Stitch Fix
Courtesy of Stitch Fix
Stitch Fix stock is getting crushed Tuesday after the subscription-based online apparel company posted disappointing results for its fiscal second quarter ended in January, and trimmed guidance for the fiscal year ending in July.
Multiple issues plagued the company’s results and outlook. For starters, Stitch Fix (ticker: SFIX) is having shipping issues with the U.S. Postal Service, resulting in longer cycle times between the shipment of “fixes” and the return of unwanted goods, which is dragging out when the company can recognize some sales. The company also said that holiday period sales “direct buy” purchases disappointed, with customers shifting their focus to buying gifts for others rather than purchasing goods for their own use.
Stitch Fix also said it had weather-related issues in February, as severe storms affected distribution centers in Dallas and Indianapolis. And not least, Stitch Fix is pushing out the expected launch of a much-anticipated new program to sell goods on a “direct buy” basis to new customers until the end of the fiscal year.
Stitch Fix stock on Tuesday is down 29% to $48.36.
For the quarter ended Jan. 31, Stitch Fix 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, which called for an Ebitda loss of between $3 million and $6 million.
For the fiscal third quarter, Stitch Fix sees revenue of $505 million to $515 million, below the previous Street consensus estimate 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.
Deutsche Bank analyst Kunal Madhukar on Tuesday cut his rating on the stock to Hold from Buy, chopping his target price to $34 from $54. Madhukar writes that he sees “potential near-term headwinds associated with macro trends and slower growth in revenue per client resulting from supply chain and cycle time challenges.” And he sees the slower rollout of Direct Buy limiting the company’s ability to beat expectations.
“We think the relative pace of growth in the near term may be slower than investors previously anticipated and we expect the company to continue investing into the business…coming out of Covid-19,” the analyst writes. “We also see a risk in the near term with the supply chain challenges that…are expected to persist in the subsequent quarters.”
William Blair analyst Ralph Schackart repeats his Marker Perform rating on Stitch Fix shares. “If anything, the quarter print is more a reminder of the volatility in the model, potentially increased as the business drifts now into negative earnings and free cash flow under heavier investment spending,” he writes in a research note. “We believe valuation and lack of visibility around earnings inflection could present some limit to upside in an otherwise rational market.”
J.P. Morgan analyst Cory Carpenter maintains a Neutral rating and $39 price target on Stich Fix stock. “Fiscal 2021 is shaping up to be more challenging than expected, largely due to elevated cycle times and a delay in the roll-out of Direct Buy for first-time customers,” he writes. “However, we don’t get a sense that there are bigger issues under the surface, with first Fix demand remaining strong and Direct Buy penetration continuing to increase. To get more constructive, we’d like to see evidence of Direct Buy’s ability to attract first-time customers to the platform, as well as more margin stability.”
Write to Eric J. Savitz at [email protected]
