How Revolve Group is diversifying its business model to set itself up for future growth
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On Tuesday, as reported in Glossy’s Luxury Briefing, Revolve Group reported its second-quarter 2024 earnings, revealing a 4% boost in year-over-year net sales for its contemporary fashion-focused Revolve retailer, while its luxury-focused FWRD company saw a 4% decline.
Based on strong “traffic, sales and customer engagement” at the Group’s co-branded Revolve and FWRD store in Aspen, which started as a pop-up in December, the company sees potential in the “new market opportunity” that stores present, according to Michael Mente, Revolve Group co-founder and co-CEO. The company is now exploring retail expansion, having enlisted a respected retail advisory firm that has overseen store expansions for Apple, Lululemon, Abercrombie & Fitch and Restoration Hardware.
In addition, the company is considering additional brand acquisitions after taking an 80% stake in luxury brand Alexandre Vauthier in June.
“We see the luxury industry’s challenges as an exciting opportunity [for] market share capture, supported by our consistent profitability and cash flow generation that sets us apart in fashion e-commerce.” Mente said on the earnings call. He later added, “If we're able to come across other opportunities with similar profiles and metrics, we wouldn't hesitate to pursue more [brands].”
Following the call, Mente and his fellow founder and CEO, Mike Karanikolas, shared details on their ongoing diversification plans with Glossy.
The diversification of your business has served you well. To what extent is diversification a guiding strategy?
Karanikolas: “With a portfolio of 1,200 brands and over 100,000 styles across Revolve and FWRD, diversification remains a key component of our customer value proposition.”
What are your differentiators in the market?
Karanikolas: “We’re the premier destination for fashion and discovery among next-generation consumers, which is not just expected to persist but also to accelerate. Leveraging advancements in AI technology, coupled with our data-driven culture and continuous merchandising innovations, we are poised to further strengthen our market leadership.”
You mentioned on the earnings call that future acquisitions will have a profile similar to that of Alexandre Vauthier. Are you looking more at acquisitions on the FWRD/luxury side of the business?
Mente: “The acquisition of Alexandre Vauthier is exciting, highlighting the vast opportunities within the market and our ability to capitalize on them, backed by our strong balance sheet and proven operational track record. We remain committed to actively evaluating market opportunities that are both accretive and synergistic for Revolve Group, encompassing both Revolve and FWRD.”
What role do you expect physical retail to play in the future of Revolve Group? Will it ever be a sales driver of 50% or more?
Mente: “Based on the success of our Aspen store, we are actively evaluating an expansion of our physical strategy. Given that approximately 60% of apparel and footwear purchases still occur in a physical setting, it can be a much larger portion of our business over time.”
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What is current luxury consumer behavior telling you? How is it informing Revolve Group strategies?
Mente: “The customer is at the core of everything we do, informing many aspects of our strategies on an ongoing basis. Our distinct point of view and styling, our product and brand selection, and our best-in-class customer experience continue to serve the discerning luxury consumer.”
Catch up on the week’s 5 most-read beauty and fashion stories below.
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2moThey truly stand out as a trailblazer. Their focus on diversification, including retail expansion, is impressive. It’s exciting to see how they’re blending physical retail with technology to capture market share and adapt to evolving consumer needs. Their shift from a purely digital focus to a more integrated approach demonstrates their commitment to staying agile and responsive to the market, which speaks volumes.