Reformation is doing all the things that it’s supposed to — but still waiting for Wall Street to really take interest.
The company went public in July with top- and bottom-line increases, plenty of room to grow overseas and at home and a strong sustainability message.
But the stock has since settled below its IPO price of $15 — although the company started to make some ground back as shares rose 3.4 percent to $13.60 in after-hours trading Thursday after the brand posted very solid second-quarter growth.
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Regardless, Hali Borenstein, chief executive officer, isn’t sweating the short-term and is focused on continuing along the path that brought Reformation to Wall Street in the first place.
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“We are entering the public markets from a position of strength,” Borenstein told WWD. “This makes our 21st quarter of double-digit revenue growth. And what’s important about this performance, it was pretty broad or was broad-based across channels, across geographies and product categories. And so we’re feeling really pleased with how we are showing up to the consumer with these results.”
Reformation’s second-quarter net income jumped 79.4 percent to $12.4 million, or 23 cents a diluted share. Adjusted earnings before interest, taxes, depreciation and amortization expanded by 53.9 percent to $25.4 million as margin expanded 320 basis points to 16.4 percent.
Revenues for the quarter ended June 27 increased 24.1 percent to $155.2 million.
The direct-to-consumer channel, Reformation’s home turf, saw the top line grow 21.2 percent to $135.3 million, primarily driven by a 22.9 percent increase in active customers. Reformation also added four new stores during the quarter, bringing its total to 70 globally.
The much smaller wholesale business grew by 48.7 percent to $19.9 million.
“Wholesale growth was a reflection of higher volume from our existing customers, who had a really strong response to our spring and summer product,” Borenstein said. “It was both sell-in and sell-through that performed quite well and it was across our accounts. When I think about wholesale, we have meaningful white space across our existing accounts and new accounts in terms of expanding the apartment or adding doors.
“What’s important to note is we use it really for strategic reasons,” she said. “It’s for new customer acquisition, testing new markets, particularly international markets and brand elevation. We remain a DTC-first business. We’re very protective of making sure we always have that lens when we’re operating our wholesale.”
Reformation’s direct-to-consumer mindset has kept it moving quickly.
“Part of our winning strategy is that we can respond so quickly to the world around us and adapt our marketing strategies, our brand strategy and our product offering in real time,” the CEO said. “We are very reliant on that real-time consumer feedback loop in order to make sure that we are offering the best we can consistently to our consumers.”
In what counts as lightning fast for the fashion industry, Reformation gets 50 percent of its product in 60 days or less, with recuts coming in anywhere from 15 days to 45 days.
And Reformation is using artificial intelligence to sharpen its approach.
“We have a team right now helping to quantify the exact demand for reorders,” Borenstein said. “How many units should we buy on a specific [purchase order] that will ultimately just help to reinforce our strong full-price selling? AI is really helping us push things like that forward. What’s particularly interesting for Ref is, our model generates so much real-time data across our retail stores, our e-commerce business. It’s demand data, it’s engagement data. It enables us to turn all of these signals into really smart actions and reinforce some of our competitive advantages, which are speed and agility.
“I’m still a humanist,” she said. “I still believe that AI is not going to solve all our problems, particularly in a fashion business where creative talent is just so incredibly important. So the question becomes where do you deploy AI to drive real incremental value and where should it be less involved in the outcomes? And I think that’s actually part of what leaders need to decide is it’s not AI for everything, it’s AI where it really makes the biggest difference.”