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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-28 · 287 added, 267 removed, 716 unchanged (44% of the section changed)

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You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and our consolidated financial statements and related notes.

and our consolidated financial statements and related notes thereto.

If any of the events described in the following risk factors or the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed.

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Risks Related to Our Business and Industry

Economic downturns and other macroeconomic conditions or trends may adversely affect consumer discretionary spending and our business, operating results and financial condition.

Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending.

Some of the factors that may negatively influence consumer spending include COVID-19 outbreaks and resulting restrictions, war, high levels of unemployment, higher consumer debt levels, reductions in net worth, declines in asset values and related market uncertainty, home foreclosures and reductions in home values, increasing inflationary pressures, fluctuating interest rates and credit availability, fluctuating currency exchange rates, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future political and economic environment and social unrest.

Economic conditions in certain regions may also be affected by natural disasters, such as earthquakes, hurricanes, tropical storms and wildfires.

Consumer purchases of discretionary items, including the merchandise that we offer, generally decline during periods of economic uncertainty when disposable income is reduced or when there is a reduction in consumer confidence.

Adverse economic changes reduce consumer confidence and have, and in the future could, negatively affect our operating results.

In challenging and uncertain economic environments, we cannot predict when macroeconomic

uncertainty may arise, whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business.

Furthermore, economic downturns could lead to reduced liquidity, decreases in the market price of our securities and decreases in the fair market value of our financial or other assets, any of which could have a material adverse effect on our business, operating results and financial condition.

If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed.

Prior to the onset of the COVID-19 pandemic in the United States in March 2020, we were growing rapidly;

however, with the onset of COVID-19 pandemic and the related social distancing and stay-at-home orders around the world, demand for our products was materially negatively impacted.

While our business performance has improved with an increase in demand for our products in recent periods, this trend may not continue, consumer demand may decline again and we may not be able to sustain the current patterns and levels.

To effectively manage future growth, we must continue to implement our operational plans and strategies, improve our business processes, improve and expand our infrastructure of people and information systems, and expand, train and manage our employee base.

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We may not be able to hire new employees quickly enough to meet our needs.

If we fail to effectively manage our hiring needs or successfully integrate new hires, our operational efficiency, our ability to fulfill

orders and provide customer service, our ability to meet forecasts and our employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results.

If we fail to effectively manage our hiring needs or successfully integrate new hires, our operational efficiency, our ability to fulfill orders and provide customer service, our ability to meet forecasts and our employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results.

We are also required to manage numerous relationships with various suppliers, vendors and other third parties.

Changes in our operations, vendor base, fulfillment center, information technology systems or internal controls and procedures may not be adequate to support our operations.

If we are unable to manage the return to growth of our organization effectively, our business, financial condition and operating results may be adversely affected.

Changes in our operations, vendor base, fulfillment centers, information technology systems or internal controls and procedures may not be adequate to support our operations.

If we are unable to manage growth of our organization effectively, our business, financial condition and operating results may be adversely affected.

We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.

Our business requires us to manage a large volume of inventory effectively.

We add new apparel, footwear, accessories and beauty and home products to our sites every week and we depend on our forecasts of demand for and popularity of various products to make purchase decisions and to manage our inventory.

Demand for products, however, is difficult to forecast and can change significantly between the time inventory is ordered and the date of sale, resulting in higher inventory levels that may adversely impact our operating results, or insufficient inventory that may adversely impact the conversion of demand for our merchandise.

Demand may be affected by macroeconomic factors such as inflation, consumer confidence and events like the COVID-19 pandemic, seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, political instability and social unrest, and our consumers may not purchase products in the quantities that we expect.

Seasonality in our business has not historically followed that of traditional retailers which typically experience concentration of net sales in the fourth quarter in connection with the holidays.

We believe our historical results have been impacted by a pattern of increased sales leading up to #REVOLVEfestival in April and during May and June, which results in peak sales during the second quarter of each year.

We have traditionally experienced seasonally slower activity during the first quarter.

