Revolve Group, Inc. (RVLV) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to our last presentation of the day. We're very pleased to have Michael Mente, Founder -- Co-Founder and CEO of Revolve with us today. And I will be doing a co-interview with our retail analyst, Lorraine Hutchinson. So first of all, thanks, everyone, for joining us today. We look forward to the presentation. How are you doing, Michael?

I'm great, guys. Thanks you for having me. Excited to be here, to have a chat with you guys.

Very good. Hi, Lorraine.

Hi.

Maybe first question, big picture for those that are new to Revolve, can you talk a little bit about how you see your position in the retail industry and some of your competitive advantages for Revolve?

Yes. Well, like stepping back and looking at the big picture, we view ourselves as the next-generation of retail, both from an operating perspective as well as a focus. We're really focused on millennials, zellenials and Gen Z. I think, ultimately, the shopping experience is much different, growing up with the Internet or at least having the Internet in your early life compared to retail of times past. I think if you look at retail in times past, for decades upon decades upon decades, physical big-box retailers, with something for everyone in one big box or kind of a mall experience. I think it's safe to say at this point that the consumer engages with retail in a different way. And we're really built for that, with a specific focus on the fashion segment.

And then the same question for FORWARD. How does the FORWARD business fit in and add to the portfolio? And where are you with that business right now?

Yes. I think it'd be important to define Revolve as really premium, aspirational luxury. This is an average order value of call mid $200s or so. So it's a real premium product. I think historically for those who aren't familiar with us, we'll peg it -- appear to kind of like a traditional big box kind of like Nordstrom or so. But if you look at FORWARD, FORWARD is really luxury retail for the younger consumer, for the millennial generation and younger. I think that ultimately, the shopping experience, I guess, the analogy or the metaphor would be in times past, it might be a different floor of a department store. With the digital zone, we have 2 -- digital storefronts that integrate to some degree. And I think ultimately, it's safe to say that the consumer -- the female consumer who's spending, I call it, $200 on a dress, is no doubt spending $1,000 or more on a handbag, and ultimately, she'll shop out of Revolve for kind of her apparel needs and her multi-category needs there. And she'll shop on FORWARD for kind of shoes and handbags, luxury brands, as well as the top-tier of apparel spend where the millennial consumer who's shopping for -- who can afford a $2,000 dress or so will come to FORWARD.

Got it. Last year was a very challenging year and a very different year. So maybe you could talk about kind of some of the lessons learned from last year and some of the bigger picture changes you've made in the business that might position you better going forward?

