Revolve Group (RVLV, Financial) shares experienced a decline today, with the stock price falling by 10.27% to $16.995. This movement comes on the heels of the company's recent earnings report which, while meeting expectations, included a lowered gross margin forecast for the year due to ongoing tariff pressures.
In the first quarter, Revolve's revenue saw a modest increase of 10% reaching $296.7 million, though slightly below the anticipated $297.8 million. The gross margin showed a minor decrease from 52.3% to 52%, while operating income significantly rose by 57% to $14.7 million. This was attributed to modest increases in marketing and distribution expenses. Earnings per share increased from $0.15 to $0.16, surpassing consensus estimates by one cent, showcasing Revolve's resilience amidst economic uncertainties.
Despite this performance, Revolve's net sales growth in April slowed to mid-single digits, although international sales were stronger. The company's revised full-year gross margin outlook is now between 50%-52%, down from the previous 52.4%-52.9%, largely due to the current tariff levels. This development has undoubtedly impacted investor sentiment, considering the stock has dropped more than 50% from its peak.
From a valuation perspective, Revolve Group (RVLV, Financial) currently has a Price-to-Earnings (P/E) ratio of 24.63, which is close to its one-year low. The company is regarded as significantly undervalued according to its GF Value of 25.77, suggesting potential upside for investors. Revolve demonstrates strong financial health, evidenced by a robust Altman Z-Score of 6.88, indicating a low risk of financial distress. The Piotroski F-Score of 8 further emphasizes the company's healthy financial situation.
On the downside, Revolve faces certain challenges, including a declining revenue per share over the last five years and an operating margin that has been in a five-year decline, at an average rate of -21.1% per year. Additionally, insider transactions have been predominantly selling, which may raise concerns among investors.
Despite these challenges, Revolve Group's strategic focus on mobile commerce, influencer marketing, and private label offerings, along with its strong international performance, suggest a path to long-term growth. Investors should keep an eye on potential market developments that could ease trade tensions and positively impact the company's performance.
