Revolve actually surpassed Wall Street forecasts on top- and bottom-line growth, but the company’s shares tumbled from $73 to $56 following the earnings news.
The Cerritos-based fashion brand posted net income of $32 million, or 42 cents a share — an increase of more than 100% over the 2020 and 2019 second quarter earnings, according to Co-Chief Executive Mike Karanikolas.
Revolve’s revenue for the quarter ended June 30 reached $228.6 million, a 61% year-over-year uptick and a 40% jump from the more stable second quarter of 2019.
Analysts had anticipated net income of 21 cents a share and revenue of about $198 million.
“While there is still some uncertainty out there, our results demonstrate that we are continuing to navigate the challenges very effectively,” Karanikolas told analysts during an Aug. 4 earnings call. “Moving forward, we are focused on actively investing in our growth opportunity, and we are excited for the path that lies ahead.”
So, what caused Revolve’s stock to tumble?
The company said “uncertainty” about the delta variant’s impact on pandemic recovery, as well as new Apple iOS privacy rules that restrict targeted advertising, likely spooked investors.
The ecommerce retailer, which derives a significant portion of its revenue from sales of outfits for going out on the town and special events, is “following delta very closely,” said Karanikolas’ counterpart, Michael Mente. “I think that our current assumption is that things could get worse, but it will not be as restrictive as times past. But of course, these things change very, very quickly.”
Delta concerns follow Revolve’s push to increase the number of in-person marketing events.
“Having those events is really to reinforce our core brand message, and it really does show in the type of merchandise that we have been selling,” Mente said.
The effects of Apple’s recently implemented privacy changes to its iOS mobile operating system, which made tracking by advertisers across apps and websites an opt-in only feature, “started to become evident late in the quarter,” Karanikolas said, adding, “It’s an area we’ll continue to focus on with our advertising partners. These headwinds are not unique to us and affect all companies. We believe Revolve is well positioned to continue to effectively navigate through the many challenges presented in this very dynamic environment.”