If we are unable to manage inventory at the right levels and with the appropriate assortment during these seasonal fluctuations or if the seasonality of our business changes, the conversion of consumer demand may be adversely impacted.

We generally do not have the right to return unsold products to our suppliers.

If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory valuation adjustments, liquidations or write-offs.

In addition, if we are required to lower sale prices in order to reduce inventory levels or to pay higher prices to our suppliers, our profit margins might be negatively affected.

Any failure to manage owned brand expansion or accurately forecast demand for owned brands could adversely affect growth, margins and inventory levels.

In addition, our ability to meet customer demand may be negatively impacted by a shortage in inventory or appropriate assortment due to reduced inventory purchases or disruptions in the supply chain.

Historically, a majority of our owned brand products and a substantial portion of the products we

source from third parties have been manufactured in China.

The COVID-19 pandemic and other factors and events have impacted, and will continue to impact, our supply chain and may delay or prevent and may also increase the cost to manufacture or transport product that is sourced in China.

Pressures continued at various times throughout 2022, with lockdowns in parts of China resulting in further disruptions to production, shipping and other commercial activity.

Other factors, such as a worsening of US-China relations, could also impact our supply chain and negatively impact the cost to source from China.

While we seek to further diversify our supply chain and sourcing, we may not be able to diversify in a cost-effective manner, or at all, which may materially and adversely affect our business, financial condition and operating results.

In addition, the supply chain worldwide has been impacted by COVID-19, Russia’s war against Ukraine, labor shortages and other factors and therefore, diversification of the supply chain and sourcing may not yield the targeted benefits.

Merchandise returns could harm our business.

We allow our customers to return products, subject to our return policy.

If the rate of merchandise returns increases significantly or if merchandise return economics become less efficient, our business, financial condition and operating results could be harmed.

Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns.

From time to time our products are damaged in transit, which can increase return rates and harm our brand.

We generally accept merchandise returns for full refund if returned within 60 days of the original purchase date and merchandise may be exchanged up to 90 days from the original purchase date.

Due to our liberal return policy and consumer behavior, we may experience heightened levels of returns such as those that we experienced in the second, third and fourth quarters of 2022, which have and may continue to negatively impact our operating results and financial position.

We have and may continue to experience increased levels of returns due to changes in consumer shopping behavior and discretionary spending as a result of changes in macroeconomic conditions or consumer confidence in future economic conditions, including levels of unemployment, the size and timing of federal stimulus programs, salaries and wage rates, increasing inflation, rising interest rates, recession and fears of recession, housing costs, energy and fuel costs, income tax rates and the timing of tax refunds, consumer perceptions of personal well-being and security, availability of consumer credit and consumer debt levels.

Consumer confidence, shopping behavior and spending have been and may continue to be negatively impacted by many factors beyond our control, including the COVID-19 pandemic and related economic impacts, supply chain disruptions, inflation, increasing interest rates and Russia’s war against Ukraine, which may adversely affect our business, operating results and financial condition.

Consumer spending habits for the merchandise we sell are affected by many factors beyond our control.

Currently, the repercussions from the ongoing COVID-19 pandemic present significant risks and uncertainty.

There is significant uncertainty over potential changes in consumer behavior and shopping patterns as the pandemic continues and as different regions experience new surges.

Pressures continued at various times throughout 2022, with lockdowns in parts of China resulting in further disruptions to production, shipping and other commercial activity.

Russia’s war against Ukraine has resulted in the imposition of unprecedented, potentially prolonged, economic sanctions on Russia and other responses from the United States and other countries.

This has also resulted in significant macroeconomic consequences, risks and uncertainties, including increased fuel and energy prices and depressed financial markets.

Other factors affecting consumers’

disposable income and confidence in future economic conditions include levels of unemployment, the size and timing of federal stimulus programs, salaries and wage rates, prevailing economic conditions, increasing inflation, rising interest rates, recession and fears of recession, housing costs, energy and fuel costs, income tax rates and the timing of tax refunds, consumer perceptions of personal well-being and security, availability of consumer credit and consumer debt levels.

