Revolve at UBS Conference: Strong Growth and Strategic Expansion

Revolve Group (NYSE: RVLV) presented its strategic vision and financial performance at the UBS Global Consumer and Retail Conference on Wednesday, 12 March 2025. The company highlighted robust growth in 2024, driven by its data-centric approach and customer-focused initiatives, while also addressing challenges such as tariffs and macroeconomic uncertainties.

Key Takeaways

• Revolve achieved a 73% increase in net income and a 60% rise in adjusted EBITDA in 2024.
• The company is expanding into physical retail with new stores in Aspen and Los Angeles.
• Focus areas include AI-driven personalization and category expansion into men’s, beauty, and home.
• Revolve’s customer acquisition costs have decreased, benefiting from improved AI utilization.
• The company is exploring M&A opportunities with a focus on strategic fit and value.

Financial Results

• Net sales grew sequentially each quarter in 2024.
• Active customers increased to nearly 2.7 million, marking a 15% compound annual growth rate (CAGR).
• Revolve spent $42 million on stock buybacks at an average price of $14.28.
• The full-price sales ratio improved to 82%, up from 79% in 2019.

Operational Updates

• Revolve operates two segments: Revolve and Forward, with average order values of $281 and over $600, respectively.
• The company reported $100 million in sales from its beauty, men’s, and home categories combined.
• Revolve’s beauty business has expanded fivefold over six years, now comprising 4% of total business.
• Initiatives to reduce return rates include policy changes and site improvements, with the return rate dropping to 55.1%.

Future Outlook

• Revolve is testing physical stores to enhance brand awareness and customer acquisition.
• The company aims to achieve a higher four-wall EBITDA margin in stores compared to its e-commerce business.
• Plans to grow its beauty category to double digits over time.
• Continued investment in marketing and technology, especially AI, is anticipated.

Q&A Highlights

• Key performance indicators for physical stores include new customer acquisition and return rates.
• Most shipping remains free, positioning the customer’s home as the dressing room.
• AI-driven size and fit technology is being improved to enhance user experience, particularly on mobile devices.
• Tariff impacts are being mitigated through strategies like factory diversification.

Revolve’s leadership remains confident in their ability to capture market share and grow profitably. For more detailed insights, refer to the full transcript below.

Full transcript - UBS Global Consumer and Retail Conference:

Jay, Unidentified role: Really honored to have Jesse Timmermans here, CFO of Revolve to talk about the business. Also Eric Randerson is here, IR from Revolve. And the plan for today is I’m going to turn it over to Jesse in just a second. He’s going to go through his presentation, talk about the company and then we’ll do a little Q and A. And at the time, just give a heads up, Christine back there has a microphone.

If you have a question, please raise your hand and just wait until the microphone comes around because we are being webcast today. We want everybody in the webcast to be able to hear the full question. So that’s just a little heads up. And that Jesse, I want to turn it over to you. All right.

Jesse Timmermans, CFO, Revolve: Well, thanks Jay. Thanks for having us and thanks everybody for joining. We’ll try to keep it quick and interesting. Definitely an exciting time to be at Revolve, also a challenging time out there. So I’m sure we’ll hit on a lot of that stuff here today.

So before I get into the details, just a quick overview if you’re not familiar with Revolve. We were founded over twenty years ago by Mike and Michael, still our Co CEOs today, still in the office grinding it out, which is a core differentiator for us, we believe in that we have that owner mindset, that founder led entrepreneurial scrappy mindset, and founded on technology. Mike was an engineer. Michael was a business analyst. They had no fashion experience.

So from day one, everything has been data driven. And that has just accelerated in the last eighteen months with the advent of AI that we’ll get into more. On top of that, we have a very powerful marketing engine, one of the early adopters and really the pioneer in social media and really able to interact in a deep level with this next generation consumer and doing so profitably. We’ve grown profitably over time, really built a strong balance sheet, which again with that founder led mindset and a strong balance sheet really allows us to invest through the cycles. So before I get into the business, we wanted to do a quick view of 2024, which was a great year for us, really inflected on top and bottom line.

Saw an increase in our active customers sequentially from the first half of twenty twenty four to the second half of twenty twenty four. Saw our net sales growth increase sequentially every quarter throughout 2024 and and also in absolute dollars. And that’s despite what we think is a consumer that is not 100% there. So we think this is primarily due to our execution and a lot of the initiatives that we implemented in 2024. And then again, we did so profitably, 73% increase in net income and a 60% increase in adjusted EBITDA, again, all while facing a lot of macro pressure out there.

So if you look at the business, stepping back, we operate two complementary segments. So complementary is a key word here. They very much are complementary. You have the Revolve segment that is a $281 AOV. It’s primarily fashion apparel dresses.

