Shares of apparel retailer Revolve Group (NYSE: RVLV) soared on Wednesday after the company reported financial results for the third quarter of 2024. As of 1:15 p.m. ET, Revolve Group stock was up a strong 23% and hitting 52-week highs.
Revolve's better-than-expected financials
Revolve runs a digital platform for apparel and footwear targeted at millennials and Gen Z customers. In Q3, the company's net sales grew by 10% to $283 million, which was ahead of some analysts' expectations. Moreover, net sales for the first month of the fourth quarter grew faster than in Q3, which is an encouraging trend.
Revolve had given guidance for gross margin. And its Q3 gross margin of 51.2% came up short of management's guidance of 52.3% to 52.5%. Increased markdowns and higher shipping rates were listed among the culprits.
That said, Revolve outperformed on profit expectations because all of its operating expenses came in below expectations. In other words, management didn't spend as expected. And this led to net income of $10.8 million, which was up 238% year over year and a big reason the stock is hitting 52-week highs today.
What's next for Revolve?
Management intends to keep expenses at a minimum in Q4, which should lead to strong profitability in the final quarter of the year. That could support the gains in the stock price today.
Another trend to watch from Q3 is international sales. According to Revolve's management, sales were up in all of its international markets, which is good. But its overall active customers (those who've made a purchase in the past year) were only up 5%.
In short, Revolve's business is healthy, but how much long-term upside does it have? One would expect better customer growth as it pushes into international markets. It's not necessarily something to worry about, but rather something to monitor from here.
Apart from keeping an eye on key metrics such as these, shareholders can simply enjoy the good Q3 results from Revolve.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Revolve Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
