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Reformation’s third-quarter revenue rose 19.1% to $173.6 million, marking its 22nd consecutive quarter of double-digit growth. The company also raised its full-year revenue forecast to $610 million to $612 million, while reporting a $1.1 million quarterly loss after an IPO-related stock-compensation tax impact.
Reformation reported third-quarter revenue of $173.6 million, up 19.1% and marking the apparel company’s 22nd consecutive quarter of double-digit growth. The brand also raised its full-year revenue forecast to $610 million to $612 million, as it seeks to show investors that its growth can continue after its July initial public offering.
Revenue in the quarter ended Sept. 26 came in $3.9 million above analysts’ forecast, according to Yahoo Finance. Adjusted earnings before interest, taxes, depreciation and amortization rose 64.2% to $23.1 million. Reformation nevertheless recorded a $1.1 million net loss, which the report attributed to the tax impact of stock-based compensation following the IPO.
The company’s active customer file grew 23.4% to 1.25 million. Reformation opened seven stores during the quarter, bringing its total to 77. Its wholesale business grew 40.8% to $20.8 million. CEO Hali Borenstein described growth as broad across geographies, product categories and sales channels.
Reformation now expects full-year revenue to grow 20% to 21%, reaching $610 million to $612 million. Its previous forecast was $602 million to $606 million. Borenstein said the higher outlook reflects both the third-quarter beat and performance so far in the fourth quarter.
Growth Meets Public-Market Scrutiny
The results give investors a new measure of Reformation’s performance as a newly public company. The sales increase and higher forecast indicate that demand has remained strong through the reported quarter and, according to Borenstein, into early Q4. At the same time, the reported net loss illustrates why revenue growth alone does not describe the company’s financial position.
Borenstein told WWD that Reformation must show it can maintain growth consistently over time. That test matters for a fashion retailer entering public markets, where investors will weigh the company’s expansion against profitability and the durability of consumer demand. The report said shares had fallen 8.5% to $16.85 before the results were released, during a broad technology-led market sell-off; the stock remained above its $15 IPO price.
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How Reformation Is Expanding
Reformation’s third-quarter growth came alongside expansion in customers, stores and wholesale sales. The company added seven retail locations and ended the period with 77 stores. The report also describes a product strategy that uses limited tests of new ideas, which Borenstein said account for 10% to 20% of the assortment.
As one example, Borenstein said the company saw stronger demand for purple styles and responded by adding more options across silhouettes and fabrics. She presented this ability to react to emerging sales patterns as a difference from committing to seasonal inventory far in advance. These are the CEO’s explanations of the company’s approach; the report does not provide separate sales figures for purple products.
Reformation went public in July. Its results arrive as investors assess whether the brand’s past growth can be sustained as a public company. Borenstein acknowledged that fashion businesses have struggled in public markets and said investors would want the company to demonstrate consistency.
“We’re really pleased with the business. The growth was really broad-based across geographies, across categories and selling points.”
— Hali Borenstein, Reformation CEO, speaking to WWD
Profitability and Investor Response
The report does not provide a detailed breakdown of the $1.1 million net loss beyond attributing it to the tax impact of stock-based compensation after the IPO. It also does not give a forecast for earnings or explain how the company expects that impact to change in future quarters.
Investors were due to weigh in on the results Friday, according to WWD. The report does not include their response or say how the stock traded after the earnings release. Reformation’s raised sales guidance is a company forecast, not a guarantee, and the article does not provide the assumptions behind the range.
Investors Weigh Results and Guidance
The next immediate marker is the market’s response to the results and revised outlook. Reformation will need to report subsequent quarters to show whether its customer growth and sales momentum continue and how its revenue translates into earnings. The company’s stated full-year target is $610 million to $612 million; further updates will clarify its progress toward that range.
Key Questions
How much did Reformation’s Q3 sales increase?
Revenue increased 19.1% to $173.6 million in the quarter ended Sept. 26. It was the company’s 22nd consecutive quarter of double-digit growth.
Did Reformation make a profit in the quarter?
No. The company reported a $1.1 million net loss. The report attributed the loss to the tax impact of stock-based compensation following Reformation’s IPO. Adjusted EBITDA rose 64.2% to $23.1 million.
What is Reformation’s new full-year revenue forecast?
Reformation raised its forecast to $610 million to $612 million, representing expected growth of 20% to 21%. Its previous revenue range was $602 million to $606 million.
What drove the company’s growth?
Reformation reported growth across geographies, product categories and sales channels, according to CEO Hali Borenstein. The company also reported a 23.4% increase in its active customer file and 40.8% growth in wholesale revenue.
Source: wwd.com
