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Sydnee Gatewood
Sydnee Gatewood
Articles (2758) 

Stitch Fix Shares Unravel on Disappointing Quarterly Results

Personal styling service posts loss even as it sees success with new offering

September 23, 2020 | About:

After reporting disappointing fourth-quarter and full-year 2020 earnings results Tuesday afternoon, shares of Stitch Fix Inc. (NASDAQ:SFIX) plunged more than 14% in after-hours trading.

The San Francisco-based company known for its online personal styling service posted a loss of 44 cents per share for the three months ended Aug. 1, which was worse than the loss of 14 cents that Refinitiv analysts were anticipating. Revenue, though, grew 11% from the prior-year quarter to $443.4 million, exceeding expectations of $414.9 million by a wide margin.

Stitch Fix's number of active clients also increased 9% year over year to 3.5 million.

For the full year, Stitch Fix recorded an earnings loss of 66 cents per share on $1.7 billion in revenue.

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While the company was challenged in the third quarter as the Covid-19 pandemic shut down its warehouses and backlogged orders, Stitch Fix founder and CEO Katrina Lake said sales in the fourth quarter were driven by demand for activewear and other more comfortable clothing as opposed to office attire as more and more consumers worked from home.

"I'm proud of our team for successfully navigating through the deepest impacts of Covid-19 and am excited to bring our model of an individual and deeply personalized shopping experience to even more consumers as they transition to a future of online shopping," Lake said.

The company also saw success with a new direct buy offering that allows customers to purchase single items rather than an entire box of clothes. It also serves as an entry point for new shoppers. Stitch Fix President Elizabeth Spaulding commented on the initiative's success.

"It's still early days, but the ability to shop personalized items and outfits in our feed-based experience is clearly resonating with our clients," she said. "Our styling algorithms combined with input from our talented stylists, and the network effects of nearly 10 years of shopping data are enabling clients to now shop via direct buy without ever having purchased something from us in the past. Encouraged by its early success, we plan to expand the offering to give existing clients more reasons to engage with us, and give new-to-Stitch Fix customers the opportunity to experience the magic of online personal styling through direct buy."

Due to the current economic uncertainty, Stitch Fix noted in a letter to shareholders that it is holding off on providing detailed full-year and first-quarter 2021 guidance. The company is, however, projecting mid-to-high single-digit revenue growth for the current quarter.

The stock's decline carried over into Wednesday morning trading. With a $2.77 billion market cap, shares of Stitch Fix were down 14.36% at $26.88. Year to date, GuruFocus estimates the stock has gained 5%.

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Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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