The COVID-19 pandemic, Russia’s war against Ukraine and other potential, adverse developments in any of these areas, could lead to a reduction in the demand for our merchandise, increase our cost of goods, freight cost and payroll costs, decrease our inventory turnover, cause greater markdowns and otherwise adversely affect our business, operating results and financial condition.

The COVID-19 pandemic has materially adversely affected, and may continue to adversely affect, our business, financial position, results of operations and growth prospects.

The COVID-19 pandemic has had, and may continue to have, severe negative repercussions across local, state and national economies, financial markets and our industry.

Our employees, suppliers and customers are located in areas affected by the COVID-19 pandemic, which has subjected us to many risks, including the impact from:

The COVID-19 pandemic has subjected us to many risks, including the impact from:

business restrictions and social distancing mandates, which have caused us to adjust how we operate our business;

the cancellation of large, in-person brand marketing events, including the #REVOLVEfestival, which have historically driven customer acquisition and demand for our merchandise, and the relatively increased expense and lower return from hosting smaller in-person events;

the cancellation of large, in-person brand marketing events in 2020 and 2021, including the #REVOLVEfestival, which have historically driven customer acquisition and demand for our merchandise, and the relatively increased expense and lower return from hosting smaller in-person events;

changes in consumer behavior, confidence and discretionary spending;

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supply chain disruptions;

increase in the cost of goods due to an increase in the cost of materials as well as an increase in the cost of freight on inbound shipments due to various supply chain challenges across the industry and world;

increase in the cost of goods due to an increase in the cost of materials;

positive COVID-19 cases at our facilities;

a global slowdown and profound economic uncertainty.

In addition, as a result of the COVID-19 pandemic, the vast majority of our corporate employees continue to work remotely.

It is possible that continued widespread remote work arrangements may have a negative impact on our operations, the execution of our business plans, the productivity and availability of key personnel and other employees necessary to conduct our business, and on third -party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices necessitated by the COVID-19 pandemic and related governmental actions.

In addition, the majority of our corporate employees continue to work remotely most days of the work week.

It is possible that continued widespread remote work arrangements may have a negative impact on our operations, the execution of our business plans, the productivity and availability of key personnel and other employees necessary to conduct our business, and on third-party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices.

If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’

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The increase in remote working may also result in privacy, data security, and fraud risks, and our understanding of applicable legal and regulatory requirements, as well as the latest guidance from regulatory authorities in connection with the COVID-19 pandemic, may be subject to legal or regulatory challenge, particularly as regulatory guidance evolves in response to future developments.

The ultimate scope and duration of the COVID-19 pandemic’s impact on the global economy and our industry are difficult to predict.

There can be no assurances that the actions we have already taken or will take in response to the COVID-19 pandemic will prevent or mitigate any associated risks or repercussions.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration, spread and severity of the pandemic, the availability, effectiveness and uptake of vaccines for COVID-19, the emergence of new variants of COVID-19 and whether existing vaccines are effective over the long term and with respect to such variants, the actions to contain the disease or mitigate its impact, and the duration, timing and severity of the impact on customer behavior, including any recession resulting from the pandemic, all of which are unpredictable.

An extended period of economic disruption as a result of the COVID-19 pandemic would have a

material negative impact on our business, financial position, results of operations and growth prospects.

An extended period of economic disruption as a result of the COVID-19 pandemic would have a material negative impact on our business, financial position, results of operations and growth prospects.

The COVID-19 pandemic may also intensify the risks described in the other risk factors disclosed in this report.

If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely and cost-effective manner, our business, financial condition and operating results could be harmed.

The retail industry is driven in part by fashion and beauty trends, which may shift quickly.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer preferences for products, consumer attitudes toward our industry and brand and where and how consumers shop for those products.

We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, maintain a favorable mix of products and develop our approach as to how and where we market and sell our products.

Failure to respond to changing customer preferences and fashion trends could negatively impact our brand image with our customers and result in diminished brand loyalty.

We have an established process for the identification, development, evaluation and validation of our new products.

