Revolve Group, Inc. (RVLV) September 15, 2026 Conference Transcript

Yeah, management team from the company. We have Jesse Timmermans. Welcome. It's the third time that you're attending the conference, so we're definitely appreciative.

Yeah, thanks, Anna. Thanks for having us, as always. Great to be in Nashville.

Absolutely. So starting with the broader industry, so we've been talking about it for a couple of years now. There's been a pretty meaningful consolidation online and offline in fashion retail, and you've grown double digits now consistently for three quarters in a row, and especially this past quarter, seeing really nice acceleration in the business. Can you talk about what are some of the learnings? What are you guys doing specifically to accelerate those share gains, just given what's going on in the environment?

Yeah, definitely a lot of challenges out there. As you said, a lot of consolidation, a lot of players just going away completely, which we definitely think serves us well. We have great merchandise, powerful brand, and the customer is coming to us for that great product and really associates with the brand. So at the end of the day, I think it is our execution. And again, going back to the merchandise, having the right product at the right time for her for whatever event she needs, and the powerful brand. And that really speaks to that next generation consumer and continuing to really resonate with her. You know, a lot of exciting growth initiatives in play that I'm sure we'll get into. But at the end of the day, I think it's just our great execution and powering through this challenging environment that we're in and taking advantage of the consolidation and challenges out there.

You've made some, you know, pretty interesting changes internally because, of course, all of this starts with the talent, right, across the organization. And you've had Divya for a few years now as the chief merchant for the business. Maybe talk about what are some of the key benefits that she's brought into the role. We saw Raisa Girona. She's been with the business for some time now. She was recently appointed as president of Brand and Partnerships, which I don't think is a role that you had previously. So just curious, you know, what she could be bringing to the table with that.

Yeah, yeah, I think, like you said, new talent is great, and it's great to have that new talent. Just as important is the tenured team that we have. As you mentioned, Divya's been here for two years. I think I am the next to least tenured person at almost 10 years. So we have a really strong bench of people that have really been in the business and know the business really well for a decade plus and almost approaching two decades for several of our team members. So we talk about merchandising in Divya. She's been phenomenal at really, I wouldn't say modernizing, but really curating the assortment for the customer. And the merchandise has been really on point for the last couple of years. And it's beyond just the merchandise itself, but really bridging and connecting the merchandise with the marketing plan, with the merchandising, and the story that it's telling, and really personalizing and curating the site for the customer. We have over 100,000 styles on the site at any given point, so it's really important to allow her, enable her to, that customer, to find the right product for her at the right size and the right fit at the right time. So beyond just the product itself, it's the merchandising, it's the storytelling that permeates, like I said, through the marketing, through the email channels. So really great progress and really pleased with where the assortment is at. And that's both on the Revolve and the forward side. Also, Men's. Men's has been performing really well and outpacing the business. And phase one of the Men's expansion is really curating that assortment and really broadening the assortment to that Monday through Friday, in addition to that kind of elevated product that we have for the weekend and going out. And then Raisa on her great new role of president of brand and partnerships. I think this is an elevation of what she has been doing, and partnerships can take many forms. Historically, it's been more collaborations. If you think about the own brands that we've collaborated on, take Sophia Ritchie or Helsa or Camila Coelho, where it's a partnership with a celebrity, with an influencer to create a brand. Or the sponsorships that we have at our Revolve Festival, where we're bringing a number of brands in that bring their product and their business to Revolve Festival and are sponsoring Revolve Festival. Or a cotton shop. We were just in Chicago a couple weeks ago with Cotton Inc. and did a cotton shop.

Yeah, we saw that.

Yeah, really great, and we've done that for a number of years. So those have been many of the partnerships of past. More recently, it's taken, kind of taken it to the next level, and that's what led into this title for RISA, and that is the partnership joint venture with Cardi B. So this is our first really equity-type partnership. Historically, there have been more royalty arrangements with that celebrity or influencer. Now it's a true joint ownership. You know, everybody has equity, really building a new business and really excited about the results out of the gate on Grow Good. And we can see further partnerships like that in the future. We have the infrastructure, the support, the fulfillment, everything that Revolve is good at. We can take that and leverage that into creating new brands with third parties.

