Revolve sees first-quarter sales hit by Covid-19 disruption
Revolve Group Inc. is withdrawing its previous financial guidance issued on February 25, in response to the disruptive impact the Covid-19 pandemic has had on businesses, the economy and consumer spending.
The company had a strong start to the first quarter 2020, with net sales increasing more than 20% year-over-year for January and February 2020 combined, and continued positive performance in the first week of March. The sales trend meaningfully changed starting in the second week of March, as the Covid-19 outbreak in the United States and elsewhere escalated, the company said, with significant year-over-year sales declines in recent days.
Revolve said it further anticipates that overall consumer demand in the coming months will be impacted by virus-related requirements for social distancing, which have resulted in the postponement or cancellation of several Revolve brand marketing events including the Revolve Festival, the brand's celebration held in tandem with Coachella.
As of February 29, Revolve had approximately $85 million in net cash and equivalents, reflecting an increase of approximately $20 million from $65 million as of December 31, primarily driven by operating cash flows.
The company's financial condition is also bolstered by a $75 million line of credit. To further boost liquidity, the company has drawn down $30 million in borrowings from this line of credit as of March 19, 2020.
“Growing Revolve for the past 17 years has brought countless ups and downs, yet dealing with the rapidly evolving impact of COVID-19 is truly unprecedented,” said Mike Karanikolas, co-CEO and co-founder of Revolve.
“Amidst all the uncertainty, we are staying laser focused on ensuring the safety of our employees while continuing to support our valued customers. Our balance sheet strength, capital efficiency and online business model position us to withstand a period of economic uncertainty and, we believe, come out stronger on the other end.”
Michael Mente, the company's other co-CEO and co-founder, added that he and Karanikolas have both personally invested more than $2.5 million, on a combined basis, to purchase Revolve shares, adding to their majority ownership stake in the business.
Revolve said it will continue to monitor the development of the Covid-19 situation, and is prepared to comply with state, city and local guidelines that may be enacted as a response, including any temporary forced closure of its fulfillment center in Cerritos, California should more rigorous restrictions be implemented in Los Angeles County.
For now, Revolve's e-commerce websites are fully operational.
On March 24, Revolve announced that it is helping provide assistance during the epidemic by donating over 10,000 N-95 masks to two Los Angeles hospitals in need.
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