Highlights from Q3 2022:

• Our customer satisfaction score in the third quarter was the highest level in at least 5 years, and we intend to continue to set the bar even higher.
• Average order value, or AOV, was a very healthy $320, an increase of 16% year-over-year.
• Our partner is entertainment studio Muus Collective, which is backed by Griffin Gaming Partners — one of the world’s largest investment venture funds exclusively focused on gaming.
• With our technology-driven DNA, operational excellence, strong brands, and connection with the next-generation consumer, we believe we are well-positioned to capture market share.

My takeaway:

Revolve is focused on long-termism or long-term growth opportunities. As a long-term investor, this is what I want to hear. The company is financially profitable yet focused on growth initiatives that will bear fruit 5-10 years from now. It paints a bright future when you have improved customer satisfaction scores, high social media engagement, and a robust balance sheet.

The economy is challenged in the short term, but Revolve is positioned well in a recessionary environment due to its operational success.

Companies like Nordstrom and Macys, or old apparel retail, are not focused on brand connection or long-termism. They have to deal with hundreds of physical retail stores and over 60,000 employees. These companies deploy inefficient advertisement strategies and are not forecast for future growth. Revolve is thriving and slated to continue to grow. Macy’s offers a 3.22% dividend yield, and Nordstrom’s offers 3.97%. When a company offers a dividend of that size, its priorities are to manage what they have, not grow it.

Revolve’s partnership with Muus Collective is the key highlight of this earnings report.

The importance of Revolve entering Web3:

• 48% of gamers in the U.S are women. The demand is rising while the supply is low.
• Male gamers tend to game because of boredom or competition. Female gamers differ in motivation, more for social reasons and to create relationships.
• Female gamers prefer simulation games, where the goal isn’t competing but to collect, build, and customize.
• The gaming market needs more products catered to women and their preferences.
• Revolve through physical fashion is now connected with Muus Collective, which represents digital fashion and gaming.

“REVOLVE is a trailblazer in the fashion industry with an incredibly loyal community,” said Amber Bezahler, Co-Founder and CEO of Muus. “Through our partnership, players will connect with their favorite brands from REVOLVE and FWRD, and engage with trends through a gamified shopping and styling experience, collectible assets, and deep social interaction. The platform will serve as a fashion playground, empowering players to become their own tastemakers by providing tools for creative expression, peer-to-peer engagement and social sharing.”

REVOLVE GROUP AND MUUS COLLECTIVE FORM STRATEGIC PARTNERSHIP WITH A VISION TO REVOLUTIONIZE FASHION IN GAMING AND WEB3

The partnership has a lot of synergies and makes a lot of sense. It allows Revolve to expand its reach and increase its total addressable market. Muus is female-founded, making for an organic connection between the customer base.

Getting at the forefront of an emerging market is another example of the shovel work Revolve is doing to fortify its moat in eCommerce and fashion. For old apparel retail, these companies have too much of an old-head mentality to get into web3 or digital fashion.

Revolve will receive intense competition from other fast fashion brands like SHEIN, Farfetch, and Fashion Nova, but I am not too worried. Revolve isn’t a Chinese company, which at this moment is like a Scarlett letter. California is the sixth largest economy in the world, giving Revolve a unique proximity advantage – Other cities do not have Los Angeles’ soul or essence.

The luxury apparel market is growing fast, so there will be multiple winners in this space. Although Revolve isn’t the first fashion company entering web3, they are at the forefront of an industry that is just beginning. Apparel companies that do not have technology in their DNA or can connect with their audience via social media will be challenged financially in the future.

I am not a quarter investor, meaning I do not make investment decisions based on every quarterly earnings report. It can take years, even decades, for a great story to materialize. Revolve has a strong brand name in the luxury apparel market, which is a moat. No matter how much money or shiny a new entrance in this market is, they cannot expect to match the prices of, say, a Lululemon or Louis Vuitton and expect the same demand from consumers immediately. Creating brand strength is a slow, organic process that can take decades to build.

Overall, the quarter was very positive. 2022 was a very challenging year, but in the future, we will look back at this time as a great buying opportunity for companies that kept their houses in order so they could keep their foot on the gas toward growth initiatives. Over the next few years, Revolve will separate itself by fortifying its digital infrastructure and strengthening its brand, while many of its competitors will realize they built their houses on sand.