About 30% of that business is dresses versus forward with a six over a $600 AOV that skews more handbags and shoes. So very complementary in that we know if the girl is buying a $200 dress, a $150 pair of jeans on Revolve, she’s buying an expensive kind of handbag or statement pair of shoes somewhere, why not forward? So we do think this is very complementary. The age demographic skews a little bit younger on revolve, a little bit older on forward. Even forward for being a luxury destination is very focused on that next generation consumer.

It’s younger, it’s more fun, it’s more aspirational than maybe some of the older school luxury players. From day one, customer has been the priority. So again, Mike and Michael founded this over twenty years ago. And from day one, it has been the home is the dressing room, own the full customer experience. So all of our inventory is owned, all of our inventory management is 1P, all of our customer service is internal.

So really being able to own that customer experience from the site, that first click all the way to delivery and trying on the dress and taking it back as a return back into inventory. This has led to really high customer satisfaction scores that continue to increase over time and really high both customer loyalty and sales at full price, which again goes back to that profitability and strong balance sheet that’s been built over time. Again, keep going back to Day one. Day one founded on technology and that has just increased over the past eighteen months with the pace of development, thanks to AI. And I think it’s one is the technology and two is the culture to really embrace that technology, which we think is a core differentiator.

So the team is always looking first to data, first to technology. We have a strong BI and data science team that is implementing this. And we’ve got a few examples here. There’s a lot of other things going on, but really across the board. So maybe if you start with some of the back office tangible things of fulfillment.

So using machine learning and data to intelligently place inventory around the world. So an inventory item that was initially purchased in Europe, we know that it’s more likely to be returned and resold in Europe. We keep the inventory there instead of shipping it back and forth across the pond. Customer service, intelligently routing customer inquiries to the right customer service agent and grouping by type of ticket. And then some of the more exciting things, enhancing our digital merchandising.

So product recommendations on the site, kind of grouping for the customer, different shops for the customer, really personalizing it to what she’s looking for. This plays into our e mail campaigns and really customizing the e mails by customer and by type of product. The site search, this is a really big win for us this year. We internally developed our own AI based search algorithm on the website. So number one, from an ROI perspective, we’re not paying a third party for a search platform.

Number two, it’s our own data, so we can continue to modify the search algorithm. And number three, most importantly, increases sales and conversion, because it operates better than the third party incumbent. And then on the marketing side, being able to expand the region one of our largest digital marketing channels through AI. So a lot of really great stuff going on here. And we talk about AI, it’s not just a buzzword.

We’re implementing this and it’s having a real impact on the business. And you could see that in the trajectory of the sales growth over the course of 2024. We operate in a large and growing market, almost $700,000,000,000 in The U. S. And several times larger than that internationally.

So still a lot of room to grow. And we’ll talk about this in some of our growth initiatives later on in the presentation. Also a longer term shift to digital channels, longer term shift of household income to that next generation consumer. So that purchasing power is shifting to our core customer demographic. And a long term track record of profitable growth with the technology, with that customer first mindset, with our powerful marketing engine being able to both grow and not just grow, but do so profitably, which is very hard to come by these days.

And that has led to market share gains over time. If you look at the comparable premium department stores, which since 2016 have been a CAGR of negative 1% or even if you look at e commerce market at 13% versus our 17% CAGR. So continuing to take market share and even with that, we think we still have very low penetration in this core demographic. And with that profitability and growth, we have a very strong balance sheet, very capital efficient model. I mentioned our inventory management is homegrown.

All of the data behind our merchandising is homegrown. Our ERP is essentially homegrown. So the platform is built very capital efficient, generally spending less than 1% of net sales on CapEx, which again strong free cash flow and has led to a very strong balance sheet, which allows us to really invest through the cycles and have that confidence to do so. And again, very hard to come by a growing and profitable company out there. Really just us and Zalando that have that are GAAP profitable and free cash flow positive.

Current macro environment really is a net benefit to us, especially if you look in this luxury environment. You hear a lot out there, Saks and Neiman not paying their bills, Matches Fashion, which was a 400,000,000 plus business completely going away, which had some near term pressure and that they were promoting excessively, which added some pressure to other businesses. But over the longer term, now that they’re gone, there’s $400,000,000 that have to go somewhere and the brands need distribution points. So we think this accrues nicely to to the Forward business, which resulted in that 11% net sales growth in the fourth quarter and making a lot of investments in Forward, really tapping into the high net worth customers. We have a pre owned handbag program that has been a great both traffic driver and core new customer acquisition tool to draw people into the stores and also on the website.

And with that, we’re testing physical stores. We do have a store in Aspen. We are opening a store in The Grove in Los Angeles later this year, so testing into that. So maybe if we take a little bit deeper dive on the key metrics that are driving the performance. Number one, active customers.

