By Jennifer Williams
Revolve Group isn't like other retailers.
Most retailers dread high return rates and how they can eat into profits. Revolve has learned to live with a return rate that is nearly triple the typical online retail average, all while posting significant earnings gains.
Revolve's return rate is roughly 60% as the retailer remains committed to a shopper-friendly free return policy. That didn't stop the company's profit from surging nearly 60% in the fourth quarter.
The company behind its premium namesake brand as well as luxury segment FWRD has pulled this off by avoiding discounts, with over 80% of net sales sold at full price, and keeping customers engaged and loyal with a wide selection of apparel and accessories and fast, free shipping. Recent bankruptcies in the luxury retail sector also have helped Revolve attract customers, especially to FWRD.
"That is the opportunity right now," said Chief Financial Officer Jesse Timmermans. With profits growing and cash on hand, he said, the company can be "on offense when others are playing defense and really capture market share."
Revolve's shoppers are mostly women in their 20s and 30s. They aren't necessarily high income, but they allocate a large portion of their disposable income to buying clothing, executives said. FWRD, pronounced forward, caters to a slightly wealthier and older set than the Revolve brand, but executives say there is considerable overlap between shoppers hunting for a $20 tube of lipstick and a $50,000 handbag.
Recent bankruptcies in the luxury sector of Canadian fashion retailer Ssense and Saks Global, which includes Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, are helping boost Revolve's sales, executives said. The Cerritos, Calif.-based company's net sales of $324 million were up 10% in the three months ended Dec. 31 compared with a year earlier, the seventh consecutive quarter of sales gains. Profit of $18.6 million climbed nearly 60% from the year-ago period and active customers grew 6%.
Part of what draws shoppers to Revolve's brands is the convenience of ordering, according to analysts. The company continues to offer free two-day shipping, even as other retailers take it away in the face of higher costs to send packages. Revolve shoppers have also long had the option to send anything they don't like back at no additional cost. The ease has pushed the company's return rate higher than the average for online retail: Revolve's is 57%, nearly triple the standard online figure, said Dylan Carden, a specialty retail analyst at investment bank William Blair.
Returns are viewed as one of the biggest profit killers for online retailers. Shipping, labor and warehousing make them costly. And items sent back may be out of season, meaning retailers have to resell them at a discount.
"They can't do a lot because customers love them for it," Carden said of Revolve's return policy.
Management is turning to artificial intelligence to help better predict fit before shoppers order. The company is also limiting the option to send items back for free for certain very high-volume returners. Still, executives don't want to cut returns at the risk of alienating shoppers.
"I could probably boost profits in the short term, in the current year, by cutting back on service levels," said Revolve co-founder and co-CEO Mike Karanikolas. "But does that really build the value we want over the long term? Probably not."
Revolve's approach to selling apparel also includes giving shoppers options, with more than 1,000 brands and over 100,000 unique items available on the site at one time. But unlike some brands that have core items in 10 different colors and six sizes, Revolve offers many options for a mini dress, for example, but won't have several shades for the same one, said Anna Andreeva, a managing director covering footwear, beauty and brands at investment bank Piper Sandler.
"There are lots of different brands, but you're not going to have a ton of depth behind those," Andreeva said. The point is to focus more on new offerings rather than heavily investing in certain staples, which caters well to Revolve's shoppers, she said.
Revolve has for years used algorithms to help predict what shoppers will buy. AI has improved the predictions, which not only helps better forecast where to invest in inventory but also makes it easier to sell dresses, tops and other garments without discounting, analysts said.
That ability to react in real time to shoppers' preferences may be more of a challenge as Revolve goes offline to some extent. After two decades as an online retailer, Revolve now is giving priority to physical storefronts, opening locations in Aspen, Colo., and Los Angeles. The move comes as shoppers, particularly younger ones, are embracing in-person shopping.
Ongoing expansion will be measured, with plans to open one or two new doors this year, but the future potential is significant. "Long term, we think physical [stores] could be 50% or even more of revenue," said Karanikolas. "But we're going to do it in the right way, not force it."
Write to Jennifer Williams at jennifer.williams@wsj.com
(END) Dow Jones Newswires
April 03, 2026 06:00 ET (10:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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