Revolve Group Inc. (RVLV) stock rose 0.50 percent on Thursday to conclude the trading at $19.92. The online apparel retailer released its report for the third quarter last week. The revenue of the company decreased marginally, but the good news was a profit increase.
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Weaker performance resulted in drop of more than 5 percent in share price over the week. Revolve Group generally is waiting for the recovery of the entertainment industry and mass events, as clothing for parties and holidays is a large part of its products range.
RVLV’s revenue decreased 2 percent year-on-year to $151 million in the third quarter. Net income rose by 103 percent to $19.4 million at the same time. The improved income came on the heels of mainly three factors including a drop in the tax rate from 25.6 percent to 9.8 percent. Others factors include a rise in gross margin from 53.6 percent to 55.3 percent, primarily due to higher inventory turnover, and a decline in marketing costs, as the company also markets apparel at live events that are now suspended.
While tax incentives and reduced marketing costs are temporary, a trend that can help the company expand in the long run is improving gross margins.
Revolve Group’s drop in revenue is attributed to the cessation of entertainment activities. The business offers goods for parties, festivals and other activities, but demand has been lower than normal in previous quarters. Thus in the third quarter, the number of orders was 4 percent lower year-on-year.
Such a slight decrease is a positive sign, however, given the sharp decline in the target audience for Revolve Group Inc. (RVLV) products. This indicates that the online retailer’s revenue will not only rebound, but will also rise as soon as social interaction returns to normal in 2021. This excitement is reinforced by last week’s news about the COVID-19 vaccine. It would be safe to stage big events again if mass vaccination happens in the coming quarters.