Active customers continue to grow this 15% CAGR and at almost $2,700,000 at the end of twenty twenty four. This is a customer that’s been active in the last twelve months. That customer buys at full price. Our full price ratio was 82% in 2024 higher than an already very healthy full price mix back in twenty nineteen of seventy nine percent. So as we get more data, we read more data points on each piece of clothing.

Our assortment gets broader. We have more intelligence on what product is working which leads to this high full price ratio and a very premium average order value at that over $300 And again, depending on the mix of Revolve and Ford, Ford having over 2x the average order value than Revolve. So if we go into the productivity of those active customers, I mentioned early on with that customer experience, with the focus on the customer, that high full price sales, we have a very loyal customer. And she has become more and more loyal over time. Her average number of orders placed per active customer increased since 2019.

Net sales per average customer per active customer has increased since 2019 and our net sales retention of 89 consistent with that of 2019. Now to call out that second number, the 89% is the average of February to 2024 because there was a lot of volatility with COVID in 2020, of course, and then a massive rebound in 2021, ’20 ’20 ’2, then some challenge and hangover in 2023 in the early parts of 2024. So we thought it was most applicable to do an average of those years and really show that the retention has stayed consistent for those cohorts. Our existing customers represent 54% of that active customer base. They place 80% of the orders and 81% represent 81% of the net sales.

So that really speaks to her number one, when she comes back, she buys more frequently increasing her purchase frequency. And second, she buys at a higher average order value, so she represents more of the net sales over time. And these cohorts behave very consistently. We have over twenty years of cohort data and the cohorts behave very consistently. And when we have macro challenges, if you take the extreme of COVID, all cohorts compress consistently.

And coming out of COVID, all cohorts expanded consistently. So really consistent and strong customer base. So with the growth profitability, strong free cash flow and the strong balance sheet, capital allocation is a question we get a lot. So number one, calling out our ownership. Mike and Michael, again, founded the business over twenty years ago.

They still own 45% of the stock, still are grinding it out in the office every day. And really think like owners, because they are owners and think long term. So we’re not making decisions to benefit the short term. It’s all about the long term and continuing to take market share. So that leads back into our capital allocation priorities.

So number one is invest back into the business. There’s still a massive opportunity out there even within our core demographic to continue to acquire customers. So that’s our number one and we think that’s the best ROI. Number two, thoughtfully evaluate M and A opportunities. So we continue to look at things.

The bar is high because we have a growing profitable business. So it has to fit both strategically and it has to be accretive. So even though we look at a lot of things, we haven’t pulled the trigger on anything meaningful, but we continue to see this as an opportunity in the future. And then number three, a return of capital through our stock buyback program that we implemented a couple of years ago. So how does the capital allocation play out?

Number one, I mentioned our strong cash balance investing back into the business. So category expansion from men’s and beauty to own brands, really investing in own brands. We have several own brand launches coming up later this year. The own brand metrics, the underlying metrics in own brands are better today than they ever have been. So that gives us confidence now to start to really invest behind owned brands and expand that platform.

And for reference owned brands have a significantly higher gross margin than a third party comparable brand. So this is very accretive to gross margin and EBITDA over time. Continue to market to that customer. Marketing is the line that we don’t guide leverage on. We want to continue to invest, continue to market.

We’ve got Revolve Festival coming up here in a few weeks. AI, I mentioned continuing to invest in AI. And then internationally, I mentioned the market internationally is several times larger than domestic, so a lot of opportunity to invest in internationally. Continue to evaluate M and A opportunities. We acquired a small French couture brand last year that we are starting to rebuild.

And then number three, I mentioned the stock buyback. So really great results out of the stock buyback $42,000,000 spend at an average price of $14.28 versus today’s roughly $24 stock price. So with all that, where do we go from here? The key growth drivers. Number one, I mentioned this several times.

We still think we have very low penetration. If you look at the number of customers around 3% of the 58,000,000 people out there eighteen to forty four years old. And again that’s several times larger internationally. And if you look at net sales, our net sales versus that $692,000,000,000 or if you even kind of cut that back further to from the $692,000,000,000 to call it a $300,000,000,000 female market, still triangulates to around 3%. So a long ways to go in terms of penetration in this core customer.

And that comes through product diversification, continued marketing, physical stores, just making the experience better and making our brand more known. Number two, I mentioned this, broaden our offering. So we do see significant opportunity in both beauty, men’s and home. Those three businesses combined almost touched $100,000,000 this year, which was our goal coming into the year. So really great progress on those components of the business.

Beauty, if we double click on that, that’s grown 5x in six years. It’s 4% of the business right now. We think that can be in the double digits over time if you look at a comparable department store. Men’s, another great example. We have a very captive and loyal female audience.

A significant portion of the men’s product purchases out there come from a female. So we think there’s significant opportunity. Once we get the assortment right, which we’re close on, then we can start to really market the men’s platform. Basics and essentials, even if you look at that core female demographic that we’re serving, there’s more opportunity to serve more aspects of her life, tap into more areas of her wallet. We just launched our Foundation Shop in January, which focuses on more like the things you’d wear to an investor conference or every day to work or getting her to think of us for more than just the festival or the party or the brunch.

