Revolve Responds to Coachella Criticism; Posts Growth Across All Segments

Michael Mente and Mike Karanikolas are riding high on Revolve’s continued momentum thanks to its use of consumer data, fashion-forward product assortment and high-profile, star-studded events (think Coachella and New York Fashion Week.)

The most recent of which was Revolve Festival, held in Southern California during the first weekend of Coachella. The guest list included the likes of Kim Kardashian, Kendall Jenner, Storm Reid, Peyton List, Jack Harlow and Remi Bader. But even the non-celebrity types are eager to participate in IRL events once again.

“The consumer is super, super excited to go out. That’s crystal clear,” Mente told WWD in a joint interview with Karanikolas. The pair lead the company together and each carries the title of co-chief executive officer. “We’re definitely seeing our consumers, after several years, excited to be out with friends, sort of enjoying the full life that she’s missed,” he said.

That bodes well for a fashion company that has made a mark for itself over a nearly two-decade run for selling festival attire and other going-out essentials by way of influencers and fancy parties. Mentes said this year’s Coachella was no different.

“We were bigger and better than ever,” he said. “There were some hiccups, some logistics there that we were able to address and learn from. But the response was just so strong. The energy and the positivity and the atmosphere and the joy that we could see in everyone there was just really palpable.”

Some of those hiccups included criticism over social media of influencers and attendees having to wait in long lines to enter the party. Some even likened the event to the ill-fated Fyre Festival, a 2017 event in the Bahamas.

“The festival was super fire, but it definitely was not Fyre Festival,” Mente said. “Everyone had food and water and everyone could leave whenever they wanted. So there were no health risks. The joy and the fun that the festivals represent was clearly there; the desire and the [fear of missing out or] FOMO-nature of the event was clearly there. There were some hiccups and such, but the teams reached out to everyone who was frustrated. [There was] a little FOMO that [some guests] missed part of the event on Saturday, but by Sunday everything was smooth and everyone was able to get in. And the event carried on without a hiccup after that Saturday afternoon hiccup.

“We’re very confident that this won’t happen in the future,” he added. “But we definitely learned and moving forward we’ll have increased technology, increased investments — making sure we put a little extra intention into the logistics process of entering the festival and ensuring that all invited guests are properly taken care of. Those are very clear takeaways. Because the demand for Revolve events is stronger than it’s ever been and we anticipate that to be even stronger in the future.”

Some analysts agreed. Camilo Lyon of BTIG rated the firm’s stock a “buy” and set a price target of $66 a share.

“We see [Revolve Group] as the quintessential recovery story heading into 2022 boosted by structural and category tailwinds, as it is at the center of three converging themes: fashion, Millennial and digital,” Lyon wrote in a note. “Despite some negative press, we believe the return of the company’s showcase event of the year signals the return of a more normalized influencer event calendar for [Revolve] as social events, concerts, festivals and travel resume in a bigger way this year.”

And the Los Angeles-based fashion company — which Mentes cofounded with Karanikolas in 2003 and later took public in June 2019 — has the numbers to prove it. In the most recent quarter, which ended March 31, net sales increased 58 percent to $283 million, up from nearly $179 million the same time last year. Fwrd, the e-tailer’s luxury segment, grew 71 percent, year-over-year, to $45.8 million, up from $26.7 million last year, while Revolve’s domestic net revenues increased 61 percent to nearly $238 million, compared with approximately $143 million the same time last year. Sales in Revolve’s international business rose 28 percent to $45.6 million, compared with $35.6 million last year. Revolve logged $22.5 million in profits as a result, compared with $22.2 million during 2021’s first quarter.

“All categories are on fire for us right now,” Mentes said. “Three years ago, we were kind of known more for music festivals and travel and special events and dates and parties and hanging out with friends in a going-out way. One of the most important things we’ve seen over the last few quarters is that the consumer wants to shop all different categories from us — there’s virtually growth in every single category. Our customer is shopping both going-out categories, at-home categories, beauty, active and whatnot. So you’ll see us touching a lot more categories as we move forward.”

Another growth drivers is Fwrd, Revolve’s luxury business, which launched in late 2019. Kendall Jenner was named creative director of the business in 2021. But even pre-Jenner, Revolve’s luxury segment was on an exceptional run, delivering a compound annual growth rate of 46 percent — or tripling net sales — over the last three years. Mentes added that Fwrd’s growth is outpacing the growth of the overall company.

“It’s driven by Revolve consumers being aware that they can shop luxury with us, with the same level of trust, the same level of curation, the same level of operational excellence and service levels,” he explained. “[In the past] the consumer didn’t know she could get that [luxury] offering from us. And the great thing is that only a small portion of Revolve customers shop on Fwrd. But they’re increasing that rate at a very, very steady pace. So there’s a very long road map for us to continue to make headway in the luxury space, really build on the core Revolve community.”

Still, not all investors were satisfied with the results. Shares of Revolve fell nearly 12 percent to $38.47 in aftermarket trading Tuesday. Some headwinds include inflationary pressures and continued supply chain woes.

But Karanikolas said these concerns are not specific to Revolve. They’re issues impacting the entire retail industry.

“It continues to be a challenge, but it’s been a challenge on and off for the better part of two years,” he said. “So we anticipate that for the remainder of the year, we’ll continue to see challenges there. But we’ve executed throughout those challenges and we expect that to continue. We feel great about our inventory and our supply chain, our ability to react nimbly.

“And the consumer continues to be really strong,” Karanikolas continued. “Our strategy on pricing continues to be that we want to be in line with where the market is trending. As prices have increased in the consumer space, we’ve increased our prices a little bit in lockstep. Based on what everyone else in the market is doing and then based on cost increases on some of the input.”

Mentes added: “We’re feeling great, because everything within our control is going extremely well. It’s been an incredible 19-year run. So we see a lot of opportunity in front of us.”

The company ended the quarter with more than $270 million in cash and cash equivalents and zero debt. Shares of Revolve, which closed down 1.29 percent to $43.51 are down more than 25 percent, year-over-year.