Online fashion retailer Revolve Group (NASDAQ: RVLV) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 3.2% year on year to $270.6 million. It made a GAAP profit of $0.15 per share, down from its profit of $0.19 per share in the same quarter last year.

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Revolve (RVLV) Q1 CY2024 Highlights:

• Revenue: $270.6 million vs analyst estimates of $271.8 million (small miss)

• EPS: $0.15 vs analyst estimates of $0.07 ($0.08 beat)

• Gross Margin (GAAP): 52.3%, up from 49.8% in the same quarter last year

• Free Cash Flow of $36.66 million is up from -$4.96 million in the previous quarter

• Active Customers : 2.55 million, up 127,000 year on year

• Market Capitalization: $1.47 billion

"We delivered significant expansion of our gross margin and year-over-year efficiency in our variable logistics costs in the first quarter of 2024, which contributed to strong profitability and cash flow generation that further strengthened our balance sheet," said co-founder and co-CEO Mike Karanikolas.

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve Group (NASDAQ: RVLV) is a next generation fashion retailer that leverages social media and a community of fashion influencers to drive its merchandising strategy.

Online Retail

Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.

Sales Growth

Revolve's revenue growth over the last three years has been strong, averaging 23.4% annually. This quarter, Revolve reported a year on year revenue decline of 3.2%, missing analysts' expectations.

Ahead of the earnings results, analysts were projecting sales to grow 4.9% over the next 12 months.

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Usage Growth

As an online retailer, Revolve generates revenue growth by expanding its number of buyers and the average order size in dollars.

Over the last two years, Revolve's active buyers, a key performance metric for the company, grew 19.8% annually to 2.55 million. This is strong growth for a consumer internet company.

In Q1, Revolve added 127,000 active buyers, translating into 5.2% year-on-year growth.

Revenue Per Buyer

Average revenue per buyer (ARPB) is a critical metric to track for consumer internet businesses like Revolve because it measures how much customers spend per order.

Revolve's ARPB has declined over the last two years, averaging 13.3%. Although it's unfortunate to see the company lose its pricing power, it was still able to achieve strong buyer growth. This quarter, ARPB declined 8% year on year to $106.07 per buyer.

Key Takeaways from Revolve's Q1 Results

We struggled to find many strong positives in these results. Its revenue growth regrettably slowed and its revenue missed Wall Street's estimates. Overall, this was a bad quarter for Revolve. The stock is flat after reporting and currently trades at $21.15 per share.

Revolve may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.