Deep Dive: Revolve Group
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What do they do? Revolve Group is an e-commerce company with a focus on selling fashionable items to women. It owns Revolve, which serves a broader audience, and Forward, which is an ultra-luxury brand.
History? Revolve Group was founded in 2003 by current CEOs Mike Mente and Michael Karinikolas. The company went public in 2019.
Industry? Apparel is a trillion-dollar market, so no need to worry about market saturation or finding “product-market-fit” (everyone wears clothes). However, it is important to look at competitors like the department stores, Amazon, or smaller e-commerce outlets powered by places like Shopify.
Management? Mike and Mike are Co-CEOs, and they currently have 65% of the voting rights.
Valuation? (from time of recording) P/S of 5.8, P/FCF of 48.
Earnings? $581 million in sales, down 3% YoY. Normalized operating margins of about 10%.
Balance Sheet? $146 million in cash, no debt. Very clean balance sheet.
Potential Competitive Advantages? Influencer network, Instagram following, and scale at concerts/festivals.
Potential Future Growth Opportunities? We chose social commerce, the U.S. economy re-opening, and the Forward brand.
Highlights? Post-pandemic tailwind, strong financial profile, was growing 20% pre-COVID.
Lowlights? Mixed product reviews (anecdotes), and hard to find any moat with the simple e-commerce offering.
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Disclosure: The authors and podcast guests are not financial advisors. Brett Schafer and Ryan Henderson are portfolio managers at Arch Capital. Clients of Arch Capital may hold securities discussed on this podcast.