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Why Revolve Group Stock Jumped 24% Last Month

By Jeremy Bowman - Mar 4, 2021 at 10:00AM

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A strong earnings report lifted the e-commerce fashion company.

What happened

Shares of Revolve Group (RVLV 2.98%) were surging last month after the influencer-driven online fashion retailer turned in a strong fourth-quarter earnings report. The company beat estimates on the top line and delivered a much better profit than expected.

According to data from S&P Global Market Intelligence, the stock finished the month up 24%. As you can see from the chart below, essentially all of the gains came at the end of the month when the report came out.

RVLV Chart

RVLV data by YCharts.

So what

The stock was quiet through most of February, though a pair of analysts did weigh in to raise their price targets ahead of the earnings report. 

The management team of Revolve dressed in white

The management team of Revolve. Image source: Revolve Group.

Revolve shares jumped 9.5% on Feb. 25 after the earnings report came out and then rallied another 15% the next day, building on the momentum. Like other apparel retailers, Revolve has struggled during the pandemic because much of its selection is meant for social events. Revenue fell 5% in the period to $140.8 million, but that still topped estimates at $135.3 million.

Despite the decline in revenue, the company delivered strong profit improvements as gross margin rose from 52.9% to 56% due to better inventory management and fewer markdowns. That helped drive a 37% increase in adjusted EBITDA to $18.7 million, and earnings per share jumped from $0.12 to $0.26, easily beating estimates at $0.11.

CEO Michael Mente said, "Our highly profitable fourth quarter capped a year of record net income and cash flow generation achieved despite the challenging COVID-19 backdrop."

Now what

Revolve didn't give specific guidance for 2021, but said that sales through the first seven weeks of 2021 had improved to low-single-digit growth, and management expressed optimism for a strong rebound once the pandemic was over. Co-CEO Mike Karanikolas said, "We believe Revolve is well positioned to benefit from the reopening of economies, which will enable our customer to finally enjoy the active social lifestyle she loves and has come to associate with Revolve."

Revolve's cash position more than doubled in 2020, leaving it well prepared to invest in marketing and other growth drivers as the economy reopens. After delivering strong profit growth last year in a difficult environment, the company looks poised for more gains once the pandemic fades.

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