Jim Cramer called Reformation Inc. (NYSE:REF) an “intriguing story” during the September 30 episode of Mad Money, pointing to the apparel company’s rapid growth, high margins, and direct-to-consumer model. But Cramer also emphasized that fashion is a difficult business and described it as a speculative investment because trends can change quickly.
Reformation Is Growing Quickly With High Margins
In Q2, Reformation Inc.’s gross margin expanded to 66.7% from 64.4% a year earlier. We discussed the rest of the company’s financial results and guidance in our article, Jim Cramer on Reformation (REF): “It Should Be Higher Than It Is.” During the September 30 episode, Cramer focused heavily on those margins and how they compare with established apparel companies, as he discussed:
Alright, so you’re probably asking, great growth, but are they making any money? Reformation’s had solid gross margins in the mid-60% range. In the latest quarter, they came in 66.7%. These numbers have been a bit noisy thanks to the Trump tariffs, the Supreme Court’s tariff refunds, but now most of that seems settled. For comparison, Ralph Lauren, which I consider to be the gold standard, has gross margins around 70%. Levi Strauss is now in the low 60s, Gap’s in the low 50s. If you want a newer-age fashion play, Revolve… also in the low 50s. That makes Reformation pretty darn profitable by comparison.
Cramer called the market’s reaction to peer Levi Strauss’ last quarter “ridiculous.”
Reformation’s Valuation in Context
Cramer also compared Reformation Inc. with apparel peers using enterprise value:
So we’ve got a decent story and solid numbers, but how does the stock stack up against its peers? Now, if we want to do a valuation comparison, I think it makes more sense to look at the enterprise multiple. That’s the enterprise value, meaning market cap plus net debt divided by the EBITDA… Reformation has an enterprise multiple of 10 based on this year’s estimates. Trying to get some apples-to-apples going here. That’s a couple turns lower than Ralph Lauren, which makes sense, but it’s already much higher than Levi’s with an enterprise multiple of seven or Gap with an enterprise multiple of four. Does Reformation deserve that premium?
Well, it has a much better growth rate than Levi’s or Gap, but it doesn’t have that kind of proven long-term track record. Maybe Revolve Group, the online premium fashion retailer I mentioned is the best comparison, another new one with decent growth. Revolve has an enterprise multiple of 13. Reformation is a good bit less expensive. So while I wouldn’t say the stock is super cheap, it’s definitely not overvalued at these levels.
It is worth noting that Cramer discussed the consumer’s impact on peer Ralph Lauren. Yahoo Finance data from September 14 put Revolve’s forward P/E at 17.99 and EV-to-EBITDA multiple at 13.58, while NYU Stern’s January 2026 apparel-industry data showed an average EV-to-EBITDA multiple of 10.30 times for 35 U.S. apparel companies with positive EBITDA. Revolve Group, the peer Cramer called the company’s best comparison, was part of our list, Earnings Standouts: 52 Stocks Outperforming Wall Street Estimates.
Fashion Risk Is the Bear Case
Cramer mentioned that the company’s growth must be viewed against the risks of the fashion industry, as he said during the episode:
Now, look, in a vacuum, I might be pounding the table on this one, but nature abhors a vacuum. In reality, Reformation’s a fashion play, and we know this can be a very difficult category, especially when the economy’s experiencing turbulence. We’ve seen various up-and-coming fashion brands come public in recent years, from Revolve to Stitch Fix to Rent the Runway, and they’ve all eventually fizzled. It’s a very tough category. Fashion is an area where trends can change on a dime and something that’s hot can cool off overnight.
The operating figures also provide areas to monitor. DTC net revenue per customer declined 1.4% in the latest quarter, while inventory increased 25.7% year over year to $81.8 million. Operating cash flow for the first half of fiscal 2026 was only about $26,000. Reformation Inc. has also recently reduced its debt burden. Total debt fell from $246.7 million at the end of June to $136.7 million by August 24 after the company used about $110 million of net IPO proceeds for repayment, bringing net leverage to approximately 0.9 times. It is worth noting that Cramer framed the stock as a speculative position, as he said:
And that’s why a story like Ralph Lauren with sustained success has such special appeal for me and it should for you… I honestly have no problem if anyone wants to make an investment in Reformation as long as you respect it as a speculative position, because I think that’s exactly what it is: a tiny women’s apparel company that’s currently doing pretty well, but could easily get derailed.
Conclusion
Reformation Inc.’s short position was about 13% to 25% of the float. Cramer closed by reiterating both sides of the argument:
The bottom line: I think Reformation is an intriguing story with impressive growth and very healthy margins for the apparel business… Given the stock’s slow start, you have got my blessing to put on a small position on this one, but only again for speculation because fashion’s an incredibly difficult game.
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