Revolve Group, Inc., the next-generation fashion retailer for Millennial and Generation Z consumers, announced financial results for the first quarter ended 31st March, 2020.
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“Our competitive position and our recent business results give me continued confidence in our long-term future. We began the first quarter strong with net sales for January and February combined increasing by more than 20% year-over-year and with our inventory turning approximately 20% faster year-over-year before the COVID-19 impact led to a significant decrease in net sales in the final weeks of March. Importantly, early in the second quarter, our efforts have helped drive improved net sales trends with sequential improvement in the year-over-year net sales declines for each of the past four weeks,” Karanikolas added.
The first quarter of 2020 began strong with year-over-year growth in net sales of more than 20% in January and February on a combined basis. This strong trend continued into the first week of March. As previously disclosed, starting in the second week of March, the net sales trend meaningfully changed coincident with the escalation of the COVID-19 outbreak in the United States and elsewhere. These COVID-19 impacts resulted in year-over-year decreases in net sales of nearly 50% through the latter part of March.
Revolve segment net sales were $124.5 million, a year-over-year increase of 1%. Forward segment net sales were $21.6 million, a year-over-year increase of 47%. Cash and cash equivalents at 31st March, 2020 were $103.6 million, an increase of $38.2 million from 31st December, 2019.
The company generated approximately $8 million in free cash flow during Q1 2020. Additionally, given the uncertain environment with the COVID-19 pandemic and out of an abundance of caution, in March 2020 the company drew down $30 million from its revolving credit line, further strengthening its cash position.
Due to the unpredictability associated with COVID-19, the company is not providing net sales or Adjusted EBITDA guidance. However, the company is providing some updated assumptions for the fiscal year ending 31st December, 2020.
Gross margin for the full year 2020 is now expected to be below the 48.6% gross margin reported for the first quarter of 2020, reflecting a further expected reduction of the net sales mix contribution from REVOLVE’s Owned Brands in 2020, the shift in mix of net sales by product category to “at home” goods like the beauty category that generates a relatively lower gross margin, and an increased promotional environment industrywide (as many retailers are seeking to clear excess inventory). These updated assumptions are a direct outcome of the unprecedented operating environment caused by the COVID-19 pandemic.
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Weighted average diluted shares are expected to be approximately 72 million and the capital expenditures are expected to be approximately $2 million.