Revolve Group, Inc. RVLV reported mixed results for the third quarter of 2026, as strong sales growth and accelerating customer acquisition were offset by higher operating costs and margin pressure. Both business segments and geographic markets delivered double-digit growth. Consolidated sales benefited from increased order volumes and a lower product return rate, marking the fourth consecutive quarter of double-digit revenue growth.
Earnings of 20 cents per share declined 31% year over year and missed the Zacks Consensus Estimate of 21 cents. Net sales increased 20.4% to $356 million, surpassing the consensus mark of $345 million. Active customers grew 18% to 3.243 million.
Revolve Group, Inc. Price, Consensus and EPS Surprise
Revolve Group, Inc. price-consensus-eps-surprise-chart | Revolve Group, Inc. Quote
RVLV Sees Strong Order Growth & Customer Momentum
Revolve's active customer base expanded by a record 202,000 sequentially, marking its highest year-over-year growth rate in three and a half years. Customer growth accelerated seven percentage points from the preceding quarter, supported by record new customer acquisition and stronger engagement among existing shoppers.
Total orders placed increased 19% year over year to 2.745 million. Average order value declined 5% to $292 from $306, primarily reflecting initial purchases of lower-priced Grow-Good beauty products. Excluding this business, average order value remained relatively flat. The product return rate declined by more than two percentage points, benefiting from category diversification and initiatives to reduce returns.
Revolve Delivers Balanced Growth Across Segments
Net sales in the REVOLVE segment increased 20% year over year to $306.8 million, while segment gross profit climbed 19% to $170.6 million. Segment gross margin was approximately 55.6% compared with 56.2% a year earlier. Across the business, fashion apparel and handbags, shoes and accessories grew faster than overall net sales. The company's expanding men's and beauty offerings also contributed to growth.
FWRD segment net sales rose 20% to $49.2 million, while gross profit increased 15% to $21.2 million. The segment's gross margin declined to approximately 43.1% from 44.9% in the prior-year quarter. Domestic sales advanced 20% to $277.4 million and international sales grew 22% to $78.6 million. International markets outperformed domestic operations for the 15th consecutive quarter, with double-digit growth across all major regions.
RVLV Faces Gross Margin & Profitability Pressure
Gross profit increased 19% year over year to $191.8 million. However, gross margin contracted 75 basis points to 53.9% from 54.6%, reflecting a lower proportion of full-price sales and increased inventory valuation adjustments. A higher contribution from owned brands partially offset these pressures.
Operating income declined 9% to $19 million, with operating margin contracting 175 basis points to 5.3%. Adjusted EBITDA fell 7% to $23.5 million, while its margin narrowed to 6.6% from 8.6%. Net income decreased 27% to $15.5 million. The year-ago quarter included a $4.5 million insurance recovery or approximately $3.4 million after taxes, which added roughly 5 cents to diluted EPS.
Revolve Increases Spending on Growth Initiatives
Marketing expenses rose to $50.8 million from $40.4 million, representing 14.3% of sales compared with 13.7% previously. Increased spending supported brand-building initiatives, performance marketing and the REVOLVE Los Angeles namesake label. Management noted that marketing expenses were below its third-quarter forecast, partly because certain events shifted into the fourth quarter.
Selling and distribution expenses increased to $63.5 million from $51.7 million, as higher order volumes and shipping costs, including elevated fuel surcharges, outweighed benefits from a lower return rate. Fulfillment expenses climbed to $12.2 million from $9.8 million, while general and administrative costs increased to $46.2 million from $38.6 million. Investments in physical retail, Grow-Good and the Donatella Versace joint venture contributed to higher overhead.
RVLV Advances Retail Expansion & Brand Partnerships
Revolve opened its third permanent store at Aventura Mall in Greater Miami during September, ahead of schedule and under budget. Owned brands accounted for nearly 60% of initial store sales, more than double their online penetration. The company also signed a lease to more than double its Aspen store's size.
Strategic partnerships continued to expand. Grow-Good, developed with Cardi B, nearly doubled sequential sales and ranked among Revolve's 10 bestselling brands. The company also launched its inaugural REVOLVE Magazine alongside the third REVOLVE Los Angeles collection, which management described as its strongest-performing release to date. The company expanded Kendall Jenner's role at FWRD and appointed Dwyane Wade to support menswear growth. AI-powered search filters improved conversion among mobile users of the feature, while a store-associate application supported sequential conversion gains at The Grove.
RVLV Maintains Debt-Free Balance Sheet Despite Cash Outflow
Operating cash outflow totaled $24.3 million during the third quarter, compared with an inflow of $11.8 million a year earlier. Free cash flow was negative $27 million versus positive $6.6 million, primarily reflecting unfavorable working-capital movements.
For the first nine months of 2026, operating cash flow remained positive at $16.9 million, while free cash flow totaled $7 million. Inventory increased 23% year over year to $293.3 million. Revolve ended September with $284.6 million in cash and equivalents and no debt.
Revolve Updates 2026 Outlook Amid Cost Headwinds
Revolve narrowed its full-year gross margin forecast to 53.9-54% from 53.5-54%, raising the lower end of the range. However, selling and distribution expense guidance increased to 17.5% of sales from 17.1-17.3%. General and administrative expense expectations rose to $178 million from $170-$172 million.
For full-year 2026, fulfillment expenses are projected at 3.3% of net sales compared with the previous range of 3.2-3.4%. Marketing expenses are expected to represent 15.9% of net sales compared with the earlier projection of 15.8-16%. The effective tax rate is anticipated to be 25-26%, versus the previous range of 24-26%.
For the fourth quarter, management projects gross margin of 52.3-52.8%, marketing expenses of 16.9% of sales and general and administrative expenses of $46.1 million. Fulfillment expenses are expected to represent 3.3% of net sales, while selling and distribution expenses are projected at 17.6%. October sales increased at a mid-teen percentage rate, although November and December face tougher year-ago comparisons. Management expects adjusted EBITDA margin expansion to resume in 2027 following its investment-focused 2026.
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Shares of this Zacks Rank #4 (Sell) company have dipped 15.4% over the past three months against the industry’s 3.1% growth.
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Revolve Group, Inc. (RVLV): Free Stock Analysis Report
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