Reformation (NYSE: REF) reported second-quarter fiscal year 2026 net revenue of $155.2 million, a 24% increase year-over-year. Adjusted EBITDA grew 54% to $25.4 million, expanding the margin to 16.4% from 13.2% in the prior-year period.

The sustainable fashion retailer delivered its 21st consecutive quarter of double-digit revenue growth. International sales surged 37% year-over-year, while the company successfully completed its initial public offering (IPO), generating $132.2 million in net proceeds.

Financial Performance

Revenue growth was driven by both direct-to-consumer (DTC) and wholesale channels. DTC net revenue increased 21.2% to $135.3 million, supported by a 23% rise in active customers to 1.2 million on a last-twelve-months (LTM) basis. Wholesale and other net revenue jumped 48.7% to $19.9 million.

Gross margin improved by 230 basis points to 66.7%, up from 64.4% in the same quarter last year. Management attributed this expansion to lower blended tariff rates and higher average unit retail (AUR) prices. Total operating expenses rose 24.2% to $84.4 million, remaining flat as a percentage of revenue at 54.4%.

Balance Sheet and Liquidity

The company’s IPO proceeds were primarily used to reduce leverage. Approximately $110 million of the $132.2 million net primary proceeds were applied to debt repayment. As of August 24, 2026, total debt stood at $136.7 million, bringing the net leverage ratio to approximately 0.9 times.

Cash and cash equivalents ended the quarter at $76.6 million. Inventory increased 25.7% to $81.8 million, reflecting preparations for new store openings and sales growth. Capital expenditures for the quarter totaled $8.4 million.

What the Numbers Show

The divergence between customer count growth and per-customer spending highlights Reformation’s current acquisition strategy. While active customers grew 23%, LTM DTC net revenue per customer fell 1.4% to $417. This decline is driven by the influx of new customers who naturally spend less than tenured buyers. However, management noted that returning customers spent nearly twice as much as new ones in 2025, suggesting that the blended per-customer metric will recover as these new cohorts mature.

Strategic Initiatives

Reformation is accelerating its physical footprint, having opened six stores in 2026 so far. The company aims to open 15-16 total stores by year-end, targeting a doubling of its store count over the next five years. International expansion remains a key pillar, with significant growth observed in the UK, Canada, and France.

For full-year 2026, Reformation expects net revenue between $602 million and $606 million, representing approximately 18.6% to 19.5% growth. Adjusted EBITDA margin is projected at 14% to 14.2%.

William Blair analyst Dylan Carden initiates coverage on Reformation (NYSE: REF) with an Outperform rating.

The investment bank’s decision marks the beginning of formal analyst tracking for the sustainable fashion retailer, which is listed on the New York Stock Exchange under the ticker symbol REF.

Coverage Details

Dylan Carden, the analyst at William Blair, assigned the Outperform rating upon initiating coverage. This classification typically suggests that the stock is expected to outperform its peer group or benchmark index over a specific period, though no specific price target or time horizon was disclosed in the source material.

Reformation continues to operate within the competitive apparel sector, where investor sentiment often hinges on brand loyalty, supply chain sustainability, and margin management. The initiation of coverage by William Blair adds to the institutional visibility of the company.