Shares of Revolve Group (RVLV 3.36%) jumped today after the online fashion retailer posted better-than-expected results in its second-quarter earnings report, showing signs of a potential recovery after several years of disappointing results.
As a result, the stock closed up 32.5% on the news.
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Revolve is turning the corner
Revolve returned to revenue growth after five quarters of decline, though its growth was modest. Revenue increased 3% to $282.5 million, but that still beat the consensus at $277.2 million.
Sales at the Revolve segment were up 4% to $245.5 million, while sales at the Forward segment, its higher-end brand, fell 4% to $36.9 million. International sales were also a bright spot with sales up 13% to $57.4 million.
The company continued to deliver strong gross margins at 54%, showing the resilience of its business model, and Revolve succeeded in lowering operating expenses by cutting marketing expenditures. As a result, operating income more than doubled from $7.4 million to $16.4 million.
On the bottom line, earnings per share (EPS) jumped from $0.10 to $0.21, which was much better than the consensus at $0.13.
Co-CEO Mike Karanikolas said:
I'm thrilled with our team's performance that fueled a strong second quarter, highlighted by a return to top-line growth and a more than doubling of our net income year-over-year. Key contributors to our strong results were significantly improved marketing efficiency and greater efficiency in our logistics costs, helped by the first year-over-year decrease in our return rate in more than three years.
NYSE: RVLV
Key Data Points
Is Revolve turning the corner?
Revolve's guidance was limited in its guidance as it just gave guidance around expenses, forecasting 52.5% to 53% gross margin for the year. It also sees an operating margin of at least 3% for the full year.
However, investors seemed more focused on the return to revenue growth and strong improvement in margins. Revolve stock looks a lot more affordable after the surge in EPS. While the company still needs to reaccelerate top-line growth, the business is moving in the right direction, and that's enough for the stock to bounce off of the recent lows.
