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Stitch Fix (SFIX) Q3 Loss Narrows, Revenues Decline Y/Y
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Stitch Fix, Inc. (SFIX - Free Report) reported third-quarter fiscal 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. The top line deteriorated from the year-earlier quarter. Meanwhile, the bottom line fared better year over year.
Stitch Fix's strategic initiatives focus on transforming the client experience and strengthening its business foundation. This involves implementing retail best practices, enhancing operational efficiencies, and leveraging AI and data science for better personalization. Key initiatives include the Quick Fix program, which has increased average order value by 25%, and testing new features like sending more items per fix and increasing client-stylist interactions.
Additionally, Stitch Fix is refining its pricing and promotional strategies, identifying more than $20 million in annualized profit opportunities by aligning prices with value. The company aims to manage inventory efficiently and drive sales through modernized and engaging client experiences. These efforts are designed to foster long-term growth and profitability by enhancing personalization, convenience and overall client satisfaction.
Stitch Fix, Inc. Price, Consensus and EPS Surprise
Stitch Fix reported an adjusted loss of 15 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 25 cents. The metric was also narrower than the loss of 17 cents reported in the year-ago quarter.
SFIX recorded net revenues of $322.7 million, which surpassed the Zacks Consensus Estimate of $306 million. Also, the metric declined 15.8% from the year-ago quarter due to lower net active clients.
The number of active clients engaged in ongoing operations was 2,633,000, marking a year-over-year decline of 20%. The average net revenues generated per active client from ongoing operations were $525, representing an increase of 2% from the previous year.
Image Source: Zacks Investment Research
Margins & Costs
In the fiscal third quarter, the gross profit declined 10.2% to $147 million from $163.7 million in the year-ago period. However, the gross margin expanded 280 basis points (bps) year over year to 45.5%, supported by strong product margins and improvements in transportation leverage. We expected the gross profit to decline 18.2% year over year to $133.8 million for the quarter under review.
The company’s cost of goods sold slipped 20% from $219.7 million in the year-ago period to $175.8 million in the fiscal third quarter. Selling, general and administrative expenses (SG&A) fell 6.7% from $184.2 million in the prior-year quarter to $171.8 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 53.2%, up 520 bps from 48% in the prior-year quarter. We expected the metric to increase 660 bps to 54.6% for the quarter.
Advertising expenses accounted for 9% of quarterly revenues, up 7% from the previous quarter. This can be attributed to the higher seasonal spend than in the fiscal second quarter.
Stitch Fix reported an adjusted EBITDA of $6.7 million for the quarter under review compared with $13.2 million in the year-ago quarter, reflecting its ongoing cost-management discipline.
Other Financial Aspects
The company ended the fiscal third quarter with cash and cash equivalents of $196.5 million, short-term investments of $48 million, net inventory of $114.5 million, and shareholders’ equity of $208.9 million.
In the fiscal third quarter, the net cash provided by operating activities from continuing operations was $20 million and the free cash flow was $18.9 million.
Outlook
For the fourth quarter of fiscal 2024, management projects net revenues of $312-$322 million, indicating a 12-14% year-over-year decline. The gross margin is anticipated between 45% and 46%, and the adjusted EBITDA is expected between $5 million and $10 million. Advertising spend is projected between 9% and 10% of revenues. The company also expects active clients to decrease sequentially in the fiscal fourth quarter and continue this trend into fiscal 2025.
For fiscal 2024, SFIX projects net revenues of $1.33-$1.34 billion compared with the previously mentioned $1.29-$1.32 billion, which indicates a 16% decline from the year-ago quarter’s reported figure. When adjusted to a standard 52-week period, the anticipated year-over-year decrease is pegged between 17% and 18%.
For the fiscal year, Stitch Fix expects adjusted EBITDA of $25-$30 million, with a margin of 1.9-2.2% compared with the previously mentioned $10-$20 million, with a margin of 1-2%.
This Zacks Rank #3 (Hold) stock has gained 10.1% in the past three months compared with the industry’s growth of 11.2%.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2023 earnings indicates growth of 4.2% from fiscal 2023’s reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company flaunts a Zacks Rank #1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 47.5% and 10.5%, respectively, from the fiscal 2023 reported figures. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Canada Goose is a global outerwear brand. It sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Canada Goose’s current fiscal-year earnings indicates growth of 13.7% from the year-ago period’s reported figures. GOOS has a trailing four-quarter average earnings surprise of 70.9%.
