SFIX - Stitch Fix Won't Be Needing Any Stitches After All
Stitch Fix’s (NASDAQ: SFIX) stock soared after the company reported a surprise fiscal Q1 profit and CFO hire. Besides beating profit and revenue estimates, Stitch Fix announced it hired Amazon.com (NASDAQ: AMZN) veteran Dan Jedda as CFO. Shares rose nearly 50%. The strong results, along with accelerated customer growth and upbeat outlook come as dozens of apparel retailers such as J.Crew, Brooks Brothers, Lucky Brand, J.C. Penney and Francesca’s Holdings (NASDAQ: FRAN) have filed for bankruptcy protection.
Q1 Results
In addition to double-digit YoY revenue growth for the quarter ended October 31 s , Stitch Fix saw the highest sequential net client additions in its history as it the active client count grew to nearly 3.8 million. This is both a quarter over quarter increase of over 240,000 net active clients and a return to double-digit YoY active client growth. Profit was 9 cents a share on net revenue of $490.4 million, which exceeded both average analyst estimates for a loss of 18 cents and net sales of $481 million, according to Bloomberg.
However, revenue growth of 10% was a far cry from the 21% pace Stitch Fix posted for the comparable period last year yet Tuesday’s stock surge propelled Stitch Fix to an all-time-high. The share price likely reflects the expectation that record client growth will continue and bring rewards over the upcoming quarters. But the tech-powered retailer still has to show that it can improve margins.
Building on the momentum, Stitch Fix expects full-year revenue to grow by 20% to 25% , being in the range between $2.05 billion to $2.14 billion, exceeding Wall Street estimates of $2.01 billion.
Outlook
As traditional bricks-and-mortar retailers continue to endure double digit YoY sales declines, Stitch Fix ’s results show how the experience of shopping for clothes could be changing for good. Moreover, now that Jedda is bringing, his digital video, digital music, advertising and corporate development expertise from Amazon, Stitch Fix’s customer value proposition can only be further enhanced. The algorithmically personalized clothing with the help of a stylist has been luring customers to ditch decade-old habits of trying clothing on in a store before paying for them. It might have not been so successful in doing so during the first few months of the pandemic as sales from the quarter that ended on August 1 st grew just 3% from a year earlier after falling by more than 9% in the prior period, but this time, Stitch Fix succeeded. In a tumultuous year for the apparel industry, Stitch Fix showed that, with the right help, consumers still have an appetite to buy clothing.
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