![]() We felt like we could come out of the gates with a better approach and then continue to build on that." But there weren't really that many players doing it or doing it well. There was a large and growing interest in apparel online. It was a new world and a new opportunity with the internet and online commerce starting to change things. The company was one of the pioneers of a promising market. Revolve needs to be seen in the context of the development of the e-commerce market. We think the future growth rate will be lower rather than higher. It is worth noting that revenue per active customer has been declining for several quarters, which is also in line with the trend observed in 2019. The number of returns also increased significantly, resulting in a 17.85% decrease in revenue per active customer to $119. The average growth from Q3 2018 to Q4 2019 was 82 active customers per quarter. However, in physical terms, the number of active customers increased by only 84 QoQ - a significant slowdown and a return to pre-pandemic levels. The number of active clients grew by 34%, average order value by 16% YoY. ![]() In the first nine months of 2022, the company's revenue reached $842.26 million, up 29.3% year-on-year. Over the past five years, Revolve has grown at an impressive CAGR of 24.82%. ![]() However, it does imply that Revolve still has a significant runway, or that the company is able to substantially improve its operating leverage. Obviously, this is a more reasonable estimate than it was before. However, the market is still asking for 19.40x Forward EBITDA for the company. Since then, Revolve's capitalization has declined by 76.8% to 2022 lows the stock is currently trading over 65% below its November 2021 high. Since the public listing, investors have been avidly gobbling up shares even at premium prices in November 2021, the stock traded for more than 60x Forward EBITDA. Of course, Revolve's prospects have not gone unnoticed by Mr. Revolve is one of the rare growth companies in the fashion industry that is also operationally efficient and doesn't burn shareholder value. We also like growth companies for the potential returns they can generate at a reasonable entry price. In addition, fashion firms have a deep competitive moat, provided with recognition and exclusivity. We like haute couture for its low price elasticity, relative resistance to macro headwinds, and simple business model. Today, the store's ambassadors are more than 30,000 microbloggers with a small but loyal audience. Revolve's focus on millennials and Gen Z is reflected in its once-innovative approach to influencer marketing and active social media advertising. Despite active international development, the US remains the key market with a share of 82.7% of total sales. The first one specializes in upper-middle/high buyers, while the second caters to high-end clients. ![]() Today, Revolve is a premium fashion retailer offering more than 70,000 clothing, footwear, accessories, and beauty products through its Revolve and FWRD platforms. Only the emerging and rapidly growing industry provided the company with a significant tailwind. Revolve was one of the e-commerce pioneers in the premium apparel market. Out of work after the dot-com crash back in 2003, two young tech co-workers Michael Mente and Mike Karanikolas founded a fashion company based on a patented technology platform and big data analytics to work efficiently. According to our estimate, the current price is slightly below the fair market value. However, in our opinion, the company's potential is significantly limited. While the stock is down significantly from its highs, current multiples suggest that Revolve still has a significant runway ahead, or that the company will improve its operating leverage. However, prospects and potential have always been reflected in the price. Over the years, Revolve ( NYSE: RVLV) has demonstrated an impressive growth rate and a permanent improvement in profitability. MoMo Productions/DigitalVision via Getty Images Investment Thesis
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