Founded in 2003, Revolve Group, Inc. (RVLV) is an online fashion retailer for Millennial and Generation Z consumers. The company operates through two segments — Revolve and Forward. Revolve offers an assortment of apparel and footwear, accessories, and beauty products, while Forward offers a large assortment of luxury brands. RVLV has built a portfolio of 21 owned brands, each crafted with unique attributes and supported by independent marketing operations.
Although RVLV suffered a setback with the pandemic, it has been able to sustain its business momentum with a strong focus on its merchandising and operational initiatives. For the third quarter ended September 30, 2020, RVLV’s beauty category’s net sales increased more than 100% year-over-year for the second consecutive quarter. By territory, Australia, Canada, and Western Europe each delivered strong double-digit growth in year-over-year net sales.
The stock is expected to gain significantly as investors anticipate increased spending on apparel and accessories with the return of social gatherings, concerts, and events once coronavirus vaccines are widely distributed.
The stock has gained 80.4% over the past year to close Friday’s trading session at $30.67, after hitting its all-time high of $30.89. Its EPS is expected to grow at 26% this year. This positive outlook and the potential upside based on a few factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates RVLV:
Trade Grade: A
RVLV is currently trading above its 50-day and 200-day moving averages of $22.55 and $18.96, respectively, indicating an uptrend. Moreover, RVLV has gained 54.7% over the past month, reflecting solid short-term bullishness.
Its net sales have climbed 5.8% sequentially to $151 million for the third quarter ended September 30, 2020. International net sales increased 18% year-over-year, outperforming domestic net sales. And its gross margin was up 164 bps year-over-year to 55.3%. The average order value increased 13.7% sequentially to $232, and net income increased 103.3% year-over-year to $19.4 million. EPS increased 107.7% year-over-year to $0.27.
In late October, the company announced the launch of upgraded service levels in Canada. For customers in Canada, it includes free returns, all-inclusive pricing, and two-day express shipping. On September 16, RVLV announced the launch of REVOLVE University. The company organized a virtual event September 21 -27to inspire REVOLVE’s community of consumers, influencers, partners, and fans through meaningful discussions.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, RVLV is well positioned. The stock is currently trading just 0.7% below its 52-week high of $30.89.
Operating for only 17 years, during which it has delivered consistent innovations and enhanced service levels in the international markets like the United Kingdom, Western Europe, Australia, New Zealand, and Singapore, RVLV has performed well and even expanded its market reach.
Peer Grade: A
RVLV is currently ranked #7 of 37 stocks in the Consumer Goods industry. Other popular stocks in the consumer goods group are Colgate-Palmolive Company (CL), Procter & Gamble Company (PG), and Kimberly-Clark Corporation (KMB).
RVLV has comfortably beaten the returns of these popular industry participants over the past year. While CL, and PG have gained 25.9%, and 12.1%, respectively, over the past year, KMB has lost 0.1% over the same period.
Industry Rank: B
The Consumer Goods industry is ranked #33 of the 123 StockNews.com industries. While the companies in this industry generally enjoy steady demand, the companies with a strong online presence have gained significantly amid the pandemic.
Going forward, demand in this industry is expected to rise as companies come up with innovative products and better marketing techniques to meet customer demand. Moreover, with several businesses going online, its market reach is also expected to expand.
Overall POWR Rating: A (Strong Buy)
RVLV is rated “Strong Buy” due to its short and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Amid the pandemic, the company has kept its customers engaged with online workouts and activations around staying at home. RVLV is expected to maximize its growth with an emphasis on elevating its international service levels, and category expansion within its owned brands.
We believe RVLV has the potential to climb in the coming months despite gaining 80.4% over the past year, based on its continued business growth, favorable earnings outlook, and strong financials. Moreover, RVLV has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
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RVLV shares were trading at $31.06 per share on Monday afternoon, up $0.39 (+1.27%). Year-to-date, RVLV has gained 69.17%, versus a 15.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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