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Investing.com -- Revolve Group, Inc. (NYSE:RVLV) shares jumped 6.6% in after-hours trading Tuesday after the fashion retailer reported third-quarter earnings that significantly exceeded analyst expectations, despite a slight revenue miss.
The next-generation fashion retailer reported adjusted earnings per share of $0.24 for the third quarter, tripling the analyst estimate of $0.08. Revenue came in at $295.63 million, slightly below the consensus estimate of $297.36 million, but up 4% compared to the same period last year. The company’s strong earnings performance was driven by exceptional gross margin improvements.
"We had a very solid third quarter, highlighted by exceptional gross margin performance that drove an 11% increase in gross profit year-over-year and a 45% increase in Adjusted EBITDA to $25 million, our highest ever for a third quarter," said co-founder and co-CEO Mike Karanikolas.
Gross margin expanded to 54.6%, a significant improvement of 347 basis points YoY, primarily due to shallower markdowns, a higher mix of full-price sales, and increased contribution from higher-margin owned brands. This margin expansion helped drive a 97% increase in net income to $21.2 million.
The company reported a 5% increase in active customers to 2.75 million in the trailing 12 months, while total orders placed also grew 5% YoY. Average order value increased slightly by 1% to $306.
Revolve’s balance sheet remained strong with $315.4 million in cash and no debt, up 25% from the prior year. The company generated $11.8 million in operating cash flow during the quarter, a 31% increase YoY.
Looking ahead, Revolve provided updated guidance for fiscal year 2025, projecting gross margin of 53.5%, up from its previous outlook of 52.1% to 52.6%. For the fourth quarter, the company expects gross margin between 53.1% and 53.6%.
"Our healthy cash flow and rock-solid balance sheet enables us to continue to invest in exciting long-term initiatives," said co-founder and co-CEO Michael Mente, noting that the company is positioned to "accelerate our market share capture and achieve profitable growth for years to come."
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