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Stitch Fix said the holidays went more smoothly than expected.
Courtesy point correction
Stitch Fix’s shares were trading sharply at the end of Monday’s trading session, after the subscription-based clothing retailer reported disappointing results for its second fiscal quarter and lowered its forecast for the next fiscal year, which starts at July.
The shares fell 23% to $ 53.14.
For the quarter ended January 31, Stitch Fix (ticker: SFIX) reported revenue of $ 504.1 million, an increase of 12% over the previous year, but below the $ 506 million guidance range a US $ 515 million. The company recorded an adjusted EBITDA loss – earnings before interest, taxes, depreciation and amortization – of $ 8.9 million, broader than the projected range of a loss of between $ 3 million and $ 6 million. It lost 20 cents per share in the quarter, two cents better than the Street consensus forecast of a loss of 22 cents.
Stitch Fix said it had 3.9 million active customers at the end of the quarter, an increase of 12% over the previous year. Average revenue per active customer was $ 467, down 7% from the previous year.
For the third fiscal quarter, Stitch Fix expects revenue of $ 505 million to $ 515 million, below the previous $ 523 million Street consensus. For the full year, the company now expects revenue of $ 2.02 billion to $ 2.05 billion, compared to a previous forecast of $ 2.05 billion to $ 2.14 billion.
Stitch Fix blamed the drop in revenue in the quarter on delivery problems. “Due to the pandemic, carriers faced unprecedented volume during the holidays and we saw increased cycle times,” said the company in a letter to shareholders. . ”The company said that adjusted for this factor, the revenue would have been within the guidance range.
Stitch Fix said he is “taking steps to diversify our outbound carrier mix and we are partnering with our main carrier, the United States Postal Service, to process our returns more efficiently.”
Stitch Fix also said his direct purchase option helped the company post its “biggest month-on-month revenue growth in any January on record” in January. But the company also said it had “a smoother holiday performance than we anticipated”, with people switching from self-buying to giving as gifts.
As for guidance, Stitch Fix said he is “seeing strong trends in new customer acquisition, healthy levels of automatic shipping retention and increasing customer engagement with direct purchase”. But the company also said that “longer cycle times … persisted in February”, and may impact revenue for the second half.
“These longer cycle times, mainly involving carrier and customer delays, affect revenue recognition in the period and can delay subsequent Fix orders, since the vast majority of our customers receive recurring Fix shipments,” said company. “In addition, there are still many uncertainties due to Covid and, as a result, we are taking a more measured approach to our prospects.”
The company also said that the launch of the direct purchase option for new customers will not happen until near the end of this fiscal year. “Our product teams have focused on expanding the user experience capabilities to ensure that direct purchase is a great experience from the beginning for customers new to Stitch Fix,” said the company. “As such, we plan to continue testing the product during the third fiscal quarter and fourth quarter, before the launch of our large-scale product at the end of the fourth fiscal quarter. This time of implementation also plays a role in our revised guidance. “
In an interview with Barron’sStitch Fix President Elizabeth Spaulding said the company remains confident in its business model and opportunity – it believes that 50% of the clothing market will go online in 2025.
But she also admits that the company’s plan to offer new customers the direct purchase model has been pushed against previous internal expectations, citing the complexity of the project. “We want to make sure we get it right,” she said.
As for the shipping issue, Spaulding notes that the company has seen cycle times – the period between sending the product to customers and returning unwanted items to the company – increasing “in the double digits” on a percentage basis, a major change related to carrier delays, although the company also observed higher consumer wait times before making returns. She also notes that February cycle times have been hindered by bad weather, particularly affecting distribution centers in Dallas and Indianapolis.
Write to Eric J. Savitz at [email protected]