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Stitch Fix (SFIX) Q3 Loss Narrows, Revenues Decline Y/Y
Stitch Fix, Inc. (SFIX - Free Report) reported third-quarter fiscal 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. The top line deteriorated from the year-earlier quarter. Meanwhile, the bottom line fared better year over year.
Stitch Fix's strategic initiatives focus on transforming the client experience and strengthening its business foundation. This involves implementing retail best practices, enhancing operational efficiencies, and leveraging AI and data science for better personalization. Key initiatives include the Quick Fix program, which has increased average order value by 25%, and testing new features like sending more items per fix and increasing client-stylist interactions.
Additionally, Stitch Fix is refining its pricing and promotional strategies, identifying more than $20 million in annualized profit opportunities by aligning prices with value. The company aims to manage inventory efficiently and drive sales through modernized and engaging client experiences. These efforts are designed to foster long-term growth and profitability by enhancing personalization, convenience and overall client satisfaction.
Stitch Fix, Inc. Price, Consensus and EPS Surprise
Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote
Q3 in Detail
Stitch Fix reported an adjusted loss of 15 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 25 cents. The metric was also narrower than the loss of 17 cents reported in the year-ago quarter.
SFIX recorded net revenues of $322.7 million, which surpassed the Zacks Consensus Estimate of $306 million. Also, the metric declined 15.8% from the year-ago quarter due to lower net active clients.
The number of active clients engaged in ongoing operations was 2,633,000, marking a year-over-year decline of 20%. The average net revenues generated per active client from ongoing operations were $525, representing an increase of 2% from the previous year.
Image Source: Zacks Investment Research
Margins & Costs
In the fiscal third quarter, the gross profit declined 10.2% to $147 million from $163.7 million in the year-ago period. However, the gross margin expanded 280 basis points (bps) year over year to 45.5%, supported by strong product margins and improvements in transportation leverage. We expected the gross profit to decline 18.2% year over year to $133.8 million for the quarter under review.
The company’s cost of goods sold slipped 20% from $219.7 million in the year-ago period to $175.8 million in the fiscal third quarter. Selling, general and administrative expenses (SG&A) fell 6.7% from $184.2 million in the prior-year quarter to $171.8 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 53.2%, up 520 bps from 48% in the prior-year quarter. We expected the metric to increase 660 bps to 54.6% for the quarter.
Advertising expenses accounted for 9% of quarterly revenues, up 7% from the previous quarter. This can be attributed to the higher seasonal spend than in the fiscal second quarter.
Stitch Fix reported an adjusted EBITDA of $6.7 million for the quarter under review compared with $13.2 million in the year-ago quarter, reflecting its ongoing cost-management discipline.
Other Financial Aspects
The company ended the fiscal third quarter with cash and cash equivalents of $196.5 million, short-term investments of $48 million, net inventory of $114.5 million, and shareholders’ equity of $208.9 million.
In the fiscal third quarter, the net cash provided by operating activities from continuing operations was $20 million and the free cash flow was $18.9 million.
Outlook
For the fourth quarter of fiscal 2024, management projects net revenues of $312-$322 million, indicating a 12-14% year-over-year decline. The gross margin is anticipated between 45% and 46%, and the adjusted EBITDA is expected between $5 million and $10 million. Advertising spend is projected between 9% and 10% of revenues. The company also expects active clients to decrease sequentially in the fiscal fourth quarter and continue this trend into fiscal 2025.
For fiscal 2024, SFIX projects net revenues of $1.33-$1.34 billion compared with the previously mentioned $1.29-$1.32 billion, which indicates a 16% decline from the year-ago quarter’s reported figure. When adjusted to a standard 52-week period, the anticipated year-over-year decrease is pegged between 17% and 18%.
For the fiscal year, Stitch Fix expects adjusted EBITDA of $25-$30 million, with a margin of 1.9-2.2% compared with the previously mentioned $10-$20 million, with a margin of 1-2%.
This Zacks Rank #3 (Hold) stock has gained 10.1% in the past three months compared with the industry’s growth of 11.2%.
3 Red-Hot Stocks
A few better-ranked stocks are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Canada Goose (GOOS - Free Report) .
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2023 earnings indicates growth of 4.2% from fiscal 2023’s reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company flaunts a Zacks Rank #1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 47.5% and 10.5%, respectively, from the fiscal 2023 reported figures. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Canada Goose is a global outerwear brand. It sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Canada Goose’s current fiscal-year earnings indicates growth of 13.7% from the year-ago period’s reported figures. GOOS has a trailing four-quarter average earnings surprise of 70.9%.