Well, what -- the thing that I'm really most validated is that our team is incredible. It was, the greatest challenges we've had as an organization, and for us to execute in such a dynamic environment and make such incredible changes across the board was something -- super, super proud of. We were, I guess, 51 weeks ago, we were entering into a period where we're ramping up for the long warm weather season. We were ramping up inventory for kind of a season of travel and going out and socializing. We were a month out from our biggest event of the year when we would have 3,000 to 5,000 different influencers and people at an interest and event, and all of a sudden, within a matter of a week or so, the world is completely different. The world that we were planning for didn't exist. And we were planning on a social-distanced lifestyle, a stay-at-home lifestyle. And that meant dramatic changes across the board from the type of merchandise that we carry, not only did we have a dramatic shift in demand, but what was independent was dramatically shifted as well. So we had to not only shift our inventory position aggressively, but also shift all of the inventory flows that we had coming. And I think that was rebuying a whole buying season on through the Internet, on Zoom and whatnot. In an environment where everyone was under a lot of personal stress as well. The team did incredible. Also from a parking perspective, we had multiple events. And we had this one actual secret event that we -- we're still holding that, it was -- we're probably 2.5 weeks out, that will eventually come out with even beyond Revolve Festival, and we had to shift our entire marketing mix from interest and events to virtual and digital events, and that went dramatically strong as well. But it was, really ultimately, despite the pain and the struggle, this really played well into our favor. We really focused kind of our brand, our merchandising and our marketing on what I view is kind of like, the way to connect with our consumer's hearts and our minds at the deepest level, I think that was where like, those real fun peak moments, those peak experiences, those plans that you're just having the best time of your life with your friends, and I think that was the smart thing to do, but also a lot to become the multi, multibillion-dollar company that we aspire to be. We have to connect with or -- across all aspects of our lifestyle. So we ultimately had an offering that would touch all of our lifestyle, but we were always upfront on the homepage, on social media, kind of like the digital front of the store with a lot of the exciting aspects. But when the world shifted, we had the assortment for all other aspects of our lifestyle and our needs. I think the extreme end of, going out just for me is kind of the pajamas. And I think that we never really talked about our sleepwear and our pajama business, it wasn't really top of mind. But when the consumer realized that she wants to feel good, she wants to feel comfortable, but also like in a really -- in a luxurious kind of way, we had the offering for her and the sleepwear business, although small, we don't talk about it much. It was really on fire. And I think that was -- really highlights that we can connect with her from going out gown to going to sleep and being comfortable. And everything in between. I think another good representation was the Beauty business. When physical retail was closed, and I think the last thing people wanted to do was go to a physical store and touch things and put things on their body and face and really wanted to that in a next-generation way. We had the selection already waiting for her. And I think this was enable -- really enabled us to connect with our existing customers, expand wallet share, but also allowed us to open the doors to a whole new consumer and attract a whole new consumer to store and to the brand. So ultimately, we learned that our long-term pieces of connecting in this premium aspiration lifestyle for the next-generation consumer, we really validated that from a merchandising perspective and a marketing perspective. And ultimately, we're a couple of years ahead in terms of where we wanted to be in terms of the road map of the depth and the breadth of the relationship with the consumer. So feeling really good despite, of course, after a very challenging year with all the operational challenges. We're extremely happy with the results. Of course, top line shrank a little bit. It's unfortunate, this is the second year in our 18-year life span where we didn't grow top line, but with the experience after the last recession, '08, '09, we knew we were a little bit better this time, a little bit more gray hair and great hairs. And we were able to turn into the most profitable year ever. So feeling very proud about that and very proud of our team.

Michael, after such a tumultuous year, I think we're all really excited to look for green shoots. Can you talk about some of your international markets that are a little further along in reopening? What you're learning about the consumers' behavior? And how that's informing your decisions that you're making for the U.S. market?

Yes. The international markets have been very, very interesting. As a large basket together, I think it's safe to say that they handled the pandemic better than we did domestically. And I think it really reflects in, of course, no COVID numbers, but also reflects in kind of like consumer spending. So we're really seeing that in the early days, everyone was scared, everyone was pulling back, everyone was in a different zone. But the countries that were handling it the best, or really have come back with a lot of excitement and a lot of intensity. You look at Australia, who locked down and closed borders and really protected their citizens, they're living a full lifestyle. We're just entering or just ending kind of summer season in Australia and the Australian business is incredible for us. We were able to do marketing events remotely. It is our first time actually doing remote events without our [indiscernible] team having boots on the ground, and that went very well. At if you look at the other side of the world and you look at Israel, where they protected things well. Of course, I'm sure we're all well aware that their vaccination distribution is probably well ahead of everyone. And that business is also incredible as well. So we really think that some of the behaviors we're seeing is that there's a resurgence and a joy in terms of the old life that we all had. There's definitely a strong return to going out behavior, which in the social lines as well as the fashion habits that were once more. So I think we're starting to see the earliest plans that that's happening domestically, and we're very prepared for that. From a merchandising perspective, we've leaned into some of the going out categories a little bit more aggressively, not from a depth of inventory side. But from a selection perspective, to make sure that we're there for the consumer when she's ready, and we're ready. And then also from ramping up of marketing spend, we're also in a position where we have a lot of things cooking. We're ready to go. We'll sequentially ramp up and ramp up. We have a small in-person event. I'd say it's small compared to where we've been, big compared to the past year. This month, and they'll be much bigger sequentially month after month ramp-up in spend there. So very excited. It's been a long year. But what I tell our team is, the light at the end of the tunnel's there. We can feel it in our skin now, and we're all ready.

