Stitch Fix (SFIX) loss widens in third quarter, revenue declines year-over-year
Shares of StitchFix, Inc. SFIX fell nearly 10% in after-hours trading on June 9 after weak third-quarter fiscal 2022 results. SFIX reported a bigger-than-expected loss per share. The same was also wider than the prior year quarter loss. Although the top line was slightly above the consensus mark, the metric fell year over year. Active customers also declined year over year.
Stitch Fix has witnessed delays in receipts due to shipping and postage delays due to ongoing supply chain issues. Poor quarterly results and a gloomy outlook for the fourth fiscal quarter hurt the stock.
Shares of this currently ranked No. 4 Zacks (selling) Stitch Fix are down 35.2% in the past six months compared to the industry’s 11.6% decline.
Stitch Fix recorded a loss of 72 cents per share, which is wider than the Zacks consensus estimate of a loss of 57. This quarterly loss per share is larger than the loss of 18 cents per share recorded in during the quarter of the previous year.
Stitch Fix, Inc. Pricing and Consensus
Price-Consensus-Chart of Stitch Fix, Inc. | Stitch Fix, Inc. Quote
SFIX recorded net revenues of $492.9 million, which represents an 8% decrease from the figure for the prior year quarter. The measure beat Zacks’ consensus estimate by $491 million. The continued strength of Freestyle capacity expansion fueled top-level performance.
Stitch Fix has 3,907,000 active customers as of April 30, 2022, down 5% from the prior year quarter level. Revenue per active client or PRPP reached $553, increasing 15% year over year. This is driven by the use of the patch plus freestyle by customers and the gains in retention rates with preview of the patch. Freestyle revenue grew 13% year over year, with strength in categories such as special occasions and social wear. Freestyle revenue from dresses grew more than 75% year-over-year, more than five times the growth rate for dresses and patches.
Margins and costs
In the third quarter of the fiscal year, gross profit fell 55.3% to $210.1 million as gross margin contracted 340 basis points (bps) year-over-year to s set at 42.6%. Rising freight costs and tighter product margins hurt gross margin.
Selling, general and administrative (SG&A) expenses increased 6.1% to $287 million. Other general expenses, excluding advertising, were 47.8% as a percentage of sales, which increased by 640 basis points year-over-year. This increase is mainly explained by the increase in fixed labor costs, including stock-based compensation.
Stitch Fix recorded an adjusted EBITDA loss of $36 million in the quarter under review compared to an adjusted EBITDA loss of $11.6 million in the prior year quarter. This is mainly due to the decline in revenue and gross margin, as well as the increase in fixed labor costs.
Other financial aspects
Stitch Fix ended the quarter with cash and cash equivalents of $137.7 million less debt and equity of $389.5 million.
SFIX used $94.5 million of cash from operating activities in the first nine months of Fiscal 2022. Additionally, Stitch Fix had free cash flow of $55.8 million in the aforementioned period.
During the reported quarter, SFX repurchased $19 million in shares and $30 million year-to-date.
For the fourth quarter of fiscal 2022, management expects net revenue of $485 million to $495 million, indicating a decline of 13 to 15 percent from the figure reported a year ago. Stitch Fix expects adjusted EBITDA to be between negative $25 million and negative $30 million with margin contraction of 5-6%.
Regarding the macroeconomic environment, management constantly navigates continuing uncertainties, including supply chain issues, global inflationary pressures and potential shifts in customer demand.
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