I'm Oliver Chen, TD Counts Retail New Platforms and Luxury Analyst. We're delighted to have Jesse Timmermans here. He's the CFO of Revolve. We have a buy rating, a $28 price target on 20 times EV to EBITDA. The company has been a leader in customer centricity, fashion, weaving AI tech into operations for a better scalable platform and long-term owners and operators. Jesse, thanks a lot.
Yeah, thanks for having us.
So for those less familiar with the story, can you help us frame how Revolve is differentiated versus peers? You know, we view you as a Gen Z leader. What are your core competencies?
Yeah, yeah. We are the fashion destination for the next generation consumer. For those of you that don't know, we were founded over 20 years ago by Mike and Michael, who are still our co-CEOs and very active in the business still today. So I'd say that is differentiator number one is that founder-led owner mindset. They still own 42% of the outstanding shares, so very long-term oriented in driving the brand and driving the business. So that is definitely a key differentiator. And then number two, when they founded the business, neither Mike or Michael were fashion guys. Michael was a business analyst. Mike was a hardcore engineer. So they relied on data and technology to make all their decisions. and built the entire technology infrastructure from the ground up, homegrown, and still leveraged that technology today, which serves us very well, especially in this new era of AI innovation and set up really well to take advantage of that. So that's number two is just the technology infrastructure, the vast and really quality data that we have, and just a culture of innovation. And then number three is the powerful brand. Over time, we've invested heavily in the brand. and really building the brand for the long term and really connecting with this next generation consumer. We have a phenomenal brand marketing team who really knows the customer and knows how to engage with that customer. We just launched Revolve Los Angeles, our first namesake label that feeds into that brand heat. And then number four, and maybe I'll keep it at that, is just the consistent growth, and not just growth, but profitable growth. And that goes back to the founder-led mindset and always growing profitably. and that's led to a very strong balance sheet. We have over $336 million in cash in the bank as of Q1, which allows us to stay on the offense when others are playing defense.
That also segues into AI. You've been a pioneer of digital in many ways and rapid A-B testing as well as using algorithms. What are your favorite examples of AI today and what you're doing and how you're using it, both magic and logic?
Yeah, yeah, absolutely. You know, I think the most visible AI opportunities are where we've leveraged AI is on the site, developed our own internal search algorithm. So that resulted in double-digit conversion rate increase. And not only that, we're not paying third-party several hundred thousand dollars a year to operate that search algorithm. Also, visual and virtual try-on on the site, which also increases conversion, just gives her the opportunity to mix and match outfits. And then most recently, AI generative Q&A on the site to surface the most relevant Q&A to really educate her better on that first purchase, which helps in conversion, helps in retention, and then also on the return rate, reduces return rate over the long term. And then it's really throughout the business, and there's a lot of examples that I could go into, all the way from, call it the midstream of the business on marketing and editorial and using AI to improve efficiency and increase output, all the way to the back office and developing our own internal reporting and analysis tool using it for invoice processing translating voice to text on customer service calls so we can better mind that data and many other examples but I would say the most visible and exciting are on the customer front and really really curating that experience for the customer we offer over a thousand brands and a hundred thousand styles on the side at any given point so that curation and kind of journey for the customer is really important.
You mentioned return rates. They've improved, but the customer and the general consumer economy has a lot of cross-currents. What's happening, return rates and structural initiatives, as well as what you're seeing perhaps with the health of the consumer?
Yeah, yeah. Return rate was a big initiative for us last year, and we had a number of initiatives in play to reduce the return rate, and we successfully did that in 2025. And then even And in Q1, we had an 80 basis point reduction in return rate on top of a 280 basis point reduction last year in Q1. And it's largely from our initiatives and really reducing the return rate, but not at the detriment of the customer. From day one, free shipping, free returns, home as a dressing room, that's core to the service proposition. So we don't want to make it harder on the customer. It's all about maintaining that customer experience. And then there is some structural shifts as well. One of our growth opportunities is category diversification. We've historically been very heavy in dresses. We think there's a massive opportunity out there to capture more share of our wallet and serve other aspects of our life from active to essentials to beauty and men's. And then physical stores also carry a meaningfully lower return rate than that of the online purchases. So as we continue to roll out more stores, there will be a structural benefit to return rate.
On customer health, you previously mentioned April trending at around 14% versus the 16% you had in first quarter. What's happening with consumer sentiment? We see a mixed picture with the consumer fundamentally sound, but sentimentally weak, but they're still spending, of course. May, at some people, have gotten better.
