Revolve Group Shares; Reasons for August’s 17% Drop

Revolve Group NYSE:RVLV

Revolve Group (NYSE:RVLV)

According to the information from S&P Global Market Intelligence, shares of online retailer Revolve Group (NYSE:RVLV) fell by 17% in value during August. The corporation reported decent results for the second quarter but expects tough times for the remainder of the year.

What is the Reason?

Revolve Group (NYSE:RVLV) runs a website that specializes in millennial-targeted clothing. It employs AI and ML to choose and organize nearly 70,000 items, and it builds brand awareness and client retention through its extensive network of celebrities and social media influencers. The firm is a digital-age take on the fashion industry.

Since more individuals started using the internet to stay in touch during the epidemic, the business has been booming. Although it has been growing at double-digit rates and turning a healthy profit for several quarters, it will reach a wall in the middle of 2022 due to inflation and rising expenses. Second-quarter sales were up 27% year over year, but net income was down 48%. A 0.3% increase in gross margin was seen.

In a time when many other fashion firms were reporting losses, this was a remarkable achievement. For instance, in the second quarter of this year, sales at Gap were down 8 percent from the same period in 2016. The problem for Revolve Group (NYSE:RVLV) shareholders is the remaining time in 2018. Revolve’s results in this climate were, on the whole, encouraging, although they were consistent with a slowing rate of growth and a squeeze on profits. However, management also warned investors that sales fell further in July, increasing by only 10% year over year and that the situation isn’t likely to improve significantly in Q3 or Q4. Already falling, Revolve shares dropped much worse.

What’s Next?

In the grand scheme of things, maybe things aren’t that awful over at Revolve Group (NYSE:RVLV). The business is poised for rapid expansion because of its sound concept and devoted clientele. However, patience is required.

As the second quarter progressed, there were several positive developments. There was a 39% rise in the number of active clients, who now number 2.1 million; a 27% increase in the number of purchases placed; and a 19% increase in the average order value, which now stands at $303. With $290 million in sales during the second quarter, this firm is only getting started in the enormous online fashion sector.

Revolve Group (NYSE:RVLV) stock has dropped 58% this year, but at its current price, it trades at just 21 times trailing-12-month profits, which is inexpensive for a firm growing at double digits. A decrease in the price might be a good opportunity for investors to buy more shares.

Featured Image-  Megapixl @Nito100 

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About the author: I'm a financial journalist with more than 1.5 years of experience. I worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan. I love to write about marketing and finance. Other than that, I like spending time in the gym and playing PC games.