Stitch Fix Shares Drop Despite Beating on Earnings

Shares of Stitch Fix, an online personal styling service in the United States, were falling after the company reported its fiscal fourth quarter financial report this week.

Despite the company’s Q4 earnings beating Wall Street estimates and revenue matching expectations, shares still dropped anyway.

The stock was down as much as 12% in after-hours trading on Tuesday.

The company also reported that its active client base had grown 18 YOY. Its user base hit 3.2 million while analysts had expected 3.23 million.

For the fourth quarter, Stitch Fix reported earnings per share of 7 cents while 4 cents was expected according to data pulled by Refinitiv. Revenue at $432.1 million was also inline with the $432 million that was expected.

“These gains are a testament to the strength of our data science capabilities,” CEO Katrina Lake stated.
The company said it managed to grow revenue per active client in every quarter of fiscal 2019. Expenses in fiscal 2019 totaled $679.6 million compared with $493.0 million last year.

The company admitted that it had been spending more on advertising to reach more customers, and advertising expenses grew to $39 million during the latest quarter from $28.9 million a year ago.

Looking ahead, Stitch Fix has called for “softer” results in the first quarter of fiscal 2020. For the first quarter, the company is expecting sales in the range of $438 million to $432 million. Wall Street was expecting $451 million. The company also said it expects annual sales in the range of $1.9 billion to $1.93 billion while analysts were calling for $1.91 billion.

“We’ve planned [the first quarter] softer than our full-year growth for two reasons,” Stitch Fix said in a letter to shareholders. “First, we’ve had greater success this year with summer products that carry lower average unit retails and average order values. Second, we spent less on marketing in late Q4 ’19, which meant we had fewer clients to contribute to revenue at the start of Q1 ’20.”

Disclaimer: We have no position in Stitch Fix Inc. (NASDAQ: SFIX) and have not been compensated for this article.