The Cardi B partnership is super exciting, and so far it's fairly limited. I think it's only six SKUs that you have online, and we've been monitoring it. It's been selling out really quickly. I know you don't market necessarily yet to that consumer about Revolve, but how do you think about that cross-selling going forward? And it is, I think, a fairly incremental customer that you're getting.

Yeah, very incremental. Very excited about the progress so far on the GrowGood product. As you mentioned, we have a very limited SKU set thus far. We've had, I think, four drops. At the outset, demand far outstripped the supply, and that was intentional in the early innings One, we wanted to test. This was new to us, and everything we do is test and measure, so we wanted to test it, and two, we wanted to create some scarcity value and really gauge the consumer interest. Quickly raised to 700,000 followers on Instagram, really solid product reviews, 4.9 out of 5 stars, and importantly, given that it's a hair product, the retention and the repeat rate has been really solid. In the July drops, over a third of the customers were repeat customers from those initial drops in April and May. So really pleased with the progress thus far. Now we plan to get into more inventory and really create a marketing plan around it so that we can have inventory in stock on an evergreen basis, really create a marketing plan behind it, and drive volume.

Does that customer know that this is a partnership with Revolve? How do you think about communicating that a little bit more going forward? Because I would think that would be a pretty interesting opportunity for the business.

Yeah, currently very little overlap with the existing Revolve customer. You know, it's a much lower price point than we operate on Revolve. It's sold via a separate website. So from a consumer perspective, maybe some of the more savvy customers know that it's associated with Revolve. But more of that association comes from the business and investment community. But the consumer doesn't necessarily know that it's associated with Revolve. I think there is opportunity in the future to cross-sell, to have that product on Revolve, but not quite yet. And then in the future, launching an apparel brand with Cardi, and that has the potential to also live on Revolve in addition to the separate destination.

Have you said when in the future? Is that something in the medium term we should expect?

Apparel will launch in 2027, but no timeline on when the product would be on Revolve, if it is ever.

Okay. Okay. Understood. Moving on to some of the recent results, you know, can't not ask about the state of the consumer, right, nowadays. And in July, you grew sales, you know, high teens, really quite a standout, right, performance in a discretionary, you know, world nowadays. Nice. So curious, you know, what are you seeing with the consumer, maybe across, you know, various income cohorts? I know you have, you know, a fairly wide, right, representation of customers that you target, but curious, just your thoughts on that.

Yeah, really pleased with the Q2 results at plus 12%, and as you said, it accelerated into July at plus 18%. Also, very encouraged with the progress that we've seen and the trends in August and at least this first couple weeks of September. So, really encouraged with the results and that double-digit top-line growth. And I think just as encouraging is that it is coming across all cuts of the business, domestic, international, Revolve, forward, men's and beauty outpacing the overall business, seeing really great category diversification, so the fashion apparel outpacing dresses. So just really good broad-based strength, which I think comes back to just our execution, having the great product. I think the marketing has had a benefit this year. We've increased the level of marketing from where we were at last year. A lot of that has gone towards our Revolve Los Angeles label, but that, because it is a Revolve label, has a halo effect on the entire business. So I think a lot of just great execution is driving those results. In terms of the health of the consumer, I think as our results have shown, I think our customer is very resilient. She is dedicating a larger share of her wallet towards apparel and experiences. And I think if you look at the news, it's pretty dire out there, but she continues to come and shop. And it's finding what she wants.

So this strength, I mean, great to hear about the strength in August and, you know, so far in September. Are you seeing this kind of a new customer, you know, coming in, combination of existing and new? Just curious if you did anything differently outside of, you know, obviously strength of the product and the marketing to drive that.

