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Should You Buy, Hold or Sell Stitch Fix Stock Post Q4 Earnings?
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A couple of weeks ago, Stitch Fix, Inc. (SFIX - Free Report) released its fourth-quarter fiscal 2024 results, igniting discussions among investors regarding the stock's future trajectory. With its latest earnings now available, investors are weighing the decision to either boost their investments or maintain their current holdings.
Analyzing Stitch Fix's Mixed Performance
SFIX shares have declined 21.1% in the past month against the industry’s 9.1% growth. Stitch Fix faces a significant challenge with its declining active client base, which has been a primary contributor to the company’s revenue decrease over the past nine quarters. The number of active clients engaged in ongoing operations was 2,508,000, marking a year-over-year decline of 19.6% in the fourth quarter of fiscal 2024.
Despite revenue headwinds, the company has maintained profitability through cost control and operational optimization, achieving positive adjusted EBITDA for seven consecutive quarters. In the fiscal fourth quarter, the adjusted EBITDA margin rose 90 basis points to 3%, while the gross margin expanded year over year by 50 basis points to 44.6%, driven by better inventory management and a focus on higher-margin private-label products.
Image Source: Zacks Investment Research
Here’s How Estimates Rise for Stitch Fix Post Q4 Earnings
The Zacks Consensus Estimate for adjusted loss has witnessed improvement, reflecting the positive sentiment around Stitch Fix. Over the past 30 days, analysts have improved their adjusted loss estimates by 5 cents to 15 cents per share for the current quarter and by 2 cents to 17 cents for the next quarter. These estimates indicate year-over-year growth of 31.8% and 19.1%, respectively.
Reasons Behind Analysts’ Optimism About SFIX Stock
Stitch Fix is committed to enhancing client experiences while maintaining a robust financial foundation, including a debt-free balance sheet, which bolsters its potential for sustained profitability. The innovative integration of AI and effective cost management further position the company for long-term success. As Stitch Fix undergoes transformation and establishes a clear growth strategy, it is well-prepared to adapt to the changing retail environment.
In its fourth quarter of fiscal 2024, Stitch Fix achieved a notable 4.5% year-over-year increase in revenue per active client, reaching $533. This growth highlights the company’s ability to deepen relationships with its core clients by offering personalized and flexible shopping experiences tailored to individual needs. Expanding the Fix model to include up to eight items and offering flexible shipment cadences have boosted revenues and reduced client churn rates by 14%.
Stitch Fix’s proprietary AI technology significantly enhances personalized client experiences at scale, contributing to a 5% rise in conversion rates among new clients. The company has implemented cost-cutting measures that saved more than $100 million in selling, general and administrative expenses in fiscal 2024. Stitch Fix expects to achieve further savings in fiscal 2025.
With its three-phase transformation strategy — rationalization, building and growth—the company aims to drive revenue growth by fiscal 2026. Ending the fiscal fourth quarter with $162.9 million in cash and no debt, Stitch Fix is well-positioned to invest in growth initiatives without financial constraints, enhancing its competitive edge in the retail landscape.
SFIX Stock’s Valuation Attractive
From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 0.29, below the five-year median of 0.50 and the industry’s average of 1.13, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of A, further validating its appeal.
Image Source: Zacks Investment Research
Is Stitch Fix Stock Worth Holding on to Post Q4?
Investors should exercise caution with the SFIX stock due to ongoing challenges and mixed performance. The decline in its active client base raises concerns about revenue growth and customer retention. Management expects active clients to decline in fiscal 2025. Nonetheless, Stitch Fix is transforming, focusing on operational efficiency and enhanced client engagement. The company has streamlined its operations, leading to an improved gross margin and cost savings.
Initiatives like the StyleFile and stylist profiles are boosting client interaction and conversion rates. The introduction of private brands and a refreshed brand identity aims to attract clients, while retaining existing ones. Investors with a long-term horizon should continue to hold the SFIX stock. Currently, Stitch Fix carries a Zacks Rank #3 (Hold).
Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023 figure. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13.1%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Crocs offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Crocs’ 2024 earnings and sales indicates growth of 6.9% and 4.1%, respectively, from the 2023 actuals. CROX has a trailing four-quarter average earnings surprise of 14.9%.
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Should You Buy, Hold or Sell Stitch Fix Stock Post Q4 Earnings?
