which carry higher margins than third-party brands, partially offset by a lower mix of full-price sales year-over-year, which carry higher profitability. However, this was partially offset by a lower mix of full-price sales, reflecting a shift in consumer preference toward lower price points and higher promotions. Non-GAAP adjusted EBITDA rose 12% to $22.9 million. Operating income also improved, rising 10% to $18.0 million, reflecting disciplined management and efficiency gains in logistics and fulfillment.

Net income, however, took a hit. GAAP net income dropped 35% year-over-year to $10.0 million, primarily due to a swing from other income to other expenses. These non-operational items included foreign currency exchange losses and a non-cash charge related to the disposal of a subsidiary, along with a significantly higher GAAP effective tax rate of 33.7%, compared to 25.7% in Q2 2024. These factors outweighed the operating improvements at the gross and EBITDA lines.

Cash flow performance was robust, reversing last year’s negative figures. GAAP operating cash flow improved to $12.6 million from negative $24.7 million in Q2 2024, and Non-GAAP free cash flow reached $9.6 million after being negative $26.7 million in Q2 2024. The period saw ongoing share repurchases totaling $1.7 million, with $55.9 million remaining under the repurchase program as of June 30, 2025, and a debt-free balance sheet with $310.7 million in cash and equivalents.

Product Lines, Customer Metrics, and Geographic Details

Owned brands, including women’s apparel and exclusive lines that only the company offers, continued to drive margin expansion and customer loyalty. Management highlighted these product lines as key not just for profitability, but also for differentiating the consumer experience and retaining full-price sell-through amid a competitive market. Third-party and luxury offerings support expansion into higher-end categories through FWRD, which also posted double-digit sales gains.

The company’s segment data showed 9% net sales growth for the REVOLVE segment to $268.4 million. and a 10% increase for FWRD, reaching $40.6 million in net sales. Active customer count (measured on a trailing 12-month basis) rose 6% to 2,743,000, and the total number of orders increased 7% to 2,424,000. Despite these gains, average order value slipped 2% to $300, as shoppers gravitated toward more affordable products. Operationally, Fulfillment and distribution expenses improved as a share of net sales, attributed to supply chain efficiency and lower product return rates -- a critical metric for online retailers managing logistics costs.

Geographically, International net sales outpaced domestic net sales, underlining the company’s ongoing push to diversify away from the more mature U.S. market. The international segment grew 17%, compared to 7% for domestic, with Inventory levels declined 6% year-over-year, supporting strong inventory discipline and working capital management.

Looking Ahead: Guidance and Industry Watchpoints

The company raised its full-year GAAP gross margin guidance to 52.1–52.6% for FY2025, up from the previous range of 50.0–52.0%. General and administrative expense guidance for FY2025 is $152–$154 million. For the third quarter, management expects gross margin in the 51.2–51.7% range for Q3 2025 and G&A expenses of $38.5 million for Q3 2025. Marketing, fulfillment, and distribution costs as a percent of sales are projected to remain flat for FY2025 based on current trends. Management did not provide explicit revenue or profit forecasts for future quarters.

Key risks for the rest of the year include macroeconomic headwinds such as shifting U.S. consumer demand, tariff uncertainty, and currency movements. Average order value continues to face pressure, which may offset rising customer and order counts. Tariffs on imported goods are a particular concern, with management noting that variability in future gross margins for FY2025 could depend heavily on tariff outcomes and mitigation strategies. The business is also monitoring industry-wide promotional intensity and evolving consumer preferences for value-oriented shopping.

Stock repurchases remain in place. Management emphasized ongoing investments in technology, artificial intelligence enhancements, continued expansion of owned brands, and the pursuit of long-term growth over short-term margin maximization. RVLV does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.