Yeah, nothing significantly different. We continue to see really healthy new customer acquisition. We surpassed 3 million active customers at the end of Q2. Some of that was driven by GrowGood and really phenomenal new customer growth coming out of GrowGood. But even stripping that out, we had record new customer additions within the core Revolve Forward business. So it's great. You know, we need to attract new customers. We continue to do that. We're very low penetrated in the U.S. and even lower internationally. And even more importantly, that existing customer, once she comes to us and gets past order one, she's very sticky with over 100% retention in years two and beyond. And in 2025, if you look at that customer, that existing customer delivered 3x the revenue of the new customer. So again, really important that when that one to capture that new customer, but then to that retention on the existing customer is a meaningful driver.

Usually you see, right, with new customer cohorts, a little bit of a lower frequency, right, and then that builds. Are you seeing that differently with your recent cohorts than, I guess, historical patterns?

Nothing significantly different from historical patterns. Again, you do see a drop-off after order one, but once they stick on order two, that revenue retention is over 100%, and that comes from both frequency, where they're coming back more times per year, And purchasing at higher average order values, driving that higher revenue.

That's great. That's great. Own brand mix is always a big topic of conversation on Revolve. It's been growing nicely, I think, growth for six consecutive quarters now. Can you talk about how you think about the sales penetration this year? I know you had some kind of a puts and takes previously where it's come down. And how do you think about that longer term?

Yep. Yeah, maybe to put it into context first, in 2025, we were at about 20% own brand mix of our Revolve platform. We peaked at 36% back in 2019. So just to kind of put some parameters around that mix percentage. Our goal is to increase own brand mix at one to two points per year. Very steady, moderate increase. And we think we can get to that 36% over time. I think different today from five to 10 years ago is that we have Revolve Los Angeles, which could accelerate that own brand mix expansion, and physical retail. Own brands are performing better relative to online in-store with higher mix, and not just higher mix, but higher inventory productivity. So the mix of sales is higher than the inventory mix in stores. So we think that can be a meaningful driver of that own brand mix expansion over time.

You mentioned Revolve Los Angeles. We've been pretty, very excited about this launch, and you certainly have talked super favorably about that out of the gate. I think there's a little bit of a confusion from investors' standpoint just about the elevated price point of that subline and the marketing investments behind that. So can you talk about what is the strategy there and anything that you can share on the new versus existing customer as they convert to that brand?

Yeah, yeah. So all by design. This initial launch, we've had two launches, maybe three now, of Revolve Los Angeles. Each were only 40 SKUs, 40 styles, so very limited. Also at a higher average selling price than our typical average selling price, very premium product. We put a lot of marketing behind it, starting with the Vogue after-party at the Oscars, Vanity Fair, sorry.

That looked great.

Yeah, yeah, it was phenomenal. And having ambassadors like Bella Hadid, Irina Sheikh. So all by design, really want to create a brand at the right pace and with a disciplined approach and really create the buzz and the halo around Revolve Los Angeles. So the investment is far outpacing the top-line results, just given the limited SKU set that we've been offering. The goal is to use that halo, really set the stage, and then next year in 2027, launch more accessible price points, premium, call it premium essentials in other categories that will really drive the volume. And that's where we'll see the top-line impact from this. And I think different from, even though it is an own brand, this is the first time it's had the Revolve name associated with it. So different than in the past where you're dedicating marketing dollars to a brand, the marketing dollars really only go as far as that brand. The customer doesn't associate that brand necessarily with Revolve. Even though it's exclusive, it doesn't have the Revolve name. With Revolve Los Angeles, those marketing dollars really create a halo for the entire business because it does have the Revolve name. So I think that is also part of what is driving the top-line results over the last couple quarters.

No, that's super helpful, and really excited to see those kind of more, I guess, moderate price points in that line ahead. And I think that kind of fills the gap, right, because you've talked about the category expansion and maybe having some of that casual assortment as well. Just curious, how will your marketing approach differ with that particular line ahead?