So a lot of opportunity here, both in third party and owned brands. And then opportunity cross sell across Revolve and Ford. Right now in the stores, we have Revolve and Ford in the store. Ford is a good draw for those high end handbags and she gets to experience kind of viewing some of these hard to find handbags, but also having some very accessible price points on Revolve everywhere from several hundred dollar dress to $12 tube of lipstick or lip gloss. So great experience for the customer and really getting her to think of us for those other product categories.

International, again, I mentioned this huge market opportunity here. Phase one in international has always been really localized the customer experience and we’ve done that over time. So historically, if you rewind six, seven years, the customer experience internationally wasn’t on par to that of a domestic customer, which meant she had to pay for shipping, pay for returns. A lot of the duties and taxes weren’t included in the price. It was kind of sticker shock once you got to checkout.

A lot of times when you return the product, you wouldn’t get your dues and taxes back. So layering on these initiatives over time, making free shipping, free returns, all inclusive pricing. So all of your taxes and duties are included. And when you return the product, you get all those duties and taxes back. That’s phase one.

Then phase two is to start to sort and market to those customers in each of those regions. Made some really good progress on the marketing this past year, especially in Europe. So that’s really benefiting international and still a very lean team. So a lot of opportunity there. We got technology enhancements, marketplace partnerships.

We partnered with Nike in India and Tmall in China and expand the payment choices and make that more localized for that international customer. Own brands. Again, I mentioned this, but just kind of double click on where we think there’s opportunity in our own brands. One is through new brands. Health is a great example.

We launched this eighteen months, couple of years ago. And this has been a really great performer for us and different from our historical own brands and that it is more premium price point. It’s sold on both Revolve and Forward and has really resonated with the customer in a different style and editorial component to this brand than some of our others. Additional categories, we think there’s room for additional categories. We launched WAO, our first men’s brand about a year ago, has performed really well.

And this is cross sold both for men’s and women’s, so a really good test case there. And then existing brand expansion, expanding the assortment within our existing owned brands. We have 29 brands in our portfolio, so a lot of opportunity to really reassort within those brands and expand and really grow those brands. Great example is L’Academy. L’Academy has been a brand of ours for several years, and just named Mariana Hewitt about a year ago as the Fashion Director for L’Academy and really put marketing dollars behind it and really rebuilt that brand.

And then finally, physical. We do think there is opportunity in the physical world. We are digitally native. That’s what we’re good at. We think we’re really good at it.

But we do think there’s opportunity to open physical stores. We opened our first store as a temporary pop up in Aspen, November of twenty twenty three. That performed well and we got a great term on the location. So we decided to make that a permanent location. Again, it has both revolve and forward.

Very unique in that it’s a destination. So we have people from all over the country and all over the world coming to Aspen and really getting exposed to the brand. Again, both revolve and forward. Lower traffic because it is a destination, but very high conversion, high ticket, great way to acquire new customers. The new customers skew higher in store than on our site right now.

And then in the fall of this year, we are opening a permanent store at The Grove in Los Angeles. We had a temporary holiday shop there over this past holiday season that performed very well and very different from Aspen. So with these two data points, we think we’ll have a good base in which to build our future physical plan upon. The Grove, if you look at the lower traffic higher conversion Aspen, Grove is higher traffic lower conversion, more kind of LA feel of course versus that destination Aspen Merchandising. So a good mix from a merchandising perspective, a customer’s perspective, average ticket perspective.

So, looking at hiring ahead of retail here soon, that will really help us focus our efforts. And the goal here is get these two stores right, get the metrics right, get the operations right. So we’re going to crawl before we walk. And then if everything works, we will sprint. We think this is a massive opportunity.

Still three quarters of the dollars out there are still going through a physical door. With that, I think we’ll open it up for questions.

Jay, Unidentified role: All right. So again, I think if you have a question, raise your hand. Christine in the back has a microphone. I don’t know if anybody in the back, I see some people standing. There’s room up in the front.

If you guys want to take a seat, feel free. But otherwise, make sure we wait to ask your question because we’re webcast. Wait for the microphone before you ask your question. I’ll start off maybe with the first one as people kind of formulate your question, but you talked about active customers, great chart. Amazon has 200,000,000 active customers and it was like $2,700,000 and obviously a lot of space between some of the some other companies out there and you talked about retail and opening up the store in Los Angeles.

Give us an idea of sort of the KPIs that you’re looking for out of Los Angeles and how you might think about the opportunity to open physical stores to increase that customer count, but also just to drive the business in general?