Nonetheless, each new product launch involves risks, as well as the possibility of unexpected consequences.

For example, sales of our new products may not be as high as we anticipate, due to lack of acceptance of the products themselves or their price or limited effectiveness of our marketing strategies.

In addition, our ability to launch new products may be limited by delays or difficulties affecting the ability of our suppliers or manufacturers to timely manufacture, distribute and ship new products.

Sales of new products may also be affected by inventory management.

We may also experience a decrease in sales of certain existing products as a result of newly-launched products.

Any of these occurrences could delay or impede our ability to achieve our sales objectives, which could have a material adverse effect on our business, financial condition and operating results.

We typically enter into agreements to manufacture and purchase our merchandise in advance of trends, shifts in customer preference and typical selling seasons.

Our failure to anticipate, identify or react appropriately or in a timely manner to changes in customer preferences, tastes and trends or economic conditions, could lead to, among other things, missed opportunities, excess inventory or inventory shortages, markdowns, valuation adjustments, liquidations and write-offs, any of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and operating results.

For example, as consumer demand trends improved in 2021 and through the first quarter of 2022, we invested heavily in inventory to meet the robust demand.

However, during the remainder of 2022, consumer demand trended down significantly, resulting in an increase in our inventory balance.

We continue to balance our inventory levels based on shifts in demand, but we may not be able to respond quickly enough to adjust our inventory position accordingly, which may have an adverse impact on our operating results.

As part of our ongoing business strategy, we expect we will need to continue to introduce new products in our traditional product categories of apparel, footwear, accessories and beauty products, while also expanding our product launches into adjacent categories in which we may have little to no operating experience.

The success of product launches in adjacent categories could be hampered by our relative inexperience operating in such categories, the strength of our competitors or any of the other risks referred to above.

Furthermore, any expansion into new product categories may prove to be an operational and financial constraint which inhibits our ability to successfully accomplish such expansion.

Our inability to introduce successful products in our traditional categories or in adjacent categories could limit our future growth and have a material adverse effect on our business, financial condition and operating results.

There is no assurance that consumers will continue to purchase our products in the future.

Customers may consider our offerings to be premium products and purchase fewer or lower-priced products if their discretionary income decreases.

During periods of economic uncertainty, we may need to reduce prices in response to competitive pressures or otherwise in order to maintain sales, which may adversely affect margins and profitability.

Our business depends on our ability to maintain a strong community of brands, engaged customers and influencers.

We may not be able to maintain and enhance our existing brand community if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’

We may not be able to maintain and enhance our existing brand community if we receive customer or influencer complaints, negative publicity or otherwise fail to live up to consumers’

expectations, which could materially adversely affect our business, operating results and growth prospects.

Over the course of 2021, we offered over 850 emerging and established brands through REVOLVE, including 30 brands developed and owned by us, which we refer to as owned brands, and almost 400 brands through FWRD.

Over the course of 2022, we offered over 900 emerging and established brands through REVOLVE, including 31 brands developed and owned by us, which we refer to as owned brands, and over 400 brands through FWRD.

Our ability to identify new brands and maintain and enhance our relationships with our existing brands is critical to expanding our base of customers and retaining our existing customers.

Third-party brands, particularly in the luxury sector, are increasingly limiting wholesale distribution, shifting to selling directly to the consumer.

Furthermore, the impact of the COVID-19 pandemic on the ecosystem of emerging and established brands is unpredictable.

We recently launched a handbag buyback program on FWRD, extending the life cycle of luxury handbags sold on FWRD.

If our third-party brand partners perceive this program negatively, our relationships may be damaged and our ability to obtain future products from our brand partners may be limited.

Furthermore, the impact of macroeconomic factors, such as inflation and supply chain challenges, on the ecosystem of emerging and established brands is unpredictable.

If we are unable to maintain an assortment of brands and styles that resonates with our customer, our operating results and brand could be negatively impacted.

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expectations, our business may suffer irreparable damage.

If these third parties increase their rates or add incremental surcharges, our costs may increase which could have a material adverse impact on our financial results.

