Stitch Fix Soars Over 30% On Stellar First Quarter Results

Online personal styling service Stitch Fix saw its shares explode on Monday after the company reported impressive first quarter financial results.

First-quarter sales soared 10% from a year ago, topping analysts’ estimates. The stock gained more than 30% on the earnings beat.

For the quarter ended Oct. 31, Stitch Fix reported earnings of 9 cents per share on revenue of $490.4 million. This was ahead of loss of 20 cents per share that was estimated on revenue of $481.2 million, according to Refinitiv data.

Active clients for the company grew to almost 3.8 million, up 10.2% from a year ago. The company defines active clients as people who have bought an item directly from its website, called a “fix,” in the preceding 52 weeks from the last day of the quarter.

Looking ahead, Stitch Fix now expects to deliver between 20% and 25% revenue growth for fiscal 2021.

The company said it delivered a record success rate across its business in the first quarter, which measures the percentage a given item is purchased by users of the styling service. That means its algorithm-based recommendation engine, which helps create “fixes” for customers, is getting smarter, and fewer items are being returned.

“While the apparel industry is currently contracting, we expect to take share and drive higher new client sign-ups as the relevance of our model of personalized discovery and convenience grows,” Stitch Fix said in a letter to shareholders.

Founder Katrina Lake said on the earnings call, “Q1 was a quarter that saw great momentum in client growth and in our business more broadly. Our offering continues to benefit from strong product market fit. In a time period where many traditional brick-and-mortar retailers are still experiencing double-digit year-over-year revenue declines in our most recent quarter, we delivered an increase of over 240,000 net active clients quarter-over-quarter, a return to double-digit year-over-year active client growth, which we expect will increase further this fiscal year.”

“In Q1, we generated net revenue of $490 million, reflecting 10% growth year-over-year and 11% growth quarter-over-quarter. We delivered net income of $9.5 million and adjusted EBITDA of $6.9 million. During the quarter, we grew our active client count to nearly 3.8 million. This represents a year-over-year increase of 347,000 clients or 10% growth and a quarter-over-quarter increase of 240,000, our highest sequential client addition on record. This surge of new clients who are still early in their spending journey with us resulted in an expected decrease in year-over-year net revenue per client of 4%. Even early in their journey with us, these new clients have demonstrated very strong purchase behavior in their first Fixes that we believe to be a strong signal of future satisfaction, retention and lifetime value.”

Stitch Fix also announced that Dan Jedda, formerly VP and CFO of digital video at Amazon, is the company’s new CFO, effective Wednesday.

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