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Stitch Fix said the holidays were smoother than expected.
Courtesy of Stitch Fix
Stitch Fix shares traded sharply lower at the end of trading on Monday after the subscription-based clothing retailer posted disappointing results for its second fiscal quarter and cut its focus for the next fiscal year, which begins in July.
Shares had fallen 23% to $ 53.14.
For the quarter ended Jan. 31, Stitch Fix (ticker: SFIX) posted revenue of $ 504.1 million, up 12% from a year ago, but below its target range, between $ 506 million and $ 515 million. The company recorded an adjusted EBITDA loss (earnings before interest, taxes, depreciation and amortization) of $ 8.9 million, wider than the target range of a loss of $ 3 million to $ 6 million. . It lost 20 cents a share in the quarter, two cents better than the consensus street forecast of a 22-cent loss.
Stitch Fix said it had 3.9 million active customers at the end of the quarter, 12% more than the previous year. Average revenue per active customer was $ 467, 7% less than a year ago.
For the third fiscal quarter, Stitch Fix has revenue of $ 505 million to $ 515 million, below the previous consensus of $ 523 million. Throughout the year, the company now records revenue of $ 2.02 billion to $ 2.05 billion, compared to the previous forecast of $ 2.05 billion to $ 2.14 million.
Stitch Fix blamed the quarter’s revenue deficit on delivery issues. “Due to the pandemic, carriers faced an unprecedented volume during the holidays and we saw how cycle times increased,” the company said in a letter to shareholders. “This resulted in us not being able to recognize all revenue from corrections we sent during the quarter.” The company said that, adjusted for this factor, revenue would have been within the guidance range.
Stitch Fix said “it is taking steps to diversify our combination of outbound suppliers and we are partnering with our main carrier, the U.S. Postal Service, to process returns more efficiently.”
Stitch Fix also said its direct purchase option helped the company in January post its “strongest month-over-month revenue growth of all recorded genres.” But the company also said it saw “a smoother holiday performance than we expected,” with people moving from self-purchase to gift.
In terms of guidance, Stitch Fix said it “sees strong trends in new customer acquisition, healthy auto vehicle retention levels and increases customer engagement with direct purchase.” But the company also said “longer cycle times … persisted in February” and could affect second-half revenue.
“These longer cycle times, which consist primarily of operator and customer delays, affect revenue recognition during the period and may delay subsequent repair orders, as the vast majority of our customers receive shipments of recurring repairs, ”the company said. “In addition, there is still a lot of uncertainty given by Covid and, as a result, we are taking a more measured approach to our prospects.”
The company also said the launch of the direct purchase option to new customers will not occur until near the end of this fiscal year. “Our product teams have focused on expanding user experience features to ensure direct shopping is a fantastic experience from the start to incorporating new customers into Stitch Fix,” the company said. “As such, we plan to continue testing the product during the third fiscal quarter and the fourth quarter before the large-scale launch of the product at the end of the fourth fiscal quarter. This release timing also plays an important role in our revised guides. “
In an interview with De Barron, Stitch Fix president Elizabeth Spaulding said the company remains confident in its business model and opportunity; he believes 50% of the garment market will change online by 2025.
But he also admits that the company’s plan to offer new customers the direct purchase model has been removed in relation to previous internal expectations, citing the complexity of the project. “We want to make sure we do it right,” he said.
Regarding the shipping problem, Spaulding notes that the company has been seeing cycle times (the period from shipping the product to customers to returning it to the company for unwanted items), which increase “in the two highest digits ”percentage, a change largely related to operator delays, although the company also saw higher consumer retention times before making returns. He also notes that February cycle times were affected by bad weather, especially affecting the Dallas and Indianapolis distribution centers.
Write to Eric J. Savitz at [email protected]