Takeaway: Revenue beat was well telegraphed. Most KPIs are slowing, as is revenue and GM. This should be a $10 stock at best. Best Idea Short.

There was little to applaud in this RVLV quarter. Yes, sales came in better than the guide -- +8% vs ‘moderating from 3%’ guidance – but that was well telegraphed over the past two months in the credit card data. What we care about is rate of change, and the rate of change is slowing. That 8% top line compares to 10% in 3Q, and we think sales will go squarely negative in 1Q23. New customer additions came in below 100k yet again, with management commenting that promotions are driving new customers to the brand – something that’s very long-term bearish. Gross Margins also decelerated – down 339bps vs -211bps in 3Q, with return rate still elevated. Overall the better top line resulted in a whopping penny beat on EPS – not exactly worthy of the squeeze we’re seeing in the aftermarket – particularly given that the top line beat (but deceleration) was so well telegraphed and EPS was down 72% vs last year. On The Retail Show this week we said that we wouldn’t press this name into this print due to the top line, but we would definitely get back involved (or press if, like us, you’re still short it). Average orders per customer and average value per order both decelerated as well, which combined with the ‘promotionally sensitive’ customer coming into the brand we just think is flat out bearish. The company also noted that it’s expanding its category breath, which we think is a huge mistake – it should stick to its knitting. If there was any pseudo bright spot, it was inventories, in which growth decelerated to +26% (still too high) from 50% in 3Q. We think RVLV is in for meaningful GM contraction in 1Q. But as much as we’re below consensus for 1Q, we think the problem here is that this company has simply run out of TAM. That’s a TREND and TAIL call. Keep in mind that this is a company that’s building a DC to house packaway inventory – which is 180 degrees from the ‘fast and current’ nature of its business model. We get to $0.50-$0.60 in EPS in perpetuity for RVLV, which is worth at best about $10 per share. We think this model is the next SFIX – a company that is growing too far beyond its core and into margin dilutive product lines, and has lost the influencer-led ‘buy now or the product is gone forever’ allure that it had just 3-years ago. We’d short this stock all day in the mid $20s. Best Idea Short.