Great. You mentioned the marketing events, and I know those have been pretty important for the company in the past. So can you tell us like how important those are for sales or brand awareness? And when do you expect to start really having some of those big events like REVOLVE Fest back?

Yes. They're very important for us because we really get to tell the story a lot more itself. I think that's -- we're able to -- even in a stay-at-home world, we're able to get the eyeballs and the impressions in effective ways. I think that's really -- it goes back to the strength of the team and the diversity of the playbook, but we're really able to elevate things and really connect on that level of excitement. That's hard to do when no one -- when everyone's apart from each other. So that's -- that will be coming back soon. It will be sequentially ramping. We have, of the scale of several hundred, at the same time, this influencers in the LA area this month. It's unfortunate, for 100, but not necessarily at the same time, it has to be spaced out a little bit and that there's going to be kind of like a queue there in that sense where it's like smaller groups and a lot of testing and safety procedures of course. And I think that as we progress into peak summer, we're talking probably end of May, early June, I think that's the zone that we're eyeing right now with planning everything, but not pulling the trigger just yet. We're laser-focused on a little bit of anxious level, watching vaccine distribution. So that's something that we're checking every day, which is not necessarily good for our stress levels, watching things fluctuate so much. But we're laser focus there. But we think we're they're sooner versus later. REVOLVE Festival is like the biggest event of the year, when we're talking to thousands of people, and these are really thousands of people from all over the world coming. That won't happen just yet, especially with the international travel. Unfortunately, we won't be able to get the Revolve community from all over the world together in one place, probably for a little bit. But we'll be able to do a lot of effective things domestically as well as internationally in the next couple of months or so. But the other aspect, not super obvious, but that we're really missing is the social events that our customers are having with each other. And I think our customers are really our greatest advocates. And I think when we're looking from a new customer acquisition perspective, it always typically is driven by what channel and kind of what platform and where they're coming from. But really a big chunk that's missing from a consumer survey perspective is they're coming from each other. Word-of-mouth is what, top 1 or top 2, depending on the time period, greatest sources of customer acquisition. And I think that's really hard to do in a social, kind of distanced world. And that's what we're really missing the most when, group of friends out, grab dinner, feeling good, dressed up, and they're talking about what they're wearing. That's where we get a lot of advocacy, and that's where we get a lot of brand awareness. And those moments are a lot harder to do when you're hanging with your friends on Zoom or when you're kind of, not in big groups, and you're not necessarily in that mindset, I'm going out to eat, whatever it may be. So I think as the events come back, it will vary -- it'll probably be a little bit ahead of when the consumer is able to go out as frequently and as freely, but they'll come together, and I think they'll come back in a very powerful way.

Got it. That's interesting. In the commentary, you mentioned investments already. What are you doing to invest to get ready for this year regarding inventory or other investments the company is making right now?

