Two months into its run on the public markets, Vernon-based Reformation Inc. is facing a tough room.
Despite posting strong revenue and margin growth in its first earnings report as a public company, shares of the sustainable women’s clothing retailer have tumbled more than 25% from its trading debut July 30.
“They exceeded their numbers. They raised their guidance,” said Dylan Carden, an analyst at William Blair & Company covering Reformation. “Everything that they sold at the (initial public offering) has happened, if not more so.”
A 24% increase in second-quarter revenue to $155 million extended Reformation’s double-digit growth streak to 21 consecutive quarters. The company hit 70 locations in the U.S., Canada, the U.K. and France by the end of June, making progress on its plan to open 15 to 16 new stores this year. And lower tariffs and higher average unit retail pushed its gross margin up 230 basis points to 66.7%.
“Our strong financial profile is underpinned by consistently high full-price selling, averaging approximately 80% over the last several years, and disciplined execution, which drives our healthy gross margins and double-digit EBITDA margins,” said Hali Borenstein, Reformation’s chief executive, on the company’s second-quarter earnings call. “We are proud of what we’ve accomplished, and we’re just getting started.”
These figures made analysts largely optimistic about Reformation’s outlook. Like Carden, Guggenheim Partners’ senior analyst Simeon Siegel held the company at a “buy” rating, citing industry-leading sales growth in the second quarter at 24.1%. Clothing retailers averaged 5.1% year-over-year sales growth in that period, a Guggenheim analysis of company filings shows. Runners-up Free People and Coach both trailed Reformation’s result by nearly 10 percentage points.
But currents outside the company’s control have dragged down its share price, which has fallen from a starting $16.22 to $12.74 at close on Oct. 1.
Reformation, founded in 2009 as a vintage retailoring shop on Melrose Avenue, sits at a market cap of $711 million – a tumble from the debut $1 billion valuation that momentarily crowned the company L.A.’s newest unicorn this summer.
The company declined to provide comment for this story.
Investors wary of retail stocks
The retailer’s contrasting internal and stock performances follow a broader trend of investors punishing retail stocks over inflation, consumer health and energy price concerns. That sentiment is pressuring Reformation’s share price, Carden said, even as its customer count grew 23% in the second quarter.
“There is some skepticism around any discretionary companies, given how volatile discretionary spending can be, particularly in a market like this,” he said. “You’re seeing people drawing down on their savings. You’re seeing a lot of companies come out and talk about internal price sensitivity.”
New Jersey-based Jersey Mike’s reoriented its growth strategy late last year to rely less on price and more on transaction volume, Chief Executive Charles Morrison said on the company’s latest earnings call.
“We made a conscious decision last year in the fourth quarter to reduce the amount of price we took as a brand and focus our efforts on growing transactions for the long term, which we believe is a much healthier way to grow the business,” Morrison said.
The sandwich chain went public the same day as Reformation and has been subject to a similar bout of investor scrutiny. It posted 10% jumps in year-over-year revenue and systemwide sales in this year’s second quarter but now trades more than $6 below its debut of $23 per share.
Another factor at play is the stampede of investor dollars into hyperscalers’ stocks, pulling attention away from anything outside the “halo” of artificial intelligence, Carden said. The AI investment boom drove nearly half of S&P 500 earnings growth so far in 2026, according to a Goldman Sachs Group, Inc. analysis.
Retailers can also vary drastically in how they pursue growth and stability, making them harder stocks for investors to get behind, said Jessica Ramirez, co-founder of consumer insights advisory firm The Consumer Collective.
Swiss shoemaker On Holding AG’s recent stock market run is a prime example, Ramirez said. Shares fell roughly 20% on Aug. 11, their biggest single-day drop so far, after the company – which hit public markets in 2021 – reported strong profitability and direct-to-consumer expansion. A trimmed wholesale business meant to protect inventory and full-price positioning spooked investors motivated by near-term sales momentum, Yahoo Finance reported.
On the heels of Reformation’s IPO, Ramirez was wary about how the company would fare in its early public market days.
“I’m not sure how well investors understand their model or where this brand fits in the market, and that sometimes tends to unfortunately … affect the company in terms of the stock price,” Ramirez said at the time.
But Reformation seems to be playing the long game, Carden said. Consistently strong financial reports could build investors’ confidence in the company over time, he said – though the number of quarters it’ll take to get there is anyone’s guess.
“This is a management team that is very much focused on not the dynamics of the last week of trading, but more how they’re executing to that goal of … making sure that you’re building a durable, sustainable, valuable brand that ultimately is rewarding for everyone involved post-IPO,” the analyst said.