Yeah, yeah, it is tricky, like you said. Sentiment, University of Michigan sentiment, it's at an all-time low. We're stuck with sticky inflation, higher fuel prices, and a lot of uncertainty, so there's a lot of challenges. I would say sentiment is pretty low. That said, I think she's proven to be fairly resilient, and I think layer our execution on top of that and being able to drive that 16% growth in Q1 despite the macro pressures out there.
You do have tougher second-half comps on the gross margin side of the model. What are puts and takes we should think about and rank order of opportunities or risks?
Yeah, yeah. Number one opportunity is own brand mix expansion. We were at about 20% in 2025. And we see that going meaningfully higher over time. We peaked at 36%, just to put some context to it, back in 2019. We think we can be higher than that, again, over time. A couple big drivers recently was the launch of Revolve Los Angeles, our first namesake brand. That was a pretty limited SKU set, but it really serves as a halo, allowing us to launch more products at more accessible price points and go deeper and really drive volume in the coming years. So that's the biggest opportunity on the margin side. I think on the offset, you know, there's just quarter to quarter fluctuation on full price markdown mix. We did see a little bit of a tick down on full price mix this past quarter, and expect that to continue for the year. But that's a quarter to quarter dynamic, still very healthy and higher than we were at in the kind of pre-COVID era. So over time, we continue to drive that up.
You do have a multi-year compare of a high degree of full-price selling. However, it's tougher when you're anniversarying that. What's happening with full-price selling? Is that a concern relative to cleanliness of inventory?
No, no. It's still in a very healthy place. So even though it did tick down year over year, it was higher last year, but we were in a much higher kind of a different time zone then, but still very healthy and higher than it was back in, again, kind of the pre-COVID era, which was the most kind of normal time period. So I think inventory is healthy, growing at about the same pace as sales, and even in the markdown component of our sales, markdown margin has meaningfully improved. That's another example of AI innovation where we leveraged AI to optimize the markdown algorithm, which is driving significant margin gains there, which, to your point, we start to lap in the back half of the year, so the comps get tougher on that side.
Thank you for that. Also, thank you for sponsoring the experiential fair. So I'll DJ today at 4.45 at the courtyard, but can we get Cardi B here next time?
We'll work on it. We'll work on it.
Okay, you're... You're already killing my margin with this pre-product. Webcasted and Cardi B, but it means that... What is the Cardi B joint venture? and tell us about Grow Good Beauty Hair Care.
Yeah, yeah, we're really excited about this. We've got a number of big swing growth initiatives at play. Grow Good is one, and I'll get into that. Physical Retail is another one, and then the Revolve Los Angeles brand launch that I mentioned. So Grow Good is a beauty product in partnership with Cardi B. It's a joint venture, very, very shared economics. She's very engaged. We pre-launched in March, sold out within an hour. We had the official launch in April, sold out in an hour again. We just got into more inventories, and that was just limited by our inventory buys. We got into more inventory in May, and then we'll have a bigger inventory buy this month, and then a bigger one in August, so kind of incrementally building into the inventory. And the brand, the Grow Good brand alone, reached 650,000 followers in a matter of weeks, which is phenomenal and outpaces some of the other kind of celebrity beauty brands out there. But compare that to Cardi's 164 million followers. That kind of puts some context around the opportunity that we have with that brand.
How did you pick doing this? You are an OG of the influencer community. Why this JV? Why beauty and hair care?
Yeah, yeah. We saw an opportunity. We'd been working with Cardi for years. She's been a great partner. and we both saw the opportunity in beauty and leveraging her passion for the product and then also, of course, her brand power. Combine that with Revolve's operational excellence and all the back office fulfillment and just great customer service that we can offer. It was a great match. And I think this sets the stage for either future partnerships or also future own brands within beauty now that we have the playbook.
Revolve Los Angeles own brand. I'm excited to see that. What are your vision for percentage of mix or pace of growth and general strategy for Halo and later?
Yeah, yeah. This year is really about that Halo effect. And not just the Halo for the Revolve label brand, the Revolve Los Angeles brand, but it also serves as a great Halo for the entire business. And then next year we'll start to get into other more accessible price points, other categories, and those will be the real volume drivers. So we We see own brand mix increasing meaningfully over the coming years. We don't put a target on it because we want to do what's right for the assortment on the We don't want to over-penetrate in any certain category or even own brands itself. The other opportunity in own brands is in physical retail. Own brands perform better in store than they do online, both from a mix perspective and an inventory productivity perspective. So we've got a couple of real opportunities to drive own brand mix higher over time.
On stores, that's a really cool topic. You signed a lease in Miami, Aspen, and the Grove are performing well. What's happening with stores? What are you learning here? I've always wanted you to have hundreds of these, but you've got to be measured.
