Stitch Fix Shares Plunged after Company Reports a Quarterly Loss and Dismal Outlook

Shares of monthly subscription styling service Stitch Fix saw its shares drop this week after the company swung to a quarterly loss and released a softened outlook on shipping delays.

The company lowered its revenue forecast for the current quarter and fiscal year and revealed that on average, active clients had spent 7% less than the same time one year ago.

Stitch Fix missed analysts’ expectations for revenue and outlook as shipping delays and lower customer spend ate into sales.

Shares had sank 21% in extended trading on Monday.

Here’s what the company reported for the quarter ended Jan. 30 in relation to what Wall Street was expecting per Refinitiv:

For the second quarter, net loss was $21 million, or 20 cents a share. This was down from a profit of $11.4 million, or 11 cents a share a year ago. Analysts were expecting 22 cents.

Net sales had increased 12% to $504.1 million, but was below the $512.2 million expected.

Despite a slow holiday season, the company also said that it saw its strongest January on record.

Looking ahead, for the fiscal third quarter, Stitch Fix is expecting net sales of $505 million to $515 million, representing growth of 36% to 39%, and an adjusted loss before interest, taxes, depreciation and amortization of $5 million to $9 million.

Executives had called it a “mixed bag” on shipping and processing delays so far in February, and they expect the trend to continue through the rest of the fiscal third quarter.

For the full fiscal year 2021, Stitch Fix now expects revenue to grow 18% to 20%, down from its prior outlook of 20% to 25%. Wall Street was expecting revenue growth of 22.6% for the fiscal year.
The company also said it added 110,000 new active clients during the quarter for a total roster of almost 3.9 million. Active clients spent $467 on average, down 7% compared with the same time a year ago.

The company wrote in its letter to shareholders, “The first COVID-19 stay-at-home government mandates were enacted nearly one year ago. This resulted in a share shift acceleration online as consumers moved away from predominantly shopping for apparel in physical stores. Industry observers estimate that approximately five years worth of online share shift occurred in the past year alone, and forecasts now call for nearly half of U.S. apparel spend to have moved online by 2025. As a result, we believe that consumers’ embrace of our offerings is here to stay and the demand trends and client growth we are seeing demonstrate that our model of personalized discovery and radical convenience position us well to capture more than our fair share. As the country begins to reopen and the broader environment normalizes, we believe overall demand for apparel will increase and we will be incredibly well positioned to win.”

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