In addition, the COVID-19 pandemic and other events have negatively impacted the global supply chain.

In addition, macroeconomic events have negatively impacted and may continue to impact the global supply chain.

If our third-party service providers are negatively impacted and they are not able to meet our or our customers’

expectations or if rates increase, our operating results and our brand may be negatively impacted.

expectations or if rates increase, our operating

results and our brand may be negatively impacted.

In addition, maintaining and enhancing relationships with third-party brands may require us to make substantial investments and these investments may not be successful.

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Maintaining and enhancing our brands will depend largely on our ability to provide high quality products to our customers and a reliable, trustworthy and profitable sales channel to our vendors, which we may not do successfully.

Customer complaints or negative publicity about our sites, products, product delivery times, customer data handling and security practices, customer support or other actions taken by us, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

Customer and influencer complaints or negative publicity about our sites, products, product delivery times, customer data handling and security practices, customer support, brand marketing events or other actions taken by us, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

We believe that much of the growth in our customer base to date has originated from social media and our influencer-driven marketing strategy.

As a result of COVID-19-related travel restrictions and social distancing measures, our ability to engage with consumers through activations such as #REVOLVEfestival, #REVOLVEaroundtheworld and other large scale in-person activities that we have used to acquire customers and drive sales were significantly reduced in 2020 and certain periods during 2021.

With recent easing of restrictions, we have been able to host in-person events with reduced attendance capacity such as The REVOLVE Gallery and the Dundas Fashion Show.

However, these reduced capacity events may be less impactful and our ability to continue to conduct these in-person events is uncertain.

If our shifts in marketing to address these restrictions and changes in consumer behavior and preferences are not effective, our operating results will be adversely affected.

Over the long term, if we are not able to develop and maintain positive relationships with our large network influencers, our ability to promote and maintain awareness of our sites and brands and leverage social media platforms to drive visits to our sites may be adversely affected.

Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.

With the easing of restrictions, we have been able to host larger scale in-person events such as #REVOLVEfestival and the REVOLVE Gallery.

However, it is possible that these events and events like them may be less impactful in the future and our ability to conduct in-person events is uncertain.

If our shifts in marketing to address potential restrictions and changes in consumer behavior and preferences are not effective, our operating results will be adversely affected.

Over the long term, if we are not able to develop and maintain positive relationships with our large network of influencers, our ability to promote and maintain awareness of our sites and brands and leverage social media platforms to drive visits to our sites may be adversely affected.

Use of social media and influencers may materially and adversely affect our reputation or subject us to tax obligations, fines or other penalties.

We use third-party social media platforms as, among other things, marketing tools.

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We also maintain relationships with thousands of social media influencers and engage in sponsorship initiatives.

As existing eCommerce and social media platforms continue to rapidly evolve and new platforms develop, and as customer behavior changes as a result of the

COVID-19 pandemic, we must continue to maintain a presence on these platforms and establish presences on new or emerging popular social media platforms.

If we are unable to cost-effectively use social media platforms as marketing tools or if the social media platforms we use change their policies or algorithms, we may not be able to fully optimize such platforms, and our ability to maintain and acquire customers and our financial condition may suffer.

Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of social media platforms, our ability to use certain platforms as marketing tools may become limited or restricted, which could adversely impact our business and operating results.

The failure by us, our employees, our network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations in the use of social media platforms or otherwise could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and operating results.

In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.

As existing eCommerce and social media platforms continue to rapidly evolve and new platforms develop, and as customer behavior and preferences evolve, we must continue to adapt to maintain an effective and authentic presence on these platforms and establish presences on new or emerging popular social media platforms.

If we are unable to cost-effectively use social media platforms as marketing tools and effectively engage with our customers, our ability to maintain and acquire customers and our financial condition may suffer.

In addition, social media platforms we use have and may continue to change their policies or algorithms, leading to shifts in the level of video and recommended content, which may impact our ability to fully optimize such platforms.

Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of social media platforms, our ability to use certain platforms, including TikTok in particular, as marketing tools may become limited or restricted, which could adversely impact our business and operating results.

