Reformation (NYSE:REF) raised its full-year revenue outlook after reporting 19.1% sales growth in the third quarter of 2026, as the fashion retailer gained customers and expanded its store network.
Net revenue rose to $173.6 million, marking the company’s 22nd consecutive quarter of double-digit growth. Adjusted earnings before interest, taxes, depreciation and amortization increased 64.2% to $23.1 million, with the adjusted EBITDA margin expanding to 13.3% from 9.6% a year earlier.
The company reported a net loss of $1.1 million, or $0.02 per share, compared with net income of $5 million, or $0.10 per diluted share, a year earlier. Chief Financial Officer Joshua Moore said the loss reflected a 165.9% effective tax rate, primarily driven by discrete tax items related to limits on the deductibility of executive and associated stock-based compensation.
Customer growth supports sales gains
Direct-to-consumer revenue increased 16.7% to $152.8 million, while wholesale and other revenue rose 40.8% to $20.8 million. Moore said wholesale results benefited from stronger and earlier-than-anticipated demand ahead of the holiday season.
Active customers over the last 12 months grew approximately 23.4% to 1.25 million. Direct-to-consumer net revenue per customer slipped 0.5% to $419, which executives attributed to a higher mix of new customers, who typically spend less initially than returning shoppers.
Chief Executive Officer Hali Borenstein said new customers typically almost double their spending in their second year with the brand, followed by mid-single-digit increases in subsequent years. Existing customers account for approximately 70% of revenue, she said.
International revenue increased 24.7% to $36.4 million, while U.S. revenue rose 17.7% to $137.2 million. The company ended the quarter with 12 international stores across the U.K., Canada and France.
Margins expand as inventory rises
Gross margin increased 250 basis points to 60.4%, helped primarily by lower average tariff rates and higher average unit retail prices. Approximately $800,000 in net refunds from vendors for previously paid IEEPA tariffs contributed 50 basis points to the improvement, Moore said.
Operating expenses increased 31.3% to $97.5 million. Moore said selling, general and administrative expenses included $10.5 million in higher initial-public-offering-related stock-based compensation, as well as higher shipping, store and public-company costs.
Quarter-end inventory rose 36% to $83.8 million. Moore said approximately one-third of the increase reflected investments in raw materials, while the remainder supported new stores, broader growth and a seasonal inventory build. Excluding new stores, finished-goods inventory grew in line with sales, he said.
Store expansion and faster merchandising
Reformation opened seven stores during the quarter, including the reopening of its Pacific Palisades location following the 2025 wildfire, bringing its total to 77. It has since opened locations in Marin and Birmingham, Alabama, and plans another in Kansas City, which would bring its year-end store count to 80.
Borenstein said the company sees a path to more than doubling its store count over the next five years. In San Jose, where a store opened in September, the direct-to-consumer revenue growth rate increased by approximately 30% and the new-customer growth rate rose 90% in the six weeks after opening compared with the preceding six weeks, she said.
The company is also using new AI-enabled tools to forecast demand for repeat orders and allocate production across factories. Borenstein said the tools draw on data from stores and digital channels to improve projections and help determine where products should be manufactured.
She said roughly half of Reformation’s product arrives within 60 days or less on average, with repeat production taking as little as 15 to 45 days. The company used that approach to respond to demand for its Olina Cropped Pant, recutting the style in 21 days and expanding its fabric into additional silhouettes.
Revenue outlook raised
For full-year 2026, Reformation now expects revenue of $610 million to $612 million, representing approximately 20% to 21% growth. It expects an adjusted EBITDA margin of approximately 14.2%, at the high end of its previous guidance range.
Moore said the outlook assumes continued gross-margin expansion from lower tariffs, higher average unit retail prices and full-price selling. It does not include anticipated tariff refunds. The company also expects nearly $2.5 million in incremental fourth-quarter stock-based compensation and public-company costs, partly offset by leverage on higher sales.
Borenstein said October was off to a strong start, but Moore noted that more than two-thirds of the fourth-quarter selling period remained ahead and described the outlook as prudent given a strong comparison with last year’s holiday season and a dynamic macroeconomic environment.
About Reformation (NYSE:REF)
Reformation is a fashion company that designs and sells women’s clothing, footwear, accessories and related products. Its assortment includes dresses, tops, denim, knitwear, outerwear, shoes, handbags and wedding apparel, with products offered through its direct-to-consumer website and retail stores.
Founded in 2009 by Yael Aflalo, Reformation built its brand around combining contemporary style with sustainability-focused production practices. The company has emphasized the use of lower-impact materials, reuse of vintage garments and deadstock fabrics, and efforts to reduce the environmental impact of its operations and supply chain.
Reformation serves customers in the United States and internationally through its online platform and a network of retail locations.