Jesse Timmermans, CFO, Revolve: Yes, absolutely. So at the highest level, the goal here is to get the stores at a four wall EBITDA margin that’s higher than our core e commerce business. So make it accretive, once that happens then continue the rollout. But some of the underlying metrics that we’re looking at, one is new customer acquisition, how many new customers are coming through those doors. And right now it’s skewing higher, as a proportion of those customers than online.

So it’s been a great new customer acquisition tool. Number two, and not any particular order, but return rate. Return rate will have a benefit over time. The return rate in stores is much lower than it is online, of course. Own brands is another metric we’re looking at.

So own brands are selling at a higher ratio in store than online and higher productivity. So we think, again, accretion over time with a higher margin owned brands and also more brand recognition in the store. And then e commerce lift, seeing an e commerce lift from the stores. We saw a little bit of a lift in L. A.

Even though it was in our backyard. It was surprising that we did see that lift. And from a customer awareness perspective as well, we’ve talked to customers who again in our backyard where I would think everybody in L. A. Knows about Revolve, still didn’t know about Revolve.

So it just kind of showed the opportunity back to that active customer chart. Aspen is a little bit harder to see the direct e commerce lift because everybody is coming in from all over the world. So that lift is distributed around the world. But yes, we think there is so far based on our experience, we think there is a massive

Jay, Unidentified role: question, definitely raise your hand.

Jesse Timmermans, CFO, Revolve: Hi. You kind of touched on this a little bit when you’re talking about the international stuff. But just curious how you guys handle shipping fees in your business model. Like are you passing them off to the consumer, in which case is it harder to retain them? Or are you guys paying for it yourselves, in which case how do you protect your margins?

Yes. Great question. For the most part, it’s free shipping, free returns. We’re taking on that burden, in particular in The U. S.

In some regions internationally, there’s still a minimum for the a minimum order for the free shipping to kick in. But it’s been part of the core of the business is to really provide that ease of shipping hassle free, free returns so that the home can be the dressing room. And she continues to have that loyalty to us. It is expensive, especially internationally, more expensive. That said, the return rate is lower internationally and there are some other kind of puts and takes that get to a it’s maybe slightly lower contribution margin internationally, but still a very profitable business.

But there are challenges and you can see those over the past few years. If you look back to 2022, ’20 ’20 ’1, ’20 ’20 ’2 when shipping rates were through the roof and return rate was through the roof, you definitely saw an impact on the P and L. The team has been able to really, really offset that one through return rate reduction initiatives, which we made a lot of progress on this past year. And then also just continuing to get more and more efficient on the shipping from just the kind of shortening the distance of the trips to looking renegotiating with existing providers, looking at additional last mile providers. So it’s just a constant effort by the team to get more efficiency there.

And then maybe finally, also the benefit that we have is one, a premium price point with a very healthy margin and that full price mix allows us to offer a lot of these benefits to the consumer where at a lower price point becomes a lot

Jay, Unidentified role: tougher. Maybe I’ll jump in with another one just because we brought up the return rate. I think last quarter the return rate fell about 55.1% not to get too specific, but that’s a low and that’s good. Can you talk about how you get that return rate lower? Obviously, you mentioned stores is a key.

You talked about hassle free returns, that’s always been a mantra of the company. But as you think about return rate going forward, A, how much of a focus is it? And B, like what are your sort of your aspirations?

Jesse Timmermans, CFO, Revolve: Yes. In 2024, it was at the top, if not near the top of our priority list is to get that return rate down. It was having a significant impact on the business. For every one point of return rate up or down it has a 30 to 50 basis point impact on the cost structure. So very meaningful.

Made a lot of progress this past year through, one policy changes which includes focusing more on high return rate customers and being more stringent there. But then also side improvements and personalization, product recommendation, size and fit technology that really helped kind of educate that customer on the first purchase and make that first purchase stickier. And then third, on the marketing front, kind of working with marketing partners and making that marketing more efficient and kind of less marketing to the high return rate customers. So a lot of initiatives going into the return rate. More to come, the team already has initiatives in play for 2025 that are new.

And then some of the initiatives from 2024 aren’t one and done. They continue to build upon each other and upon themselves and have a bigger impact over time from the merchandising and personalization front. So we think there’s more opportunity there. And then just as the business naturally shifts into some of those other product categories, beauty has a low single digit return rate. So as beauty increases, that has a natural benefit.

Men’s has a lower return rate than women’s, women’s being more focused on dresses and dresses having the highest return rate. Even more expansion into that foundational those foundational pieces, which have a lower return rate. And then finally, to your point, physical stores have a lower return rate. So I think, over time, I think there is the chance that return rate becomes lower than it was pre COVID just due to some of those natural shifts in the business. The one offset to that is international.

As we continue to localize international, that international return rate increases. So that’s a good headwind, bad on that individual return rate line item, but good for the overall business and the growth sales increase, net sales increase, customer acquisition increases.