Yeah, yeah, definitely being measured. We think we're very good at online, but acknowledge we still need to build the muscle for physical retail, and that's everything from processes, inventory management, and the team. So that's the phase we're in right now is really building that infrastructure. infrastructure. What we've learned, stores are a great source of new customer ads. Even in our home of LA, we see a halo for the online business. And just anecdotally in talking to customers and kind of overhearing customers talk, it's incredible how many customers don't know Revolve, even again in our home turf of LA. So great new customer acquisition tool. I mentioned own brands, own brands outpacing in-store, and then return rate, back to the return rate meaningfully lower in-store than online. And we think it could be half of the business over time. There's still three-quarters of the dollars out there in retail are flowing through physical retail stores, so it's a largely untapped opportunity for us.
We have been fortunate to teach a class with Revolve at Columbia Business School, and part of it is how fast you are at A-B testing digitally extremely well and executing that to both cultural relevance and inventory management. What's the hardest part of stores? How do you actually do that physically? It's not exactly possible.
Yeah, yeah, it is tougher in stores, and that's the one thing we're learning. And I think both the challenge and the opportunity is how do you fit and what do you fit into a store out of our 100,000 styles that we carry on the site. So it is very much a curation, and each store is different. Aspen is much different from the Grove. It's going to be different than Miami. But we do have a rich set of data, both on the merchandise front and on the customer front. We know what they're buying, where they are, so we can leverage that to assort the store. And then even in-store, we can quickly A-B test. We've got some back-to-AI opportunities. We have some really great visualization tools where we can see what product is in what area of the store and what's selling and who's selling it. So we can, maybe not as quick as online, but really quickly read what's working in-store and quickly reassort.
You learn a lot. it's a magic model with having 100,000 styles what is your view for the SKU count later because you have a lot of liberty to go into multiple categories too but you're balancing this simplify to amplify but the customer loves coming back even when things aren't perfect there's still opportunity for skewer style growth and just for example that has increased significantly over the past eight years, I would say, with the goal of increasing the units but doing so via breadth and not
depth, so still buying very shallow and increasing the breadth, and we continue to read and react. So then that comes back to AI curation and helping her kind of navigate the site and enabling her journey to find the right product across those styles.
Yeah, reinforcement learning could hold the promise, intersecting that with personalization. But still, you've got to be cool and human, too, and sexy. So test, read, and react. Actually, that's a mainstay of when I worked with you on the IPO. What about test, read, and react today, you know, versus call it five years ago?
Yeah, faster, better.
Yeah.
Yeah, just kind of incrementally gets better every year, even before this AI evolution. We continue to get better and better via machine learning, via just having more data points over the course of our journey. And having 2.8 million active customers across 100,000 silos across 20 years gives us a very rich set of data to work with.
Yeah, that's quite proprietary, and it all has a lot of veracity to that data. We talked about Coachella, TD count at Coachella. What happens to the person who doesn't go to Coachella later in life but still wants to love Revolve? customer lifetime value.
Definitely an opportunity there. I think she can continue to grow within the Revolve ecosystem and then graduate into Forward, which is our luxury segment. A higher price point, slightly different product mix. Great photography there too.
Really, really proprietary kind of looks.
That's a key differentiator from some of the other luxury players. It's a real curated young luxury feel. That comes through on the site, comes through in the merchandise. We just partnered with Rosie Huntington-Whiteley as our fashion director, which has been well-received by both brands and customers alike. So it's continuing, again, similar to Revolve, just that constant newness, curation, having a vast assortment, but making sure it's very curated. So that serves that customer that's growing her wallet, growing her different aesthetical...
You also have other brands like Helsa, too. Yep. And do you think that helps serve long-term value for the older customers as well?
Yeah, yeah, and cross-listing, more and more cross-listing across both Revolve and Ford, where brands can kind of play in both.
Well, what's on the roadmap for Ford? It's been great momentum now, and it's a big luxury opportunity.
Yeah, yeah. Just continued great merchandise, great editorial, great assortment. We're also focusing on the high-value customer, really investing there. in gaining that customer, and I think that customer is kind of feeling the turmoil in the luxury industry, and there's fewer points of distribution, fewer places to find great product. And again, brands and customers alike are finding forward is a really great place to find great product. And then, once we have her in, she realizes the great service that we offer that outpaces other competitors, and even going D to C or going directly to the brand itself, we can generally outperform on a service level.
That sounds very compelling. On the capital allocation side, Jesse, $336 million of cash, no debt. What do you think about thinking about capital deployment, investments, minority stakes, M&A? And then a different part B to this is this is an investment year to a certain extent. Could you reflect upon that too?
