Stitch Fix said the holidays were softer than expected.
Courtesy Stitch Fix
Stitch Fix stock was trading sharply lower in late trading Monday after the subscription-based apparel retailer posted disappointing results for its fiscal second quarter and trimmed its guidance for the coming fiscal year, which starts in July.
Shares had plunged 23%, to $53.14.
For the quarter that ended Jan. 31, Stitch Fix (ticker: SFIX) reported revenue of $504.1 million, up 12% from a year ago, but short of its guidance range of $506 million to $515 million. The company posted an adjusted Ebitda loss—earnings before interest, taxes, depreciation and amortization—of $8.9 million, wider than the guidance range of a loss between $3 million and $6 million. It lost 20 cents a share in the quarter, two cents better than the Street consensus forecast of a 22-cent loss.
Stitch Fix said it had 3.9 million active clients at quarter end, up 12% from a year earlier. Average revenue per active client was $467, down 7% from a year ago.
For the fiscal third quarter, Stitch Fix sees revenue of $505 million to $515 million, below the previous Street consensus at $523 million. For the full year, the company now sees revenue of $2.02 billion to $2.05 billion, down from a previous forecast of $2.05 billion to $2.14 billion.
Stitch Fix blamed the revenue shortfall in the quarter on delivery issues. “Due to the pandemic, carriers faced unprecedented volume during the holidays and we saw increased cycle times,” the company said in a letter to shareholders “This resulted in us not being able to recognize all the revenue for Fixes we shipped during the quarter.” The company said that adjusted for that factor, revenue would have been within the guidance range.
Stitch Fix said it is “taking steps to diversify our outbound carrier mix, and we are partnering with our primary carrier, the United States Postal Service, to process our returns more efficiently.”
Stitch Fix also said that its direct-buy option helped the company in January post its “strongest month over month revenue growth of any January on record.” But the company also said it saw “a softer holiday performance than we anticipated,” with people shifting from self-purchases to gifting.
As for guidance, Stitch Fix said it is “seeing strong new client acquisition trends, healthy auto-ship retention levels, and increasing client engagement with direct buy.” But the company also said “longer cycle times …persisted in February,” and could impact second half revenue.
“These longer cycle times, mainly comprising carrier and client delays, impact in-period revenue recognition and can delay subsequent Fix orders given that a large majority of our clients receive recurring Fix shipments,” the company said. “In addition, there is still a lot of uncertainty given Covid, and as a result, we are taking a more measured approach to our outlook.”
The company also said the rollout of the direct buy option to new clients won’t happen until near the end of this fiscal year. “Our product teams have been focused on expanding features of the user experience to ensure that direct buy is a great experience from the outset to onboard new-to-Stitch Fix clients,” the company said. “As such, we plan to continue testing the product throughout fiscal Q3 and into Q4 before our full-scale product launch in late fiscal Q4. This rollout timing also plays a role in our revised guidance.”
Write to Eric J. Savitz at [email protected]