Jay, Unidentified role: Maybe just a follow-up on that. And obviously feel free to interrupt anybody if you have a question, please raise your hand. But on some of the stuff that’s like the personalization sounds kind of interesting fit and maybe using technology to make sure that people get the right thing when they buy it the first time. Can you just talk about that like you mentioned some of the 2024 things are going to continue on. If you can tie that to the AI piece like how much of that is sort of technology enabled and how much opportunity is there maybe from here just to really specifically talk about those drivers of lowering that return rate?

Jesse Timmermans, CFO, Revolve: Yes, a meaningful portion of that is technology and AI. So I mentioned the AI search, so having a better search algorithm on the site and being able to search for more general terms and get the right product has a significant conversion lift and gross and net sales lift. And theoretically, her purchase is then again more educated, so she’s returning less. The size and fit technology also technology driven, AI driven. So that gets better and better with more data and better technology over time.

Also it wasn’t historically, I don’t remember exactly when we rolled this out, but 70% of our orders come through a mobile device and the size and fit technology wasn’t optimized on the mobile device like it was on the desktop. So that also had a significant impact as we rolled that out. And And then personalization and product recommendations, whether it’s a size and fit recommendation or a post purchase recommendation on another product, because we have her size information, we have her historical purchase behavior, we can really recommend great products for her in that post purchase that have a lower return rate than that initial purchase.

Jay, Unidentified role: Do you know how much the consumer returned something because they bought something that really doesn’t fit? Or is it just because like, well, they were just going to experiment and try it on at home and if they felt the mood they would buy and if not they just send it back? Like how much of it is real functional returns like, hey, this isn’t going to work for me, this is what I want versus just sort of like people buy on spec and they just plan on returning a whole bunch of stuff anyways?

Jesse Timmermans, CFO, Revolve: Yes. It’s both. Majority is the true size and fit. And it’s not necessarily just small, medium, large, but we have 100,000 styles on the site in any given point across 1,400 different brands. And 30% of our mix is dresses.

And a dress across 1,400 different brands, every dress fits different, the cuts different, the length is different. So it goes beyond just kind of in the feel and, kind of the flow of the dress. So goes beyond even just sizing. And she knows that and she’s looking for discovery. She comes to us for what’s new.

So I think some of it, a large portion of it is intentional. She’s buying several dresses knowing that three or four aren’t going to work out of the five. And that’s okay with us. The return the home is in the dressing room as long as she’s buying five and returning four in one order. What we don’t like is buying one, returning one, buying one, returning one that really impacts the shipping and logistics.

But yes, and I think there is also a discovery element even outside of size and fit. So she is ordering multiple things and just trying on and she knows the service is great and she knows returns are free. So it gives her the opportunity to really try different brands and experiment knowing that she’s going to return.

Jay, Unidentified role: Okay. Good question over here.

Jesse Timmermans, CFO, Revolve: Thanks. Your

Jay, Unidentified role: core customer, are they affected by sort of the macro headlines? Do they know what a tariff is? Do they care? Just want to get a sense of how your core customer is feeling right now.

Jesse Timmermans, CFO, Revolve: Yes. I think they do. I don’t know that the general person on the street knows exactly what the tariff is and how it impacts them, but they are hearing the noise of cost increases. And I think especially in January, if you look to the we only kind of provided the first seven weeks of the year. And if you look at that seven weeks, it was really challenging from the fires in LA, during which we paused social media, to the chatter of TikTok going away, which she does pay attention to, administration change, tariff talk, cost increases, consumer confidence.

So I think it does impact her psyche. And we’ve seen that in the past. If you go back to the I don’t know what year it was 2022, ’20 ’20 ’3, the SVB collapse and there was a lot going on right around that time. We saw our return rate tick up significantly and sales kind of decelerate from where it was immediately prior to that. So there are macro impacts to her.

I think it impacts her less maybe than others. And it’s more I think the biggest impact is when you can’t go out. So COVID was a great example where you just can’t go out. That has the biggest impact, of course, because the brand is all about living your best life and being out there and enjoying your friends and going to events.

Jay, Unidentified role: Maybe another one for me. Jesse, I’d love to ask you about customer acquisition costs. One of the things that’s kind of remarkable to me about the business, just how steady the growth has been top line. Obviously, there’s been volatility in macro and whatnot, but the company seems to know how to acquire consumers. Can you just talk about the investment required?

Obviously, there’s a shift over the last couple of years from Apple and companies seem to navigate that really well. Can you just talk about sort of like the cost today versus where it’s been in your ability to control that? And maybe going forward how you see it? I know it’s a big question, but just start off maybe with the history and then we’ll maybe look forward.

Jesse Timmermans, CFO, Revolve: Yes. Yes. No, there’s a lot there and it’s a core differentiator of the business is really connecting with this next generation consumer the way they want to be connected with in a really authentic genuine way And that really comes through on the brand marketing component. So maybe if we step back and look at the history and the breakout, about 75% of our spend over the course of a year is in the digital performance marketing. 25% is in the brand, which is all the social influencer events type marketing.