The failure by us, our employees, our network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations in the use of social media platforms or otherwise, including intellectual property laws and tax reporting and compliance requirements, could subject us to regulatory investigations, class action lawsuits, liability, taxes, fines or other penalties and have a material adverse effect on our business, financial condition and operating results.

In addition, an increase in the use of social media for product promotion and marketing may increase the risk that such content could contain problematic product or marketing claims in violation of applicable regulations.

For example, in some cases, the FTC has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.

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Influencers with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us.

It is not possible to prevent such behavior and the precautions we take to detect this activity may not be effective in all cases.

It is not possible to prevent such behavior and the precautions we take to detect this activity may not be effective in

Our target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy.

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Failure to continue to obtain or maintain high-quality endorsers of our products could harm our business.

We establish relationships with both celebrity endorsers and design, celebrity and brand collaborators to develop, evaluate and promote our products as well as strengthen our brand.

We establish and maintain relationships with both celebrity endorsers and design, celebrity and brand collaborators in order to develop, evaluate and promote our products as well as strengthen our brand.

In a competitive environment, the costs associated with establishment and retention of these relationships may increase and there can be no assurance that our investments and efforts will ultimately result in new customers or increased sales to existing customers.

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If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers.

are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive leverage and efficiency with our suppliers, our net sales may decrease, and our business, financial condition and operating results may be materially adversely affected.

As social media and influencer-based marketing gains popularity, the market for these channels has become increasingly competitive.

If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive leverage and efficiency with our suppliers, our net sales may decrease, and our business, financial condition and operating results may be materially adversely affected.

The market for social media and influencer based marketing has become increasingly competitive.

We believe we have maintained the effectiveness and efficiency of these channels in recent periods;

however, if competition continues to increase, it may impact our operating results.

We also seek to engage with our customers and build awareness of our brands through sponsoring unique events and experiences such as #REVOLVEfestival, #REVOLVEaroundtheworld, #REVOLVEawards and the REVOLVE Gallery, as well as short-term pop-up retail experiences.

We also seek to engage with our customers and build awareness of our brands through sponsoring unique events and experiences such as #REVOLVEfestival, #REVOLVEaroundtheworld and the REVOLVE Gallery, as well as short-term pop-up retail experiences.

Our marketing initiatives have and may continue to become increasingly expensive as competition increases and generating a meaningful return on those initiatives may be difficult.

In addition, several of such events have been, and may in the future be, postponed, significantly modified or cancelled in response to the COVID-19 pandemic.

Furthermore, it is uncertain whether the behavior of our target demographics will change as a result of the pandemic in a manner that makes such events less effective.

If our marketing efforts are not successful in promoting awareness of our brands and products, driving customer engagement or attracting new customers, or if we are not able to cost-effectively manage our marketing expenses, our operating results will be adversely affected.

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We also use paid and non-paid advertising.

We acquire and retain customers through paid search and product listing ads, paid social media marketing, affiliate marketing, retargeting, personalized email marketing and mobile “push”

We acquire and retain customers through paid search and product listing ads, affiliate marketing, paid social media marketing, retargeting, personalized email marketing and mobile “push”

communications through our mobile apps.

If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers and our financial condition would suffer.

Our ability to acquire customers in a cost-effective manner also depends on the rates we are charged by various third parties on which we rely, including vendors, suppliers and logistics providers such as UPS, FedEx and DHL.

When these third parties increase their rates or add incremental surcharges, it increases our costs.

If these third parties

continue to increase their rates and add surcharges, and we do not seek to pass them on to our customers, our financial results could be materially adversely impacted.

If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results.

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If existing customers no longer find our offerings appealing, or if we are unable to timely update our offerings to meet current trends and customer demands, our existing customers may make fewer or smaller purchases in the future.

The COVID-19 pandemic also initially adversely impacted our ability to retain existing customers.

A decrease in the number of our customers who make repeat purchases or a decrease in their spending on the merchandise we offer could negatively impact our operating results.

