We recently compiled a list of the 10 Footwear Apparel Stocks Affected By China Tariffs. In this article, we are going to take a look at where Revolve Group Inc. (NYSE:RVLV) stands against the other footwear apparel stocks.
Donald Trump’s sweeping tariffs on China, Mexico, and Canada have caused a lot of footwear and apparel stocks to crash. Even though the President paused tariffs on Canadian and Mexican goods for a month, the 10% tariffs on China are still in place.
Fashion brands provide an interesting investment opportunity. Due to their loyal following, they have the ability to raise prices to take care of tariffs. In a similar way, these brands have become quite agile in diversifying their supply chain since the pandemic, so sourcing products from outside China is also a possibility for many. More than these brands, it is the retailers that will get hurt as their value proposition to their customers may get hurt when brands raise prices. However, these retail stocks are not a part of our discussion for now.
In order to come up with our list of 10 stocks affected by Trump’s tariffs on China, we only considered stocks with a market cap of at least $1 billion and a product sourcing mix exposure to China of at least 5%.
A modern fashion boutique lit up with neon display signs.
Revolve Group Inc. (NYSE:RVLV)
Revolve Group Inc. is an online fashion retailer that operates through FWRD and REVOLVE segments. It provides a curated selection of beauty, apparel, accessories, home products, and footwear. The company sources 14% of its products from China.
KeyBanc recently upgraded RVLV from Sector Weight to Overweight prior to the upcoming Q4 financial results and assigned it the target price of $37. Previously KeyBanc analyst Ashley Owens had downgraded the stock stemming from concerns over revenue stress, inventory rightsizing, and enhanced return rates. As per the recent upgrade, analysts changed their pessimistic point of view and believe that the company is well-positioned to return to steady growth revenue and increased margins at the start of the year. This change in analysts’ view comes amid expectations of margin expansion and strategic investments.
Analysts highlighted that the brokerage anticipates more strategic investments in technology aimed at improving search engine optimization and further lower return rates.
With this, we foresee continued logistics cost efficiencies, stabilized/improving AOV, as well as product mix normalization, which should drive further margin accretion.
As stated by the analyst, the company is projected to improve margins through stable average order value (AOV) and cost efficiencies. With a stock performance of over 110% gain in the previous year, the recent downturn in the share price can be taken as a buying opportunity.
Overall RVLV ranks 8th on our list of the footwear apparel stocks affected by China tariffs. While we acknowledge the potential of RVLV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as RVLV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