We did see a decrease in CAC this past year, in both on the performance and the brand side. If you look at the performance marketing side, that digital performance marketing, there is some softening in the markets. We saw CPMs and CPCs decrease. We also got better through the use of AI and more efficient. So we’re able to expand the reach on one of our largest digital marketing channels with the use of AI, which really played out nicely in the efficiency.

Also suppressing adds to high return rate customers both benefited us on return rate and performance marketing. And then continue to test new channels within performance marketing. And to your point on Apple privacy and cookie deprecation, our underlying efficiency metrics that we look at in performance marketing are at or around the same level today as they were back in 2039 despite all of those challenges that have played out. Now there’s been some channel shifts within, but the team’s been really good at managing that line item effectively. Brand marketing, also saw efficiency on the brand marketing side.

If you look at festival, Revolve Festival, which we just announced on Monday coming up here in April, it’s one of our largest events of the year. Last year, we cut the budget by 40%, cut it from a two day event to a one day event. And we’re still able to get not just, but more social media impressions and press impressions out of that event. And then also doing more kind of medium sized high impact events. Good example is New Year’s Eve party we threw in Aspen, this past New Year’s Eve.

The average post there was viewed over 400,000 times, which is better than our some of our best posts of the past. So again, the team continues to shift and do new things, get more efficient without significantly impacting the impressions that we’re getting. If we look ahead, however, we are not guiding to leverage on the marketing line item for 2025. We’ve got some exciting things coming up. I mentioned several own brand launches that will take some dedicated marketing, another store opening up that will take some dedicated marketing.

And just going back to that massive opportunity and customers out there left to acquire, marketing isn’t aligned that we want to communicate deleverage on, yet.

Jay, Unidentified role: Well, if I can follow-up on that, I think Revolve is an interesting company because it sort of comes from a tech background. We were just talking before the presentation started like, oh, sometimes Revolve goes to tech conferences and it’s not here, we’re at a consumer conference. Obviously, the mics, the CEOs of the company bring a level of expertise in technology that a lot of other softphone companies don’t have. And so it’s interesting that you I think have been able to navigate these things. But can you just talk about from an investment perspective and a finance perspective?

It seems like that the company has a line of sight into if I invest here, I’m going to get this result. And how do you draw the line between where to sort of cap the investment and say, okay, we’re going to be satisfied with this level of growth versus saying, hey, we know if we invest more, we’re going to get more. So why not just push a little bit and sort of accelerate that active customer file and that growth to move up that chart that we were talking about?

Jesse Timmermans, CFO, Revolve: Yes, yes. No, it’s another heavy and good one. Sorry. No, it’s great. Yes, I think from a technology perspective and kind of looking at ROI, one, we AB test almost everything, and have really good methodologies in place.

So we have a good read on the payback, at a very early stage in deployment. There are some things we don’t AB test like the return rate policy we just implemented. But a lot of the technology on the site is all AB tested. So we have a good read on conversion gains, revenue lift, how much to invest. And we’re very lean and scrappy.

Again, less than 1% of our net sales goes to CapEx and a big portion of that is internally developed software. So very efficient and lean team that’s implementing this stuff. In terms of customer acquisition, I think we feel like there’s a right pace to build a brand. We’re not just a retailer, but we are building a brand and we think there’s a right pace to do that and being more consistent over time and really investing in that brand marketing component that it’s hard to get a direct near term ROI and apply that to new customer acquisition. But we know there’s a long term brand building component to that that keeps her coming back.

And operating a profitable business is really important to us. Mike and Michael as founders and owners. And also building the balance sheet really comes through in challenging times where we do have that balance sheet to support us and allow us to continue to invest through disruption where we generally gain more when others are pulling back, of course, so.

Jay, Unidentified role: I mean, it feels like that most top line companies, I don’t think have a lot of visibility into it’s a question that came earlier like this is a choppy macro environment, what do you see, how do you know. But I feel like the company and maybe this is speculation on my part has a pretty good idea of like how to grow the business and pretty good confidence in that if you implant strategy A, B and C, it’s going to lead to outcome X, Y and Z. But you have a patience and a discipline around doing that like you just said to build the brand. I just think that’s kind of underappreciated. I don’t think most companies operate that way.

I don’t think they have any idea like if their product is going to resonate in Christmas of twenty twenty six. Now that you know, but I think just with the technology, I think your ability to predict it and do things is really different. I mean, how I mean, I’m not trying to blow it to your mouth, but do you feel like it’s a relatively fair statement? I know it’s hard to compare yourself to other companies.

