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Stitch Fix said the holidays were milder than expected.
Courtesy of Stitch Fix
Stitch Fix stock traded sharply lower at the end of trading Monday, after the subscription-based apparel retailer posted disappointing results for its fiscal second quarter and trimmed its forecast for the upcoming fiscal year beginning in July.
Shares were down 23% to $ 53.14.
For the quarter ended Jan. 31, Stitch Fix (ticker: SFIX) reported revenue of $ 504.1 million, up 12% from a year ago, but lower than the $ 506 million to $ 515 advisory range million. The company posted an adjusted Ebitda loss – earnings before interest, taxes, depreciation and amortization – of $ 8.9 million, wider than the expected 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 loss of 22 cents.
Stitch Fix said it had 3.9 million active customers at the end of the quarter, up 12% from the year before. Average revenue per active customer was $ 467.7% less than a year ago.
For the fiscal third quarter, Stitch Fix sees revenue of $ 505 million to $ 515 million, lower than the previous Street consensus of $ 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 quarter’s revenue shortage on delivery issues. “The pandemic meant carriers experienced unprecedented volume during the holiday season and saw longer cycle times,” the company said in a letter to shareholders. “As a result, we couldn’t recognize all of the revenue for Fixes that we shipped during the quarter.” The company said adjusted for that factor, revenue would have been within guideline.
Stitch Fix said it is “taking steps to diversify our mix of outbound carriers, and we are working with our primary carrier, the United States Postal Service, to process our returns more efficiently.”
Stitch Fix also said the direct purchase option in January helped the company deliver its “strongest month-on-month sales growth ever in January.” But the company also said it saw “a softer holiday performance than we expected,” with people switching from self-purchase to gifting.
In terms of guidance, Stitch Fix said it “sees strong new customer acquisition trends, healthy autoship retention levels, and increasing customer engagement with direct purchase.” But the company also said “longer cycle times… persisted in February” and could impact second-half sales.
“These longer cycle times, mainly consisting of carrier and customer delays, impact revenue recognition over the period and can delay subsequent Fix orders as a large majority of our customers receive repeat Fix shipments,” said Company. “Plus, given Covid, there’s still a lot of uncertainty, and as a result, we’re taking a more measured approach to our outlook.”
The company also said that the roll-out of the direct buy option to new customers will not take place until the end of this fiscal year. “Our product teams are focused on expanding features of the user experience to ensure that buying right from the start is a great experience for new Stitch Fix customers,” the company said. “As such, we plan to continue testing the product throughout the fiscal third quarter and fourth quarter before our full product launch occurs at the end of the fiscal fourth quarter. This timing of the rollout also plays a role in our revised guidelines. “
In an interview with Barron’sStitch Fix President Elizabeth Spaulding said the company remains confident in its business model and its opportunities – she thinks 50% of the apparel market will shift online by 2025.
But she also admits that the company’s plan to offer new customers the direct buy model has been pushed out from previous internal expectations, citing the complexity of the project. “We want to make sure we’re doing it right,” she said.
As for the shipping issue, Spaulding notes that the company is seeing cycle times – the period from shipping products to customers to returns to the company for unwanted items – increase on a percentage basis at “ high double digits, ” a big change. related to carrier delays, although the company also saw higher waiting times for consumers before making refunds. She also notes that February cycle times were affected by inclement weather, particularly the Dallas and Indianapolis distribution centers.
Write to Eric J. Savitz at [email protected]