Yeah, I would say it would be more similar than different. Our typical playbook, still 75% of our marketing is digital advertising, the Googles and Metas of the world, affiliates. And then we have the 25% that is brand marketing. The brand marketing on Revolve Los Angeles specifically has kind of flipped where the majority is the brand marketing versus that digital performance marketing. So I would expect more of the same next year, not at quite the high level of investment that we saw this year after we create that halo and really set the stage.

Got it, got it. Shifting gears, I mean, physical retail is super interesting as well, and you have the Miami store opening this fall. We're excited for that. Just curious, what are some of the learnings from the two stores that you have so far? I know it's still early with L.A., but we often, you know, get the question, can an e-com, you know, player really grow, you know, stores and operate stores in a profitable way? Just curious, anything you can share on that?

Yeah, we're really excited about physical retail. We're in the final stretches before we open the Miami store. Really excited about that. It's one of our top five markets. And we'll be, I would say, more indicative of the future stores, more kind of mainstream than what we've had thus far. If you look at Aspen, which is our most mature store, that's a destination, high value, high net worth customer. You know, nobody's from Aspen. They're traveling in, so it's really hard to read the halo. Lower traffic, higher conversion. And then we have the Grove, which also a unique destination in that it's kind of more tourist, so it has high traffic and lower conversion relative to Aspen. So we've got two unique stores. So really excited about Miami that will give us a third data point to tell us how fast and when we can really push the accelerator down on physical. And we think we can do it, and it will be accretive both on top and bottom line, or we wouldn't do it. You know, I think a couple benefits that we have, one, just the power of the brand. Two is that technology platform that we have, the fulfillment, the logistics technology, and leveraging that into a physical store. And then own brands, as I mentioned, outperforming in-store, which own brands carry a meaningfully higher gross margin than a third-party brand, so that contributes to the bottom line. Stores having a much lower return rate than online, which also contributes to healthy bottom line. So we're confident that we can operate these stores on an accretive level to the overall business, and not just from an accretion perspective, but incrementality in really capturing new New customers outpace in-store and seeing a halo effect from the Los Angeles store at the Grove, which was really encouraging to us, given that it's in our backyard and we thought everybody in L.A. should know Revolve, but to see that halo effect in new customers is really encouraging.

How do you think about the store potential down the road? Not to put a number on this today, but obviously you wouldn't be doing this if you didn't think you can do this in a creative way.

Yep, yep, yep. We think it can be a meaningful part of the business. Again, not putting any numbers around it. And we want to get a few more months, kind of a few more data points under our belt and really build that muscle before we hit it too hard. But I think Miami will do that. So by the time we exit 2027, we should have a really good feeling about kind of physical store, how big it can be, how fast the rollout will be.

Great. Switching gears to gross margins, just thinking through the puts and takes, so the full price mix of net sales is still, I mean, very healthy, but has come down slightly, and this is despite you guys not really being more promotional, and markdowns utilized pretty effectively since you rolled out that algo last year, you know, for the business. So can you talk about what are you seeing in the industry in terms of promotionality? How are you thinking about your own promotions? And exiting right to queue inventories were a little elevated. I think you said through year-end is when you plan to work through that. Just maybe talk about sort of an inventory management thoughts into next year.

Yeah, a lot there. So maybe starting with the full price mix, yeah, still a very healthy full price mix, starting with an eight. It has come down slightly from last year. We do see ebbs and flows in full price mix, but still very healthy and really industry-leading. So happy with where full price mix is, but again, relative to last year, a bit lower. The big win we had last year, as you mentioned, was the optimization of the markdown algorithm via AI, which gave us significant margin gains last year. So now we're starting to lap that. So that's another year-on-year comp that we're dealing with. Still very healthy markdown margins, just against a really tough comp of last year. Inventory levels, slightly elevated, but not concerning. At the end of Q2, we were comping coming off of Liberation Day and the high tariffs, where we did have late receipts. So inventory was lower year-on-year last year. So we are comping that. And like you said, by the time we exit the year, the net sales growth and the inventory growth should normalize. So no significant changes in, you know, kind of increasing or decreasing inventory buys to manage that. We feel good about our inventory balances. Forward is very much in line, and that's the one that takes longer to work through. So it's good to see forward balanced. But, yeah, I would say in a good place, you know, slightly elevated, margin slightly lower, but, you know, in the realm of reasonable for us.

