Another e-commerce retailer’s shares are now up for grab with Revolve going public. Revolve Group Inc. is gearing up for its plan to get listed in the NYSE by the ticker symbol ‘RVLV’. The California based company plans on raising $211.7 million USD by offering 11.8 million shares at the price range of $16 – $18 per share.
The lead bookrunning managers include Morgan Stanley, Credit Suisse BofA Merrill lynch while Barclays Capital Inc., Jefferies LLC along with 4 other banks will act as co-managers for the offering.
Michael Mente and Mike Karanikolas, the two co-chief executives came together and established in 2003 this digital retailer, which now sells 500+ brands. It is a spot for all technology savvy population irrespective of gender, with several private label brands which accounted for 83% of the total sales in the previous year. The remaining 17% sales were accounted by the luxury-focused, Forward. As per its filing with the Securities and Exchange Commission, there has been an increase in sale by $87.5 million from 2016 sales of $312.1 million while the net income totaled to $5 million in 2017.
Out of the 11.8 million shared that will be offered to the public, 2.9 million comprises of Class A common stock, while the selling shareholders offer 8.2 million. A point to be made is that the company is not offering to pay any cash dividends on these shares. As per the prospectus issued, the no-dividend policy will mean increased retained earnings and better scope of expansion. The company’s decision to offer Class A and Class B shares would help the voting rights and decision making power to not get much diluted and remain in the hands of executive officers and directors.
Inventory Management Method
One strong forte of the company is its inventory management method. A major drawback for a retailer is to keep up with the on-trend merchandise and if not managed efficiently these stocks could result in heavy losses. With an automated inventory management customized technology, Revolve seems to have been smoothly handling the hurdle. However, the reporting system might not be as strong. The firm confessed of its material weakness and assured that remedial solutions are already in motion.
With the influencer-driven strategy as a major component of the company’s marketing mix, it reaches out into the market more effectively. Social media and hashtags like #RevolveFestival etc have helped develop and expand the customer base vastly. However, this also means chances of poor relations with its network, which could pose a great degree of risk for the company.
The China-US trade relations might prove unfavorable for the IPO with Revolve having its operation set in the former country as well. With the tariff threat looming overhead and the sour experiences of the big retailers – Walmart Inc. and Target Corp. The company fears of the business taking a serious hit. To be able to obtain and retain a legal permit in China would be another challenge for Revolve.