Yes. Well, on the inventory side, we are -- we shifted to a really defensive mode last year. And we wanted to be really, really protective. And the world is just -- such uncertainty. So we've incrementally ratcheted up inventory position, anticipating a comeback and anticipating a rebound, but nothing dramatic. So that's beginning to happen. You talked about a little bit the marketing events will begin to scale up and scale up. Even in Q4 there was an incremental step up, and we will see step ups continue at least sequentially through at least Q2 and most likely Q3, but of course, we'll have to stay agile, and [indiscernible], because who knows, say, how the world is going to be. Agility is always a strength. One thing that we have invested a lot is, that we haven't touched on this yet, is our own brands. Our own brands are a very important part of our strategy. We're able to leverage our marketing capability to really create a true brands that the customer loves. And these brands are not the traditional private label. They're not overpriced derivatives of our best-selling product. These are kind of trend first, areas where kind of our adapt to different systems, really tell us that even more of this, so we'll go and design into that. And really validate this, that like our own brands, all right, some of our greatest sources of brand page traffic, Google search word terms. These are brands that we've created. So there's a very brand-enhancement strategy there. But we've taken our own brand down this past year in a pretty aggressive way, really because we wanted to be light and agile on inventory. And on the own brand side, we have to commit to larger units and larger dollars per style. So we have an amazing kind of roster of third-party brands where, if, in theory, when we wanted to buy $1,000 per style and 5, 6 units, we could do that. So we went to an inventory light mode and agile mode. And the results were awesome. We feel it was clearly the right move. And now we're beginning to ramp up. That team delivered very few [indiscernible] here compared to times past. But the investment was there behind this. So that team was very, very busy. So as we begin to -- quarter after quarter expand our own brands again. I think this is going to come back in a very pound-for-pound, style-for-style, stronger level than ever before because of the diversity. There's going to be diversity across traditional categories, call it dresses, tops, pants and jackets and whatnot, but also across manufacturing techniques, like wovens versus jersey versus denim versus active, diversity across price points, really some of the entry-level price points as well as really premium price points, as well as end uses, which is like going out dresses as well as kind of comfortable casual dresses. So there's going to be a lot of diversity in the own brand offering, quarter after quarter for the foreseeable future well beyond 2022. I think that's going to be a strong marketing advantage, but also another way to continue to expand gross margins off our current kind of record-breaking high. So feeling great about that. And the other area where investment, which we touched on a little bit, is going to be international, the international market over the long-term is much bigger than the domestic market. We know that we're building a brand that resonates globally. Of course, a lot of branding efforts that we do are digital and digital and social media, know no boundaries. So there is already a demand of the consumer, an appetite for the Revolve product globally, but we just have to invest to make the consumer experience on par, how it is domestically, when we started the business outside of the house, we were one of the first in the world to really have free shipping and free returns. Some of the things that are table stakes, bread and butter that we take for granted now, but when you look internationally, there's some really challenging things, where it's like free returns is challenging sometimes, all-inclusive pricing is not even a table stake there, where it took us a year of waiting for the Canadian government to get through all the paperwork. To have all-inclusive pricing, where you can buy a product, you pay your duties in all fronts, exactly what you're getting into. And if you return to product, you automatically get duties and tariffs back. We were just sitting on our hands waiting for paperwork to be processed for a year. We have to do that in literally dozens and dozens of regions around the world. So there's continued investment to really enhance that. And we've seen that -- that's just one aspect of the customer experience internationally that we have to nurture. Of course, shipping times, which we really pioneered kind of free 2, 3-day shipping, 18 years ago, was really important. We thought it quite obvious, but to mirror that internationally, I think is super, super can. Right now, we can hit probably about 80% of our customer base with 2 to 3-day shipping, but there's still other -- I think that's really some of the quiet things that are showing why the international business it still on fire as well. So a lot of kind of nuts and bolts across the board and a lot of investments. We've never been a very historically high CapEx company. We've been very, very capital efficient. So there hasn't been really much need to deploy capital in big, big ways. But whenever there's an opportunity there, we're excited as well. So even though it's been a challenging year with a lot of things going on, a lot of teams have been really very long-term future oriented, really last -- haven't lost sight of the big picture. And navigated the short-term very, very well with a lot of agility, a lot of blood, sweat and tears and hard work, but also buy it for the long-term price and really investing for the future as well.

Michael, I wanted to follow-up on your owned brand strategy. Can you just differentiate for the audience, how you think about own brands versus a traditional private label product? And then also, where do you see penetration going? Do you think it will get back to prior levels, exceed them? And what kind of time frame are you thinking?

