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Here's Why You Should Consider Investing in Stitch Fix (SFIX)
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Stitch Fix, Inc. (SFIX - Free Report) currently boasts robust prospects based on its strong product portfolio, business growth initiatives, solid liquidity position and focus on cost management.
This Zacks Rank #2 (Buy) company has a market capitalization of $551.3 million. In the past month, it has surged 49.4% compared with the industry’s growth of 4.7%.
Image Source: Zacks Investment Research
Let’s delve into the factors that have been benefiting this renowned online personal styling retailer for a while now.
Diverse Product Portfolio: Stitch Fix remains on track with its efforts to boost assortments and improve clients’ experience. The company remains on track with a significant transformation of its business in several areas, including the expansion of Shop to the existing client base, the launch and scale of Fix Preview and investments in systems and people.
It is constantly leveraging product innovation, evolving assortments and using personalized experiences to gain more clients. The company remains optimistic about Fix Preview. It rolled out Fix Preview to 100% of its women and men clients across the United States and the U.K. markets. Earlier, management also launched Stitch Fix Freestyle, which offers quite a distinct shopping experience.
Business Strategy: Stitch Fix has been enriching its client experience across Fix and direct buy known as Freestyle. It came up with several feature upgrades, including expanded branded shops. Management is also focused on expanding the company’s product offerings and driving awareness for personalized shopping.
SFIX remains committed to preserving liquidity and achieving profitability while simultaneously attracting long-term customers to fuel a return to growth. SFIX continues to refine its traditional paid channels as well as diversify into underpenetrated channels. Its focus on enhancing client retention and re-engagement strategies is also commendable.
Focus on Cost Management: Stitch Fix has been effectively managing its cost structure. During third-quarter fiscal 2023, selling, general and administrative expenses fell year over year from $287 million to $192.7 million. The company’s advertising costs decreased 52.2% year over year. SFIX’s third-quarter adjusted EBITDA came in at $10.1 million, higher than $3.18 million reported in the second quarter of fiscal 2023. Its focus on effective management of costs and expenses is likely to improve margins and profitability in the quarters ahead.
Solid Cash Flow & Liquidity Position: Its ability to generate healthy cash flows adds to its strength. In the fiscal third quarter, the company’s free cash flow totaled $21.9 million, reflecting a second consecutive quarter of positive free cash flow. Stitch Fix ended the fiscal third quarter with no debt and cash and cash equivalents of $193.6 million.
However, the company has been subject to a challenging operating landscape with several issues like high inflation, rising interest rates, recessionary concerns and tightening labor markets. Of late, a higher inflationary environment has been affecting consumers’ spending, which might adversely impact its near-term performance.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings per share suggests growth of 4.9% and 53.7%, respectively, from the corresponding year-ago reported figures. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 3.4%. Its earnings per share are expected to rise by 660% from the corresponding year-ago reported figures. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Nomad Foods manufactures and distributes frozen foods. The company has a trailing four-quarter earnings surprise of 8.5%, on average.
The Zacks Consensus Estimate for NOMD’s current financial year sales suggests growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.
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Here's Why You Should Consider Investing in Stitch Fix (SFIX)
Stitch Fix, Inc. (SFIX - Free Report) currently boasts robust prospects based on its strong product portfolio, business growth initiatives, solid liquidity position and focus on cost management.
This Zacks Rank #2 (Buy) company has a market capitalization of $551.3 million. In the past month, it has surged 49.4% compared with the industry’s growth of 4.7%.
Image Source: Zacks Investment Research
Let’s delve into the factors that have been benefiting this renowned online personal styling retailer for a while now.
Diverse Product Portfolio: Stitch Fix remains on track with its efforts to boost assortments and improve clients’ experience. The company remains on track with a significant transformation of its business in several areas, including the expansion of Shop to the existing client base, the launch and scale of Fix Preview and investments in systems and people.
It is constantly leveraging product innovation, evolving assortments and using personalized experiences to gain more clients. The company remains optimistic about Fix Preview. It rolled out Fix Preview to 100% of its women and men clients across the United States and the U.K. markets. Earlier, management also launched Stitch Fix Freestyle, which offers quite a distinct shopping experience.
Business Strategy: Stitch Fix has been enriching its client experience across Fix and direct buy known as Freestyle. It came up with several feature upgrades, including expanded branded shops. Management is also focused on expanding the company’s product offerings and driving awareness for personalized shopping.
SFIX remains committed to preserving liquidity and achieving profitability while simultaneously attracting long-term customers to fuel a return to growth. SFIX continues to refine its traditional paid channels as well as diversify into underpenetrated channels. Its focus on enhancing client retention and re-engagement strategies is also commendable.
Focus on Cost Management: Stitch Fix has been effectively managing its cost structure. During third-quarter fiscal 2023, selling, general and administrative expenses fell year over year from $287 million to $192.7 million. The company’s advertising costs decreased 52.2% year over year. SFIX’s third-quarter adjusted EBITDA came in at $10.1 million, higher than $3.18 million reported in the second quarter of fiscal 2023. Its focus on effective management of costs and expenses is likely to improve margins and profitability in the quarters ahead.
Solid Cash Flow & Liquidity Position: Its ability to generate healthy cash flows adds to its strength. In the fiscal third quarter, the company’s free cash flow totaled $21.9 million, reflecting a second consecutive quarter of positive free cash flow. Stitch Fix ended the fiscal third quarter with no debt and cash and cash equivalents of $193.6 million.
However, the company has been subject to a challenging operating landscape with several issues like high inflation, rising interest rates, recessionary concerns and tightening labor markets. Of late, a higher inflationary environment has been affecting consumers’ spending, which might adversely impact its near-term performance.
Other Stocks to Consider
Some other top-ranked stocks are Urban Outfitters, Inc. (URBN - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Nomad Foods Limited (NOMD - Free Report) , all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings per share suggests growth of 4.9% and 53.7%, respectively, from the corresponding year-ago reported figures. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 3.4%. Its earnings per share are expected to rise by 660% from the corresponding year-ago reported figures. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Nomad Foods manufactures and distributes frozen foods. The company has a trailing four-quarter earnings surprise of 8.5%, on average.
The Zacks Consensus Estimate for NOMD’s current financial year sales suggests growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.