Reasons Why Stitch Fix (SFIX) Should be in Your Portfolio
Stitch Fix, Inc. SFIX is poised to benefit from its business growth initiatives, solid product portfolio, healthy liquidity position and cost management actions. The company's constant focus on innovation and product diversification enables it to adapt to changing consumer preferences and capitalize on evolving trends.
The San Francisco, CA-based company has a $558.6 million market capitalization and currently carries a Zacks Rank #2 (Buy).
Let’s delve into the factors that have been benefiting this renowned online personal styling retailer for a while now.
Stitch Fix remains focused on the transformation of its business in several areas, including the expansion of shops, the launch and scale of Fix Preview and investments in systems and people. The company has been constantly leveraging product innovation and evolving assortments, as well as personalized experiences to gain more clients.
SFIX rolled out Fix Preview to its women's and men's clients across markets in the United States and the United Kingdom to drive personalized shopping experiences for its clients. Stitch Fix has also been enriching its client experience across Fix and direct buy, known as Freestyle. With the rollout of Freestyle, management looks to grow the client base and achieve profitability.
The company looks forward to enhancing client retention and reengagement strategies in an effort to continue to increase engagement. SFIX continues to refine its traditional paid channels as well as diversify into underpenetrated channels.
Stitch Fix’s commitment to generating healthy cash flows allows it to effectively deploy capital for business purposes. For instance, in third-quarter fiscal 2023, the company generated free cash flow of $21.9 million, marking the second consecutive quarter of positive free cash flow. Stitch Fix ended the fiscal third quarter with cash and cash equivalents of $193.6 million and no debt.
Its focus on effective management of costs and expenses is expected to boost margins and profitability in the quarters ahead. In the fiscal third quarter, the company’s selling, general and administrative expenses fell 32.9% year over year to $192.7 million. Its advertising costs decreased by 52.2% year over year.
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In the past three months, it has surged 53.5% compared with the industry’s growth of 12.1%.
However, the company has been subject to a challenging operating landscape with several issues, like rising interest rates and recessionary concerns. Of late, a higher inflationary environment has been affecting consumers’ spending, which might affect its near-term performance.
Other Stocks to Consider
Some other top-ranked stocks are Abercrombie & Fitch Co. ANF, Arcos Dorados Holdings, Inc. ARCO and Urban Outfitters, Inc. URBN. While Abercrombie and Arcos Dorados sport a Zacks Rank #1 (Strong Buy), Urban Outfitters carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 3.4%. Its earnings per share are expected to rise 732% from the corresponding year-ago reported figures. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Arcos Dorados operates as a franchisee of McDonald's restaurants. The Zacks Consensus Estimate for ARCO’s current financial-year sales and earnings per share suggests growth of 16.4% and 10.1%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 23.5%, on average.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings per share suggests growth of 5.1% and 57.1%, respectively, from the corresponding year-ago reported figures. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report