With the owned brands, like the brands we developed, we really aspire to be the coolest brands in the world. I think it's really -- it's not, it's not high-quality, low price Kirkland, which of course, is awesome and valid and has it's awesome place. But that's definitely not us. We want to be the hot brand that you see on the people that you aspire to become, the people that you look up to. And I think, a perfect kind of the best case study probably for me is kind of our denim brand, GRLFRND denim. I think denim is a brand that is very, very brand loyal. It's really the place where you go and storage and you really connect with the brand that has an awesome fit. There's a lot of loyalty once you commit to a denim brand, you know it fits well and you become a loyal consumer. But it's also the hardest to break into. And we built GRLFRND to be one of our peak periods, our biggest brand when we were investing into inventory, biggest denim brand, are comfortable, and we're competing with the biggest denim brands in the world. And another important validation is that it's carried by a lot of the competition, whether it be some -- the luxury online competitors or whether they be the luxury department stores. Some of the brands, I guess, the one that was our biggest fan was, Shopbop used to carry it for many years, and they realized the Amazon shop, and realized, oh, that's our band so the you decided that maybe it wasn't best -- the best thing to support it so strongly. But if you look at the rest of the competitive set, you look at anyone else on the luxury side, you most likely see growth in there as well. So I think that really validates the brand, the product, nature first. And I think if you look at penetration, I'm really optimistic and probably and I really feel that we can get into like our peak penetration, kind of, you call it, low 40s on a lower style count, I think style-for-style, pound-for-pound. I think we're going to be able to offer a better [indiscernible] than ever before because of some of the diversity that I talked about earlier. So I think we're going to be able to do it even more efficient ways than times past. So we're going to have incredible brands. There will be a lot of brands launching in the next year or 2, touching all aspects of the -- ultimately all the different categories, all different zones that are our consumers kind of lean towards, and even long term, even into the beauty category. And I think that on a stop to stop basis, we're going to be able to connect with consumer in a much deeper way, continue to drive kind of traffic and engagement, and of course, drive margin and profitability. So feeling super awesome about that, that's quietly -- we're going to look back and look at the year as an incredible investment year for owned brand.

And you've grown some new segments during COVID, like Beauty and Loungewear. How do you envision product mix will change as we come out of COVID?

I don't really think of it as a mix kind of a challenge and opportunity, I really look at it as like each of these segments and zones, trying to grow each zone. I don't see any reason why each one of the -- these ones can grow, and how they net up and how the average over given periods of time, is really just going to be a function of what the consumer is driving. What's going to be the most important to the consumer at the time, what's growing the fastest. I think there's no optimal mix concern. I think mix is kind of like a vestige of physical retail, where you literally have constraints, like you have to fit things in a box. I think for us, each of these could be circles that grow and grow and grow. We ultimately grow a bigger pie. So I think that's kind of how we view things from a strategic perspective. I think that speculating into the future, there's no doubt that some of the tail end of things. I would probably -- we don't have to make the bet because we're very read and react, but making a prediction that we're probably all loaded up on kind of sweats and Loungewear for a little bit. I think it's a category that we anticipate. I still think that could be a category that grows for us. But I could anticipate it being a category that's going to be growing as fast as some of the categories that have really suffered in times past, they've been really kind of colder like dresses and apparel and things like that. So the cost of port, optimistic that we've made inroads and connected with the consumer and complete kind of a broad sense across the merchandising kind of spectrum. And we'll be able to grow all of those segments, Beauty -- including Beauty as well.

Maybe we could shift over to international a little bit. Obviously, some interesting results last quarter. But do you need to make an investment to make international happen, such as warehouses or fulfillment operations to really make that happen? And how big could international be versus the U.S., long term?