Jesse Timmermans, CFO, Revolve: Yes. No, I think so. And it probably I think we probably take it for granted because it’s just the natural way of the way we’ve done business. And we have a lot of long tenured employees and leaders in the company that operate the way Mike and Michael think and do think long term. I think maybe a good example of that would be in the own brands where we do have tremendous data on the products.

Again, 100,000 products on the site at any given point. We launch on average of 1,900 products a week. We have 60 attributes up to 60 attributes on each piece of clothing. So we have a really vast and rich data set on the merchandise and what’s selling. We take that and we can implement that in our own brand division.

And with these own brand launches coming up, they are taking investment now. We’re in an investment cycle. G and A has been higher as a ratio to net sales than it historically has been and we haven’t leveraged that line item. But we are investing in own brands and we’re confident in that because the underlying metrics, number one, are performing. And number two, we have good data to say that these brands that we’re launching have a really good chance of working.

And we can build into them in a kind of in a gradual way. So again, kind of lower quantity initial purchases or builds on the own brand. And then when it works and when it checks, then we’ll reorder into that. Okay.

Jay, Unidentified role: Now I’m going to have to ask this question. I feel like people feel like I’m not doing my job unless I ask it, but just on the tariff situation because it is kind of fluid, it’s changing a lot. You addressed it on the last call, but just can you just talk about how you’re thinking about it, what the company might do if there are going to be permanent tariffs on countries where you do a lot of manufacturing? Excuse me.

Jesse Timmermans, CFO, Revolve: Yes, that’s a good one. So yes, I mean, definitely does have an impact on us. I think maybe starting with where we I think are different than others. One is that higher price point, rich gross margin and high full price sell through, which allows us to kind of absorb or it has a less of an impact than maybe it does on others. That said, still an impact.

So if you kind of isolate it down to the most direct impact is in our own brands, which is 18% of our revolve segment business. Of the owned brands, the vast majority is produced in China. In our guidance, we had reflected the initial 10%, not the additional 10% that came after that. So we’ll have an impact. We’re working on mitigation strategies, everything from working with the factories.

Some factories are already looking at moving out and opening factories in other regions. Also looking at not just direct tariff mitigation, but how can we optimize logistics to save money to offset the tariffs, which the team again continues to do. Really great things there. And then finally, we do think there is less elasticity with our customer than others. She’s coming to us for what’s new.

She’s buying at at full price. It’s a higher price point. So we do have opportunity and we haven’t decided which way we’ll go on this and it’s probably some combination of how much do you absorb versus how much do you pass on. On the third party side, that’s really just a pass through model we’re buying and marking up. So not a significant margin impact there.

But how it impacts the consumer, we’ll have to see and what the price increases really are and how she reacts to that.

Jay, Unidentified role: And then maybe last one, just on that consumer, I think that frame for everybody just who the active consumer is. I mean, it’s obviously more female than male, but it’s a higher income consumer. Is it someone who’s maybe a little bit more protected from tariffs? Because I think what we hear across the board is that maybe the lower income consumer is maybe a little bit more skittish about what they’re hearing about tariffs versus like higher income consumers and sort of where do you see it and how might that affect Revol?

Jesse Timmermans, CFO, Revolve: Yes, yes. Primarily female, young in that 25 to 40 year old zone. She does have higher income, not as high as you might expect given the premium price point, but more of her dollars are allocated to fashion as a proportion of her income. Forward does skew higher income, more aspirational. So when you saw that kind of hangover coming out of the post COVID rebound, it really impacted that forward business and that aspirational consumer.

But again, I think she’s going out enjoying life, see how much of the pricing has an impact on her and kind of the effect of the overall just kind of noise out there. But I think again, she’s coming to us for full price and for discovery and I think that continues. Okay.

Jay, Unidentified role: Maybe we have thirty seconds. Any last questions in the audience? No, last one. Okay. So maybe just Jesse, last one.

Just on M and A, you talked about it in the slide, but I don’t Alexander thought I’m going to say it the wrong way. But what should we expect going forward? Obviously, you’ve been buybacks, you’ve done not a lot of CapEx, but you’ve done some different things. I mean, what is build up your cash in the balance sheet? What’s the priority from here going forward?

Jesse Timmermans, CFO, Revolve: Yes. Still priority is number one, invest back in the business and we think there’s a lot of opportunity there, again, especially in more challenging times. But we do continue to look at a lot of things on the M and A front. The bar is pretty high given that we have a growing profitable business. So it has to align strategically and has to be accretive.

So the bar is pretty high, but I do think there is opportunities out there. And then buybacks is there is kind of a backstop for behind the first two.

Jay, Unidentified role: Got it. Okay. Well, Jesse, thank you so much.

Jesse Timmermans, CFO, Revolve: That was great. Really appreciate all your time and all

Jay, Unidentified role: your insights.

Jesse Timmermans, CFO, Revolve: Thank you. Yes. Appreciate it.

Jay, Unidentified role: Okay. Thank you, everybody.

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