Yeah, yeah. Really great place to be in terms of capital allocation. Where we see the greatest ROI is investing back into the business, and this gets to your point B of your question. That's where we see the greatest ROI. We're still only 3% penetrated in our core domestic market, even lower penetration internationally, so we have a lot of room to grow. So number one is invest back into the business, and this is definitely an investment year, supporting the Revolve Los Angeles launch, the Grow Good launch, physical stores. We have a lot going on. We're really optimistic about the long-term growth opportunities, and if even just one of these hits, it'll be a game changer. So that's number one, invest back into the business. Number two is opportunistic M&A, and that can take the form of partnerships, minority investments, which we've made several of. Most recently in January, made a minority investment into a brand that serves the growth opportunity and category diversification, so really excited about that. And we continue to look at things, but all three of these things at the same time.
And what's your approach? Like, what are you looking for for a partnership or a minority investment? How would you choose the methodology and or the nature of the targets?
Yeah, yeah, it needs to serve one of our growth opportunities. And generally where these fit is in that category of diversification, whether it's men's or active or essentials. You know, there could be opportunity in BV, although we've chosen to kind of more incubate and build that on our own at this point. But really, it's about serving one of those growth opportunities and primarily that category diversification. A lot of times, it's a brand that we carry on the sites. We have really good intel into how the brand is performing with our customer and in our ecosystem.
International is about 20% of sales. I think there's a lot of pent-up demand there given how much global traffic you have. Plus, you could probably improve service levels. What's happening internationally?
Yeah, really great growth coming out of international. 20% this most recent quarter, and that's on top of great growth last year, so really good long-term growth out of the international business. That said, it's very diversified across regions, so it's very seldom that you'll see every region hitting in the same quarter. This most recent quarter, of course, and into Q2, Middle East is experiencing some pressure, obviously. But then on the flip side, we have regions like Mexico, which was a phenomenal grower. We increased new customers by 80%. And back to your service point, that was the result of increasing the service levels, offering different, more curated payment types for that customer in Mexico, and then doing some more dedicated marketing. So that's the international playbook, is get the service levels right and on par with the U.S. customer. Then make sure the assortment is right, of course, and then do more dedicated marketing in those regions. China's been phenomenal for us, and that's more different, you know, when it comes to marketing and a much different customer. We recently developed an own brand specifically in China for the China customer that was designed, styled, and the fit was specific for that customer. Marketed that via live stream, sold out, had over 100,000 views on the live stream, so more opportunity to do more of that kind of dedicated own brand within China.
Yeah, we've seen a lot of missteps in China, actually. How did you do so well there? What have been the learnings so far?
Yeah, yeah, our head of China spent a lot of time in China and has a lot of contacts there. Then we hired a kind of under him, a head of China that came from the live streaming industry. So she knows, you know, how the customer behaves, how she shops, what she looks for. So I think it's people and, you know, just making sure we're going at the right pace and addressing the customer's needs.
I'll ask one more, then I'll open it up to the audience for questions. There's a lot of great things we talked about from stores to own brands to beauty. Like, how do you prioritize these, or what are you thinking about that? Just to make, I think you do a good job focusing on the core of bread and butter, but what are your thoughts on prioritization and not going too crazy?
Yeah, yeah, I think this goes back to the founder-led culture that we have and having Mike and Michael still in the seat of the CEO and building at the right pace, growing, being aggressive, but doing so at the right pace, remaining profitable. So it is a constant balance of prioritization. We do have a lot going on right now, so I think it's making sure that we are investing while at the same time keeping the house in order and growing that core business.
Any questions from the audience, feel free to raise your hand. Go ahead, Linda. Yeah. I'll repeat the question for the webcast as well. Influencer marketing and AI.
So to date, all the influencer marketing and the marketing in general has been human. So very authentic and curated, you know, more playbook of the past. Not to say that it won't shift to AI over time. We'll have to see how that plays out. But we are very conscious of the customer feedback and how the customer reacts to that. So thus far, it's been at least on the marketing and what you see is human. That said, we're leveraging AI in the back, in the systems and the processes to increase the speed and efficiency at which we do things. And then more so on the performance marketing side, where we're using that to expand the reach on some of our bigger channels. But yeah, I think you have to be very careful to make sure it's authentic and gauge the customer reaction.
We had a question over there as well.