Yes. At the time being, we don't have to make those -- it seems counterintuitive, but we don't have to make those, kind of like distribution center investments. I think we've studied it many times, and it's kind of an ongoing process to clients-only study. What it kind of -- because of our nature of having this incredible selection, call it, directionally, 50,000 styles of apparel, thousands and thousands of styles of Beauty and such where we have this really broad selection. So housing that broad selection in different regions is a challenge. So the team is really built to have home base and the mother ship there. We have everything there, but what we had to do is build the inroads and kind of like the distribution network globally. And we've been doing that over the years. As mentioned, able to hit 80% of our consumer in 2 to 3 days. And ultimately, continue to get that extra 20% as well as accelerate speed. So [indiscernible] investments there, and it's not always the most top of mind kind of subject, compared to things like social media marketing and brand and things like that, but under -- a level below, it's absolutely essential. It's kind of the foundation of making sure that the business is strong. It typically only comes up when it's the challenge for some organization or so. But this is an area that's a big strength of ours. So to interact so that I think the best example is that, by a lot of the distribution kind of network that we've built. The Middle East has become from something tiny, it just -- very, very big. We haven't talked about it too much because it was so small, but you compound high-growth over a small number a couple of years, and all of a sudden, it becomes very, very interesting. And this year kind of broke through the headlines where, wow, Middle East is becoming one of our biggest regions there. Kind of like UAE and Israel becoming very, very important for us. So we're able to ship there very, very quickly. And I think, if you think long term, and I think when we think long term, we're talking decades upon decades out. I think there's no doubt that the international business should be much larger than the domestic business, despite sheer size and kind of economics. I think that the Revolve brand's a global brand. I think we've proven that there is a demand in the relationship and the excitement for the brand globally is there. It's really just the long-term road map to localize everything, from kind of some of the nuts and bolts like payment methods, tariffs and all-inclusive pricing, shipping and operations, but then also getting one level in [indiscernible] marketing, both from a digital perspective and from a brand perspective, working with like the influencers, the regions that are really focused in that region, as well as kind of like the performance marketing channels that are specific to those regions. And ultimately, also on a product segment level, I think as the businesses grow, we could begin to think that whether it be smaller sizes in certain regions because just the population is smaller and adjusting things like that. Or stylistic shifts in certain regions, because ultimately, there's specs and nuances that we have to adapt for the local customers. So it will be a multi-decade journey, but to circle back, I think long term, the international opportunity is bigger than the domestic opportunity, and we're excited to pursue it.

Got it. Maybe a couple of logistics questions related to that. First, how long does it take to ship something to, say, Europe or the Middle East? And then second, I think when you went public, having return rates where they were was a little surprising to people, but clearly, you're running a profitable business despite the return rates. So maybe talk to us about how Revolve works around returns and how that's an important part of the business and the business works around it?

Yes. Well, first question in terms of reach of the consumer. I guess, it really varies. I think that some, like the U.K. is kind of our most developed and invested category, where there is a kind of a distribution hub that will service that in the in the broader region. Of course, that's evolving with Brexit. But product -- we have shipments going there daily, so we can get things there really like, 1 day. I think it's just a matter of kind of cost, whether we want to, what's the standard offering and what's the expedited offering. And the same goes, I think, 2 days to the Middle East. I think -- broadly -- the key areas in the Middle East, not necessarily every aspect of the Middle East. Areas that are exciting for us for the time being. So that's something that took a lot of work. And I think that's a lot of credit to the team for really making those investments over time. Those are things that take quite a long time. And then I guess, the return rates is quite interesting, and we really think -- we've always said the philosophy and thesis is that the home is your addressing room. In 2003, we had free returns. And this was a very manual process. And this was like completely on the house. We like literally wake up in the morning, there would be returns on our doorstep. And that we ultimately say that this is a good thing. People -- the question was, would people buy clothes online was still a question, it wasn't like the standard practice now that we take granted. We thought that it would be important, at least, especially in this premium category to offer free shipping at an expedited rate and offer free returns. So you can try on whatever you want. When you're buying jeans, now it fits. Buy 3 sizes, try it on, ship it back, we're still going to make money on that transaction. So that was the thesis across the board. And kind of marrying both is that like, we've been able to do it in a very, very profitable way. We've seen shifts where dresses as a category, when you buy a bunch of dresses, try them on, have a mini fashion show in your closet and ultimately keep what makes sense to you. But we're trying to marry that experience internationally as well. I think that as you make these investments, it does seem counterintuitive on a lot of levels. But we think that the increase -- we're trying to increase return rates internationally because that means we're engaging with consumers in like a little bit more aggressive ways and deeper ways where they're willing to try -- you have that trust that, you are in Europe, you can order from us in Los Angeles, trust that you can get awesome clothes that you can't get anywhere else. You could easily return it. And then ultimately, you have that relationship with us. I think that's the powerful relationship that we're trying to develop with the consumer across the world, all around the world.