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If we fail to generate repeat purchases or maintain high levels of customer engagement and average order value, our growth prospects, operating results and financial condition could be materially adversely affected.

We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.

Our business requires us to manage a large volume of inventory effectively.

We add new apparel, footwear, accessories and beauty styles to our sites every week and we depend on our forecasts of demand for and popularity of various products to make purchase decisions and to manage our inventory of stock-keeping units.

Demand for products, however, can change significantly between the time inventory is ordered and the date of sale.

Demand may be affected by, among other things, the COVID-19 pandemic and events like it, seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, political instability and social unrest, and our consumers may not purchase products in the quantities that we expect.

Seasonality in our business has not historically followed that of traditional retailers, such as typical concentration of net sales in the holiday quarter.

We believe our historical results have been impacted by a pattern of increased sales leading up to #REVOLVEfestival in April and during May and June, which results in peak sales during the second

quarter of each fiscal year.

We have experienced seasonally slower activity during the first quarter.

As a result of the COVID-19 pandemic and the postponement and cancellation of several events such as #REVOLVEfestival in 2020 and 2021, our seasonality has not followed typical patterns in recent periods.

The duration of COVID-19 is highly uncertain and if large scale in-person events such as #REVOLVEfestival are postponed or cancelled, our seasonality will likely be impacted in 2022 and potentially beyond.

It may be difficult to accurately forecast demand and determine appropriate levels of product to purchase.

We generally do not have the right to return unsold products to our suppliers.

In addition, if we are required to lower sale prices in order to reduce inventory levels or to pay higher prices to our suppliers, our profit margins might be negatively affected.

Any failure to manage owned brand expansion or accurately forecast demand for owned brands could adversely affect growth, margins and inventory levels.

In addition, our ability to meet customer demand may be negatively impacted by a shortage in inventory or appropriate assortment due to reduced inventory purchases or disruptions in the supply chain due to a number of factors, including the COVID-19 pandemic and shipping delays.

Historically, a majority of our owned brand products and a substantial portion of the products we source from third parties have been manufactured in China.

In addition, COVID-19 has impacted the supply chain worldwide and therefore, diversification of the supply chain and sourcing may not yield the targeted benefits.

Merchandise returns could harm our business.

We allow our customers to return products, subject to our return policy.

If the rate of merchandise returns increases significantly or if merchandise return economics become less efficient, our business, financial condition and operating results could be harmed.

Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns.

From time to time our products are damaged in transit, which can increase return rates and harm our brand.

We generally accept merchandise returns for full refund if returned within 30 days of the original purchase date and for exchange up to 60 days from the original purchase date.

Given the interruptions related to the COVID-19 pandemic, we instituted a policy that merchandise returns will be accepted for full refund if returned within 60 days of the original purchase date and may be exchanged up to 90 days from the original purchase date.

Due to this extension of the return period and as pandemic-related restrictions are lifted, we may experience heightened levels of returns, which may negatively impact our operating results and financial position.

Our business, including our costs and supply chain, is subject to risks associated with sourcing, manufacturing and warehousing.

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We may not be able to pass increased prices on to customers, which could adversely affect our operating results.

As a result of the COVID-19 pandemic, we experienced a delay in the manufacturing and delivery of goods to us.

In the event of an extended and significant disruption in the supply of the fabrics or raw materials used in the manufacture of the merchandise we offer as a result of the COVID-19 pandemic or otherwise, we and the vendors that we work with might not be able to locate alternative suppliers of materials of comparable quality at the right time and at an acceptable price.

In addition, merchandise and materials we receive from vendors and suppliers may not be of sufficient quality or free from damage or such merchandise may be damaged during shipping, while stored in our fulfillment center or when returned by customers.

We may incur additional expenses and our reputation could be harmed if customers and

potential customers believe that our merchandise does not meet their expectations, is not properly labeled or is damaged.

As a result of supply chain challenges due to a number of factors, including the COVID-19 pandemic, Russia’s war against Ukraine, lockdowns in China, port closures and labor shortages, we have experienced delays in the manufacturing and delivery of goods to us.