Yeah, so the question was the international business and how that margin profile compares to the U.S. business. Generally, on a gross margin basis, it's very consistent across domestic and international. It's a similar product. There's always differences region by region, and Ford can skew higher in certain regions than Revolve, so that takes the blended margin down. And then on the transactional cost, that's where you see some pressure on the international side because it does cost more to ship back and forth internationally. but we're continuing to get better and better and more efficient when it comes to that. We can serve 80% of our international customers in two to three business days, which is phenomenal, and that's coming out of the US. So service is a key element there. So higher on the transactional cost, but then offset by a slightly lower return rate. So there's some puts and takes, and by the time you get down to contribution margin, it's similar. And the international team, the dedicated international team is very small. We're leveraging the greater Revolve infrastructure to serve that business. So you just get economies of scale as you grow.
Any other questions? Jesse, which part of your job keeps you up at night and which part's the most fun? So the least fun and the most fun.
Least fun, investor conferences.
Oh, no. Are you kidding me? You've come back again and again. You're pretty loyal. Well, you like music and culture.
No, I would say... Yeah, no, these are fun. I was just giving you a hard time. No, I think what keeps me up at night are good things. We have a lot of growth opportunities in play right now. Last year was all about tariffs, and that was a bad keeping me up at night. This year is all about the growth opportunities, and we covered them all. But I think in just the prioritization point, that's always important. I think fun, I've got a couple different versions of fun. I think fun is getting out and experiencing the brand, whether that's at Revolve Festival or some of the other events that we do because a lot of times, you know, I'm just, you know, in the back office and just grinding in Excel and doing other things. Yeah, that's fun, too. But it's really good. Yeah, and that's the other piece. That's the other fun part is just, you know, cranking in Excel and working with a team, being in the office and engaging there. But it is good to get out and really experience the brand and talk to the customer. And now having physical stores, it's great to visit the stores and see how the customer is engaging and see the product in real life.
What's been most fun when you do experience the brand? What have been your biggest surprises?
Yeah, I think maybe not a surprise, but everybody knows us for the brand and what you see on Instagram and the influencers and the great product and all the sexy. What is surprising to most is when you talk to a customer, the first thing they say is the service is phenomenal. I get my product the next day, the returns are so easy, the product is great. So that's a surprise to a lot of people is the customer really values that service component. and then I guess surprising is how many people still don't know Revolve again back to that 3% penetration we still have a lot of opportunity out there and a lot of customers to acquire I think you've been leaders to embracing your customer and personalization but what do you think is ahead for service and what are you testing with returns anything on the horizon because the mics both have intense innovative minds on a service front And, you know, I think we're very good today. It can always get better. I think it's, you know, faster shipping. You know, the return process is easy, but that can always be faster. So I think on the service side, it comes back to the website and the curation and the personalization, and that, you know, continues to evolve, and we can get better and better there. So I'd put that in the service component as well. And, yeah, we do have some initiatives in play for return rate, but, again, we want to make that return rate go down in win-win ways and not impact the customer experience.
The other thing we talk about at TD Cowan in a book we wrote is what we call the retail nexus. So we're thinking about marketplaces and digital advertising. You do have such high frequency and loyalty in your multi-brand. How are you contemplating those aspects of opportunity?
Yeah, yeah. I think brand is always important. And building the brand for the long term, and that goes back to investing in brand marketing consistently over time and just really building that brand. and that set us up well to launch Revolve Los Angeles and that first namesake brand. So I definitely think it's a balance. You have to do both.
Could you get alternative revenue streams from digital advertising?
I think we could, and we've discussed that. And we do have now some pop-ups on the checkout where we're getting some revenue from that. But I've tried to really want to maintain that experience and just that core Revolve experience on the site and not clutter things too much.
Yeah, it's a balance with trust and execution. And what about the marketplace frontier?
Yeah, I think...
Don't you like it being capital light, but there's trade-offs?
Yeah, there are trade-offs. And fun fact, Mike and Michael worked with...
They did massage chairs, right, in the very beginning.
Oh, yeah, they did a bunch of stuff. Maybe cell phone cover, I don't know why.
Yeah, there was a lot of innovation and experimentation.
Yeah, but they partnered with Jose at Farfetch and launched Farfetched North America in the early days. So they got direct experience with that marketplace model. And what they realized, it's really hard to manage all those different brands. And going back to the service level, you don't have 100% control over the full purchase cycle.
Yeah, sometimes iconic luxury, as we cover that sector too, like owns from the alligator farms to the customer touch point.
So I get it. last question what do you think's less well understood about revolve and if we only remember a couple of things from this time precious time we had together what should they be yeah I think less understood or less appreciated is just that founder-led culture and the culture of innovation and technology it's a phenomenal brand we have great product but it's really the culture behind it that's that's driving that and you know led by mike and michael um and i think to take away from this is the consistent growth profitability and the meaningful growth opportunities we have ahead okay great well jesse it's been a pleasure thank you yeah thanks all very much