Michael, can you talk a little bit about your outlook for marketing costs? Many of the traditional brick-and-mortar retailers have shifted more of their dollars online, so maybe just talk about the costs and what your plans are for 2021 to capture some of the incremental demand?

Yes. There's no doubt that the increased -- with the renewed focus on digital, which of course, has been a lot of [indiscernible] pieces for ours for 18 years now. I think that was quite clear that the digital focus is essential. But of course, that allowed us to get ahead for quite some time. But I think our sophistication with online advertising and digital marketing across the board is really kind of the multifaceted aspect of it. It's really kind of it's the, really unique blend that I don't think anyone has been able to match up, best-in-class kind of data-driven performance marketing with strong tech. And I think that's been born since when we founded the company, when we were still doing advertising on Yahoo! and Google, and that was our roots. That's really the thesis of [indiscernible] behind the business in terms of capturing traffic and converting in effective ways. Of course, it's evolved so much to the multilayers of all the social media platforms and such. But that's the performance in digital side. And I think also that people will be deploying capital there, but also the experience is incredible. But also the rare and the nuance that I think that no one else can match is really the brand component and tying those together. I think that each one of these platforms is -- every single platform is, I guess, biased to Google, is both brand storytelling and content integrated with data optimization and conversion. And I think that that's something that I think we think we can do better than anybody else. So the increased competition is welcome. I think we're very, very, very well fit and more than capable on position for massive success. I think this past year really shows it. And I think we're very excited for what's to come.

How quickly is the U.S. consumer really anticipating this vaccine in the summer? And can you just talk a little bit about your ability to chase into demand if we do see a nice V-shaped recovery?

Yes. Like, we're really optimistic as far as vaccine distribution. I think that kind of our viewpoint is, if all that we've known -- and we watch very, very closely, if vaccines are available for everyone by the end of May, available as well as distributed by, call it, the end of June. We view that as the latest that things will ramp up. So that's kind of for sure. End of June, we're going to be ready to go. And we think that a little bit earlier, depending on how things -- to roll out, how things roll out and kind of things work that it will be sooner than there. So that's kind of given our current knowledge, which, of course, could shift, it could accelerate. It could decelerate. That's kind of our operating thesis, but this is really a thesis that we monitor on a daily and weekly basis. So of course, subject to change, but optimistic that it's sooner versus later. And I think we're geared up and ready for sooner. And I forgot, I'm sorry, I think I forgot your second part of your question.

I think just around the ability to chase. I mean, look, we're hearing a lot about high freight costs, about some delays in the ports. Do you think you can get the product here? And if you can, will there be higher costs associated with that product?

Yes. The ability to chase really plays in our favor. I think the hardest part was actually decelerating and slamming on the brakes a year ago. That was the hardest part. So the ability to chase is really, plays to our strength. We are able to identify the strength of our product with our data-driven systems, like literally within a day. It's not really -- we don't need feet in the door and traffic and understand like, is this moving, it is not, weekly cadences and whatever, we're much, much faster than them, given our deep technology, technological competency there. So that plays into our strength. Majority of our business is from reorders and our reorder business is significantly higher margins than our read and react test product. So this is what we're built for. So I think that -- we're very excited about that. And as far as kind of like supply and distribution and such, there's definitely been challenges across the board. But because we're a premium product and because getting product to consumers quickly is key, we air ship everything in. And there have been increases in air shipping costs over the past year or so, which we're trying to lap already. But we have not seen any delays in terms of the supply chain, getting product into our DC onto the website and flowing. We haven't seen any problems in that part. So we're fortunate in that regard. So as far as kind of like how the landscape is kind of playing out, and as far as kind of how the world is evolving, very, very excited about the positioning from like the inventory position and the offering we have, our ability to ramp up, kind of the marketing playbook and their ability to go or no-go, false start or go aggressively and ramp up aggressively. That agility is both on the merchandising side and the marketing side. It's really going to pay to our strengths, and I think feeling great after a challenging, challenging year of discipline. I think it's great to feel ready to go on offense again.

