Shares of Stitch Fix Crumble After Guidance is Cut

Personal styling service company Stitch Fix saw its shares fall this week after the company offered a weak outlook for its fiscal third quarter and slashed its forecast for the full year.

In its latest quarter, the company said it had experienced challenges with onboarding new customers and converting clients.

For the three month period ended January 29th, the company reported a per share loss that was in line with analysts estimates and revenue came in slightly higher than expectations.

For the second quarter the company reported a loss of 28 cents compared to 28 cents expected. Revenue at $516.7 million was higher than the $514.8 million expected.

The company reported a net loss of $30.9 million, or 28 cents per share, compared with a loss of $21 million, or 20 cents a share, a year earlier. That was exactly in line with analysts’ estimates for the quarter.

The company counted active clients of a little more than 4 million, an increase of 4% from the year-ago period. Revenue per client came in $549 during the period.

Stitch Fix defines an active client as a customer who either checked out a curated style box called a Fix or ordered an item using the retailer’s direct-buy option in the preceding 52 weeks, measured on the last day of that period.

Chief Executive Elizabeth Spaulding said the company’s active client count is not where she wants it to be, even though the company recently introduced an option for shoppers to buy single items from its website, without a subscription, which is known as Freestyle.

Looking ahead at the third quarter, Stitch Fix expects net revenue to be between $485 million and $500 million, which would represent a decline of 10% to 7% from the prior year. Analysts had been looking for sales of $560.5 million.

For its fiscal year, which ends July 30, Stitch Fix sees revenue flat to slightly down year over year, assuming that the number of active clients is flat through the end of the 12-month period. Analysts had expected revenue to be up 8.1% for the year.

“We are confident in our long-term strategy, and we’re seeing clear signals that we are taking the right steps for the future of the business,” Spaulding told analysts.

Stitch Fix shares shed more than 17% in extended trading on Tuesday, having already tumbled 41% this year as of Tuesday’s market close.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.