Stitch Fix Stock Is Getting Crushed After Earnings Beat Expectations

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Courtesy StitchFix

Stitch Fix

stock was tumbling even though the online personal shopping website reported a narrower-than-expected loss for its fiscal first quarter and beat analysts’ sales expectations thanks to a boost in its Freestyle service that allows customers to shop directly on the site.

Stitch Fix (ticker: SFIX), whose shares were down nearly 22% to $19.49 it 10:43 a.m. Wednesday, posted a fiscal third-quarter loss of 2 cents a share, lower than the 14-cent loss estimated by analysts.

“We are in a major learning phase right now as we build out our new Freestyle experience,” said CEO Elizabeth Spaulding on a call with investors Tuesday evening.

Revenue rose to $581 million, up 19% from last year, surpassing the $571 million expected by Wall Street.

Active users grew 11% to 4.18 million from a year ago. That was still less than the 4.23 million active clients analysts projected, according to FactSet.

Stitch Fix also cut its revenue outlook for the fiscal year, saying that it’s in a transitional period of bringing on new users amid supply-chain crunches.

“The supply chain issues we would expect to subside over the coming year …We’re learning a lot right now,” Spaulding said. “We’re confident we’re going to improve over the coming quarters.”

Investors on the call weren’t so convinced, though, and brought up concerns that the Freestyle sales growth and market share for the company might outweigh other products it offers.

Spaulding says she sees an opportunity to navigate the demand for various products and services.

“We anticipate generating more traffic to site through both stitchfix.com through product detail pages and new channels,” she said. “In the short-term, people are making a tradeoff between, ‘do I want to try Fix, do I want to try Freestyle?’ , and so that’s the learning phase we’re in right now and we see opportunity to get better.”

Stitch Fix sends customers clothing and accessories that are selected by a stylist based on information provided, and items can be purchased or returned. With Stitch Freestyle, customers can instantly buy items that have been curated for them.

Stitch Fix anticipates revenue increasing at a high single-digit rate, down from its prior outlook of 15% or more growth. That compares with the 15.7% year-over-year growth analysts had been expecting.

Following Wednesday’s close of trading, shares of Stitch Fix have fallen 57% so far in 2021.

Write to Logan Moore at logan.moore@barrons.com