And then as you think about investments over the next few years, are there any pockets like warehouse capacity or any new technology investments, head office, design, anything that you see coming on the horizon over the next few years?

Nothing too significant. There's -- we've made some investments in the, over the past 1 or 2 years. New centralized distribution center, as well as some automation. And I think we've seen that how that automation, despite some of these rising costs, we've been able to offset a lot of these costs, which is both from an air freight perspective or from a wage perspective. We've been able to offset a lot of that with automation. Our current facility should last us, at current growth rates, 3 years -- that's 2 years, 2.5 years. We're going to do our best to outgrow it faster. But of course, we don't need to -- but we're set up for growth there. And we're always looking for opportunities to invest in ways that will be high ROI, other ways to automate and improve. But nothing that is massively significant on the horizon that affects kind of our outlook on a macro scale P&L. I think we're not hearing something here, sorry.

Yes. Maybe -- this is Justin. I'll ask one more and then maybe Lorraine will see if there's anything from the audience. I guess just remarkable margins last year, given the top line challenges and definitely beat all my estimates for the second half. How are you thinking about that? And did you learn anything about the company's long-term margin potential?

Yes. I was -- I think with the long term, I think it's important to clarify, we think long-term, like we think decades out. We think we're going to -- there's just massive opportunities for growth, to execute again. But if you think long term, long term, I think we've kind of proven that at that mature long-term state the profitability margins, they are there. It's kind of validated completely already. And I think it's -- we're hopeful that as the world evolves and we get better and better, we can challenge that and continue to push but. We've already proven that, at that terminal state, which hopefully is 30 years in the future afterward -- we're a household brand in all around the world, that we can be an extremely profitable company. So we feel really great about that.

And we don't have any questions from the audience, Michael, but I did want to ask, Revolve's always been at the forefront of marketing. What are you most excited about, coming out of the pandemic? Is it Snapchat or Tiktok? Or what do you see as sort of the next leg of really exciting marketing opportunities?

Well, categorically in that, the part that I'm most excited about is our in-person events. And I think that's something that maybe not -- maybe like something that we so far. But I know that everyone is excited from a consumer level, from an influencer community level, from a brand level, from a team level, our team is very excited. So that's probably the most exciting that's coming up. But as far as kind of exciting and new, I think Tiktok will be something that's very important for us. I think that's -- they're showing that they're very aggressive in terms of developing the platform. The growth numbers are awesome. Even though that some of the advertising kind of offerings aren't on the scale of kind of like the Facebook, Instagram. They're pushing aggressively, and I think they're really going after e-commerce in a very significant way. I think they're kind of viewing it -- advertising and e-commerce at equal kind of priorities, whereas some of the other opportunities in the previous social media platforms have been a little bit more advertising oriented, which, of course, they've been very beneficial to us. But I'm optimistic and hopeful that integrated social commerce that has been proven in China and the Chinese social media platforms, that's already proven as in people will do that. It works well. It can be done. And it does seem that Tiktok is positioned to do that well. So barring continued shifts elsewhere, I think that will be an area we continue to invest, both from a content perspective, ensuring that we have awesome content on our feed, that we're working with the right people, the right influencers on the content side, but also on the kind of like the paid side as well, that there's going to be a lot of developments there. So we're spending on both the performance marketing team and the brand marketing team, spending a lot of time there.

Great. I think that we're out of time. I'd like to wrap it up. Lorraine, I don't know if you have any comments versus to the conference tomorrow, but Michael, really appreciate your time, and thanks for giving us some really good insights into Revolve.

Well thank you, guys. Thanks for the opportunity to chat. Hopefully, we'll be doing this in person sometime soon.

Thanks, Michael.

Thank you, guys.