Okay. So taking a step back, so with the model, right, this year, so you're seeing really nice sales acceleration, but not the flow through, because you guys made a decision, you know, to invest in the business. Can you talk about kind of where you made that decision with the investment compared to your expectations at the beginning of the year, and, you know, what has been some of the learnings, whether from G&A or, you know, marketing investments? I mean, obviously, you're taking share at a really nice clip, so those are, you know, resonating.

Yep. Yeah, we entered into 2026 knowing that this was going to be an investment year. We've got, on top of our core growth initiatives of category expansion, international expansion, continuing to acquire new customers in our domestic market, we've got the three big swings that we're working on, which is the Grow Good joint venture with Cardi B, Physical Retail, and Revolve Los Angeles. So we entered the year knowing this was going to be an investment year. I think what we saw is really great results out of all three of those big swing initiatives and increased the level of investment. And you can see it on the top line in the success of Grow Goods thus far and physical retail performing well. So we did increase the level of investment. Just to put it into context as well, for the year-to-date period, there was about two points of incremental growth investment. About 150 basis points was in marketing and about 50 basis points in G&A. So next year in 2027, intending to get some leverage both on G&A and marketing, primarily G&A, and marketing will be around 16%, call it this year, versus 14.3% in 2025. So we are coming off a lower comp in 2025, increase the level of marketing in 26, and then kind of balancing that into 2027.

That's super helpful. So the profitability of the business into next year, you know, sounds like should be back to expansion mode, which is great to hear. Remind us, how do you think about the longer term margin profile for Revolve?

Yeah, I would say our call-it midterm goal is to continue the double-digit top-line growth and deliver double-digit EBITDA margin. And if you bridge from where we're at today, if you strip out the growth initiative, strip out the tariff benefit that we had this year, we're at about 8% EBITDA margin. So bridging from 8% to the double-digit, about a point of that comes from gross margin, primarily from own-brand expansion, with own-brands carrying premium margin to that of third parties. And then the other point comes from cost leverage on the other areas of the P&L, primarily G&A. If we can continue to deliver top line and the double-digit zone, the goal is to increase G&A in the mid-single digits, so that drives that other point to get us to the 10% EBITDA.

Okay. All right. Terrific. In the last minute, I feel like you can't have a revolve and not ask you about AI, and you've been pretty much ahead of the curve, right, with investments for some time now. Maybe talk about what are you most excited about, where are you seeing the best ROI so far, and maybe give us a sneak peek of what's ahead.

All of it. All of it. Yeah, we need a lot more time to talk about AI in depth, but honestly, very excited about all aspects of AI from the website, and a lot of things we've done on the website from bringing the search in-house, using AI, really increasing the performance of that search, The curation, the personalization, the customer experience, testing chatbot features, bubbling up the most relevant Q&A, and that serves both on a conversion basis, but then also managing return rate as well. And then a lot of things going on in the back office from editorial processes to leveraging AI in-store to measure and read traffic and how the consumer is behaving with the product on the floor in the store. And then also internal kind of function, kind of LLM homegrown, where anybody in the organization, not anybody, but, you know, the core people in the organization can query the database directly and get immediate answers, speeding up decision-making. So a lot going on. And I think at the core, it's Mike and Michael and having that founder-led mindset, the technology backbone, and just a culture of innovation.

All right. Well, this is a great place to end. Well, thank you so much.

That was quick.