We're getting close to the point where we cover our RVLV short, which we put on at $50 (the stock is now at $12 and imploding on last night's miss and guide down). But we still think there's downside from here, both in numbers and the stock. The company put up a slight revenue beat of $258mm vs the Street at $254mm, with revenue accelerating from last Q down 6% to down 4%. The net active customer additions actually increased this quarter to 52,000, but the YY growth decelerated for the fifth quarter in a row. That’s about where the “good news” ends on this print. The company missed EPS of $0.10, putting up $0.04. The weakness in margins came from basically every expense line, and the company updated guidance for continued elevated expenses for the FY in gross margins, fulfillment, selling and distribution, marketing, and G&A. Average Order Value (AOV) declined in the quarter to -7% YY from -1% last Q. On a brand basis, Revolve was down 2% and FWRD (its higher price point brand) was down 14%. Management said the inventory and demand at Revolve is better than at FWRD, but we still see the sale offering at Revolve increasing based on our tracker. With costs still elevated and inventory positioning still not in check—another two quarters before its back in line—and slowing order values, we still think there's another downward revision to come. Knowing what we know today, we’d cover this stock closer to $7-$8 vs $12 today. We think we're in the ninth inning of this short call, but the game isn't over yet. Still some runs to put on the board to run up the score. See Elevator Pitch and SIGMA analysis below.