In the event of an extended and significant disruption in the supply of the fabrics or raw materials used in the manufacture of the merchandise we offer, we and the vendors that we work with might not be able to locate alternative suppliers of materials of comparable quality at the right time and at an acceptable price.

We may incur additional expenses and our reputation could be harmed if customers and potential customers believe that our merchandise does not meet their expectations, is not properly labeled or is damaged.

We rely on third-party suppliers, manufacturers, distributors and other vendors and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

We do not own or operate any manufacturing facilities.

We use multiple third-party suppliers and manufacturers based primarily in China and, to a lesser extent, the United States and other countries, including India, to source and manufacture all of our products under our owned brands.

The outbreak of COVID-19 led to the temporary closure and reduced capacity of our manufacturing partners for a period of time, which resulted in delayed delivery of product to us.

COVID-19 outbreaks in key regions have led to and may continue to lead to the temporary closure and reduced capacity of our manufacturing partners for a period of time, which results in delayed delivery of product to us.

Pressures continued at various times throughout 2022, with lockdowns in parts of China resulting in further disruptions to production, shipping and other commercial activity.

Other factors, such as a worsening of US-China relations, could also impact our supply chain and negatively impact the cost to source from China.

While we have maintained long-standing relationships with many of our largest suppliers, we engage our third-party suppliers and manufacturers on a purchase order basis and are not party to long-term contracts with any of them.

The ability of these third parties to supply and manufacture our products may be affected by competing orders placed by other customers and the demands of those customers.

If we experience significant increases in demand, or need to replace a significant number of existing suppliers or manufacturers, there can be no assurance that additional supply and manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer will allocate sufficient capacity to us in order to meet our requirements.

supplier or manufacturer will allocate sufficient capacity to us in order to meet our requirements.

Furthermore, our reliance on suppliers and manufacturers outside of the United States, the number of third parties with whom we transact and the number of jurisdictions to which we sell complicates our efforts to comply with customs duties and excise taxes;

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be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products;

have financial difficulties;

have financial difficulties, including as a result of negative economic conditions;

encounter raw material or labor shortages;

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If we are not able to negotiate acceptable pricing and other terms with these entities or if they experience capacity constraints, performance problems or other difficulties, it could negatively impact our operating results and our customer experience.

In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by public health crises, including the COVID-19 pandemic, inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war, including the current conflict in Ukraine, or terrorism, trade embargoes, customs and tax requirements, political crises and social unrest, and similar factors.

Furthermore, volatility in the global oil markets has resulted in higher fuel prices, which many shipping companies have passed on to their customers by way of increased fuel surcharges.

We have recently experienced increased shipping costs as a result, and these costs may continue to increase in the future.

We have not directly passed these increased costs on to our customers, which may adversely impact our operating results.

We may choose to directly pass such cost increases on to our customers in the future, which may impact the conversion of demand for our product.

We may not be able to pass such increases on to our customers.

In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by public health crises, including the COVID-19 outbreaks, inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war, including Russia’s war against Ukraine, or terrorism, trade embargoes, customs and tax requirements, political crises and social unrest, and similar factors.

For example, strikes at major international shipping ports have in the past impacted our supply of inventory from our vendors.

Trade disputes between the United States and China have and may continue to lead to increased tariffs on our goods and restrict the flow of the goods between the United States and China.

The COVID-19 pandemic caused delayed shipments from our manufacturing partners and other third-party suppliers, initially in China, but over time impacting third parties worldwide.

Trade disputes between the United States and China have and may continue to lead to increased tariffs on our goods and restrict the flow of our goods between the United States and China.

COVID-19 outbreaks have caused and may continue to cause delayed shipments from our manufacturing partners and other third-party suppliers.

Pressures continued at various times throughout 2022, with lockdowns in parts of China resulting in further disruptions to production, shipping and other commercial activity.

We are also subject to risks of damage or loss during delivery by our shipping vendors.

If our merchandise is not delivered in a timely fashion or is damaged or lost during the delivery process, our customers could become dissatisfied and cease shopping on our sites, which would adversely affect our business and operating results.