Official name: RVRC Holding Ab
Domicile and stock exchange: Borås, Sweden, and NASDAQ Stockholm (mid-cap). Listed in July 2021. The company was founded in 2013.
Ticker: RVRC
Business: Online retailer of outdoor clothing, Direct-To-Consumer. www.revolutionrace.fi corporate.revolutionrace.com
Fast-growing, easily scalable, profitable, with significant founder ownership and active founders in company management.
CEO: Pernilla Nyrensten
Special note: Nyrensten is the first female founder and CEO to take her company public on the Stockholm Stock Exchange in its 160-year history. Fiscal year: July 1 - June 30.
Share price at the time of writing the opening post on June 14, 2022: 55.00 SEK. The company’s market capitalization at today’s price is 7.2 billion SEK. Revenue for the calendar year 2021 was 1,164 million SEK, and adjusted EBIT was 28.7 percent. The IPO subscription price was 75 SEK per share in July 2021.
I am opening this thread for the Swedish outdoor brand RevolutionRace. The company has an interesting story, my own experiences with their online store have been positive, it has ambitious goals, and the company is profitable. I see a lot of growth opportunities for the company. Its founders, Pernilla Nyrensten and Niclas Nyrensten, are outdoor enthusiasts who noticed a lack of affordable, functional, and good-looking outdoor clothing on the market. They founded the company in 2013 as a garage startup to fill this gap. From the beginning, they have utilized customer feedback in their product development, and today, a community has developed around the brand, similar to an Inderes (Finnish investor community) community, with over 340,000 product reviews published on the company’s website. The brand seems to have many fans, evidenced by the fact that when RR launched its first hiking shoe collection in December 2021, they sold out in two days. The company has online stores in 18 countries and also has company pages on Amazon in Germany and the UK. The most important market areas are German-speaking Europe and the Nordic countries.
Business model
RevolutionRace does not manufacture clothes itself; instead, products are manufactured through subcontractors in China and Vietnam. Products are sold directly to consumers via the online store without intermediaries, i.e., direct-to-consumer. According to the company: “Our business model is actually quite simple. We sell outdoor clothing exclusively online, directly to our customers. By eliminating retailers and other unnecessary intermediaries, we can bring our new products to market faster. While other brands typically take a year to develop a new product, it only takes us six months. A faster, more direct process without intermediaries means we can offer quality clothing at a reasonable price.”
Another successful D2C online store that comes to mind is the German bicycle manufacturer Canyon. Maailmanluokan maantie-, gravel- ja maastopyörät | CANYON FI
Both have successfully established themselves in industries where customers may have been accustomed to personalized service from specialty stores. Both companies benefit from a good price-quality ratio and a wide product selection. D2C clearly brings pricing power to the market compared to traditional players. In the bicycle industry, Canyon has inspired several manufacturers to follow the same business model, especially for enthusiast bikes.
Growth
Sales are flowing like a river. Revenue has grown from 284 million SEK in the fiscal year July 1, 2018 – June 30, 2019, to 1.1 billion SEK in calendar year 2021. The goal is to continue growing to at least 2 billion SEK by the fiscal year July 1, 2023 – June 30, 2024. Growth has largely occurred in existing markets, but new online stores (countries) have also been opened. Most recently, Switzerland in the autumn and Estonia in the spring. The launches have been successful. It is easy to see growth opportunities by expanding into new target groups and product categories. In December 2021, hiking shoes were launched and sold out in two days. In the spring, a backpack collection was launched, which has also sold well and received good reviews. Geographically, new markets are available. The easiest market area is certainly Europe. No acquisitions have been made in history, so all growth is organic.
In the first quarter of 2022, growth no longer occurred in the Nordic countries. In the “corona hangover,” the entire market declined by approximately 14 percent, meaning RR, by maintaining its sales, increased its market share. Revolution’s market share in the Nordic countries is about 2.5 percent and in Germany 1 percent. Sales in German-speaking Europe continued to grow.
Growth opportunities include opening new online stores (countries) somewhat “Evolution-style” (referencing Evolution Gaming, a successful online gaming company that expanded globally). This means expanding into new product categories and increasing market share. Opportunities are easy to see, provided that the overall market does not decline significantly.
Profitability
Adjusted EBIT for calendar year 2022 was 28.7 percent. In the quarter ending December 31, 2021, adjusted EBIT was 28.9 percent. In its interim report, RevolutionRace warned that transportation availability would increase costs and slow down deliveries, affecting profitability. RR believes this situation will continue this quarter. The company aims for an EBIT margin of over 25 percent in the future. The company’s profit has been positive throughout the monitoring period.
Dividend distribution
Dividend distribution of 40-60 percent of distributable earnings. For the fiscal year July 1, 2020 – June 30, 2021, 0.67 SEK per share.
Risks
RevolutionRace has benefited from the COVID-19 pandemic. A record number of pet dogs have been purchased, and national parks are full of RevolutionRace outdoor gear. People haven’t been keen to go to shopping malls, so online purchases have been easy to make. The “corona hangover” has already been visible in the Nordic markets, where the overall market has shrunk by almost 12 percent, while RR’s sales have remained constant. I believe that outdoor clothing is at the top of the list of purchases to be cut when consumer purchasing power weakens, but on the other hand, there is a shift from more expensive brands to products with a better price-quality ratio. At the time of the IPO, Dagens Industri clearly took a stance on the risk of brand burnout. It noted that there have often been examples of rapid rises and falls of fashion brands. At this point, it is necessary to assess whether a hiking clothing brand is different.
Analyst coverage
Carnegie: Buy with a target price of 95 SEK as of May 11, 2022.
Nordea: Buy with a target price of 105 SEK as of Feb 9, 2022.
Comparables
USWE P/E 32
MIPS P/E 55
Musti Group P/E 26
Boozt P/E 32
RVRC P/E 23
My own experiences
I first came across RevolutionRace’s website through Facebook marketing a few years ago. I wondered about the customer reviews, how good one pair of pants could be. Soon after adopting the hiking pants, I wrote a similar review. Since then, I have bought all my outdoor clothing from here. Sometimes making a purchase has been limited by the lack of suitable sizes.
Some of the material translated from Swedish, so in addition to all other errors, translation errors are also possible.