A couple of weeks ago, Stitch Fix, Inc. (SFIX - Free Report) released its fourth-quarter fiscal 2024 results, igniting discussions among investors regarding the stock's future trajectory. With its latest earnings now available, investors are weighing the decision to either boost their investments or maintain their current holdings.
Analyzing Stitch Fix's Mixed Performance
SFIX shares have declined 21.1% in the past month against the industry’s 9.1% growth. Stitch Fix faces a significant challenge with its declining active client base, which has been a primary contributor to the company’s revenue decrease over the past nine quarters. The number of active clients engaged in ongoing operations was 2,508,000, marking a year-over-year decline of 19.6% in the fourth quarter of fiscal 2024.
As a result of this, the company’s top line moved down 12.4% in the fiscal fourth quarter. This ongoing decline in sales points to persistent difficulties in client retention and acquisition. (Read: SFIX Q4 Loss Narrower Than Expected, Client-Centric Innovation Drives Growth)
Despite revenue headwinds, the company has maintained profitability through cost control and operational optimization, achieving positive adjusted EBITDA for seven consecutive quarters. In the fiscal fourth quarter, the adjusted EBITDA margin rose 90 basis points to 3%, while the gross margin expanded year over year by 50 basis points to 44.6%, driven by better inventory management and a focus on higher-margin private-label products.
Image Source: Zacks Investment Research
Here’s How Estimates Rise for Stitch Fix Post Q4 Earnings
The Zacks Consensus Estimate for adjusted loss has witnessed improvement, reflecting the positive sentiment around Stitch Fix. Over the past 30 days, analysts have improved their adjusted loss estimates by 5 cents to 15 cents per share for the current quarter and by 2 cents to 17 cents for the next quarter. These estimates indicate year-over-year growth of 31.8% and 19.1%, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Reasons Behind Analysts’ Optimism About SFIX Stock
Stitch Fix is committed to enhancing client experiences while maintaining a robust financial foundation, including a debt-free balance sheet, which bolsters its potential for sustained profitability. The innovative integration of AI and effective cost management further position the company for long-term success. As Stitch Fix undergoes transformation and establishes a clear growth strategy, it is well-prepared to adapt to the changing retail environment.
In its fourth quarter of fiscal 2024, Stitch Fix achieved a notable 4.5% year-over-year increase in revenue per active client, reaching $533. This growth highlights the company’s ability to deepen relationships with its core clients by offering personalized and flexible shopping experiences tailored to individual needs. Expanding the Fix model to include up to eight items and offering flexible shipment cadences have boosted revenues and reduced client churn rates by 14%.
Stitch Fix’s proprietary AI technology significantly enhances personalized client experiences at scale, contributing to a 5% rise in conversion rates among new clients. The company has implemented cost-cutting measures that saved more than $100 million in selling, general and administrative expenses in fiscal 2024. Stitch Fix expects to achieve further savings in fiscal 2025.
With its three-phase transformation strategy — rationalization, building and growth—the company aims to drive revenue growth by fiscal 2026. Ending the fiscal fourth quarter with $162.9 million in cash and no debt, Stitch Fix is well-positioned to invest in growth initiatives without financial constraints, enhancing its competitive edge in the retail landscape.
SFIX Stock’s Valuation Attractive
From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 0.29, below the five-year median of 0.50 and the industry’s average of 1.13, the stock offers compelling value for investors seeking exposure to the sector. The stock currently has a Value Score of A, further validating its appeal.
Image Source: Zacks Investment Research
Is Stitch Fix Stock Worth Holding on to Post Q4?
Investors should exercise caution with the SFIX stock due to ongoing challenges and mixed performance. The decline in its active client base raises concerns about revenue growth and customer retention. Management expects active clients to decline in fiscal 2025. Nonetheless, Stitch Fix is transforming, focusing on operational efficiency and enhanced client engagement. The company has streamlined its operations, leading to an improved gross margin and cost savings.
Initiatives like the StyleFile and stylist profiles are boosting client interaction and conversion rates. The introduction of private brands and a refreshed brand identity aims to attract clients, while retaining existing ones. Investors with a long-term horizon should continue to hold the SFIX stock. Currently, Stitch Fix carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks are Nordstrom Inc. (JWN - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Crocs, Inc. (CROX - Free Report) .
Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023 figure. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13.1%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Crocs offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Crocs’ 2024 earnings and sales indicates growth of 6.9% and 4.1%, respectively, from the 2023 actuals. CROX has a trailing four-quarter average earnings surprise of 14.9%.