What Revolve Group (RVLV) Said on Its Q3 Earnings Call

Key Points

• Sales grew 20% to $356 million in Q3, with REVOLVE and FWRD both up 20%. Active customers rose 18% year over year, and international sales growth outpaced domestic growth for the 15th consecutive quarter.
• Profitability weakened amid growth investments: gross margin was 53.9%, down 75 basis points, and adjusted EBITDA fell 7% to $23.5 million. Management calls 2026 a “foundational investment year” and expects adjusted EBITDA margin expansion to resume in 2027.
• Revolve highlighted momentum in brand partnerships and physical retail, including strong early performance at its new Aventura store and nearly doubled sequential sales for its Grow-Good joint venture. For Q4, it expects gross margin of 52.3%–52.8% and continued pressure from freight and marketing costs.

Revolve Group NYSE: RVLV reported third-quarter net sales of $356 million, up 20% from a year earlier, as both its REVOLVE and FWRD segments posted 20% growth and international demand continued to outpace domestic sales.

Co-Founder and Co-CEO Mike Karanikolas said the company’s active customer base increased 18% year over year, accelerating by 7 percentage points from the prior quarter. Revolve added 202,000 active customers sequentially, its largest quarterly increase to date, supported by record new-customer acquisition and higher engagement among existing shoppers.

“Net sales grew 20% or more across both segments, REVOLVE and FWRD, and in domestic and international markets,” Karanikolas said. Domestic sales rose 20%, while international sales increased 22%. International has now grown faster than the U.S. business for 15 consecutive quarters, according to the company.

Profitability reflects investment year

Third-quarter gross margin was 53.9%, near the high end of Revolve’s guidance range but down 75 basis points from the prior-year period. The company said the decline reflected a difficult comparison with the prior year, when it benefited from AI-driven markdown optimization.

Net income totaled $15.5 million, or $0.20 per diluted share, compared with $0.29 per share a year earlier. The prior-year result included an insurance recovery worth approximately $0.05 per diluted share. Adjusted EBITDA was $23.5 million, down 7% year over year, as the company increased spending on growth initiatives.

CFO Jesse Timmermans said Revolve views 2026 as a “foundational investment year” and expects to return to adjusted EBITDA margin expansion in 2027. Management said increased spending this year has centered on physical retail, brand-building, the Grow-Good beauty joint venture with Cardi B, and initial costs tied to its newly announced Donatella Versace partnership.

• Gross margin: 53.9%, down 75 basis points year over year.
• Adjusted EBITDA: $23.5 million, down 7% year over year.
• Total orders: 2.7 million, up 19% year over year.
• Average order value: $292, down 5% from $306, primarily due to lower-priced Grow-Good beauty orders.
• Cash and cash equivalents: $285 million as of Sept. 30, with no debt.

Revolve used $24 million in operating cash flow and generated negative free cash flow of $27 million during the quarter, primarily because of working-capital movements. For the first nine months of the year, however, operating cash flow was positive $17 million and free cash flow was positive $7 million.

Returns improve as category mix broadens

Product returns declined by more than 2 percentage points from a year earlier, exceeding management’s expectations. Karanikolas attributed the improvement partly to category diversification, including growth in beauty, men’s products and other areas that carry lower return rates than apparel. International sales also have lower return rates, management said.

The company said its ongoing initiatives with brands and investments in technology are also contributing to lower returns. Karanikolas said Revolve sees longer-term opportunities to use AI and visualization technology to help shoppers make more informed product selections.

Return-rate improvements helped offset higher logistics expenses, though fuel surcharges and freight costs remained a pressure. Selling and distribution expense was 17.8% of net sales, up 35 basis points year over year. Timmermans said elevated fuel costs, international mix and lower average order value from Grow-Good all contributed to higher shipping-related costs.

Brand partnerships and retail expansion gain traction

Co-Founder and Co-CEO Michael Mente highlighted several brand-building and partnership initiatives, including the launch of Revolve Magazine and the third product drop from the company’s REVOLVE Los Angeles label. The third drop was the label’s best-performing release so far, according to management.

The company also expanded Kendall Jenner’s role to Global Creative Director of FWRD and named former NBA player Dwyane Wade as Chief Performance Officer for its men’s fashion initiatives across REVOLVE and FWRD.

Revolve’s Grow-Good joint venture with Cardi B nearly doubled net sales sequentially in the third quarter and ranked among the company’s top 10 selling brands, Mente said. He added that the business is already accretive to profitability. The company said repeat purchases have increased meaningfully over the past three months, while products that had sold out earlier are back in stock.

Management also discussed its recently announced joint venture with Donatella Versace to create a beauty and fashion business. Versace will serve as chief creative officer, while Revolve will provide digital commerce, technology, consumer data and operational capabilities. Mente said the announcement generated nearly 6 billion press impressions, citing Cision data.

Separately, Revolve said its $11 million investment in activewear brand 437 has generated nearly $900,000 in equity earnings through September. The brand’s direct-to-consumer sales nearly doubled year over year in September and it has been the company’s top activewear brand across REVOLVE and FWRD year to date.

Stores show early momentum

Revolve opened its third physical store at Aventura Mall in Greater Miami in late September, ahead of schedule and under budget. The store outperformed management’s initial projections in its first weeks of operation, Mente said. Owned brands represented nearly 60% of net sales at the Aventura location, more than double their online penetration.

The company said physical retail could support margin expansion over time because owned brands carry higher gross margins. It also cited spending behavior among omnichannel shoppers, who spend nearly three times as much as single-channel customers.

Revolve plans to expand its Aspen store footprint. It signed a multiyear lease to more than double the permanent store’s size and expects construction to begin in early 2027. Before construction, the company plans to move into a temporary Aspen location spanning more than 8,500 square feet.

Management also pointed to an internally developed AI-powered store-associate application that helps employees locate inventory and recommend complementary products. Since the app’s rollout at The Grove in Los Angeles in August, the company said store conversion rates have risen sequentially each month.

Fourth-quarter outlook

Revolve said October net sales increased by a mid-teens percentage from a year earlier. Timmermans cautioned that comparisons become more difficult in November and December, when the company posted double-digit growth in the prior-year period.

For the fourth quarter, Revolve expects gross margin between 52.3% and 52.8%, implying an approximately 75-basis-point year-over-year decline at the midpoint. The company expects selling and distribution costs to reach about 17.6% of net sales, reflecting continuing freight pressure, while marketing investment is projected at about 16.9% of sales due partly to brand-building expenses shifted from the third quarter.

For the full year, Revolve tightened its gross-margin outlook to a range of 53.9% to 54.0% and raised its selling and distribution forecast to 17.5% of net sales. It expects full-year marketing investment of 15.9% of sales and general and administrative expense of about $178 million.

About Revolve Group (NYSE:RVLV)

Revolve Group, Inc operates a digital commerce platform focused on fashion and lifestyle products. Through its REVOLVE and FWRD platforms, the company offers women's and men's apparel, footwear, accessories, beauty products and other lifestyle merchandise from established and emerging brands. Its portfolio also includes proprietary and exclusive brands, including superdown and Song of Style.

The company primarily reaches customers through its e-commerce websites and mobile experiences, supported by influencer marketing, social media, content creation and data-driven merchandising.

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