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Stitch Fix Falls After Cutting Annual Sales, Profit Forecast

Nikitha Sattiraju

(Bloomberg) -- Stitch Fix Inc. plunged almost 40% in extended trading after the online personal styling service cut its full-year sales and profit forecast on lower order values, rising costs and the potential impact of coronavirus.

The company said fiscal 2020 net revenue will be $1.8 billion to $1.84 billion, from a previous projection of $1.9 billion to $1.93 billion, and below analysts’ estimates of $1.92 billion. Annual adjusted earnings before interest, taxes, depreciation and amortization will be zero to $10 million, the company said, from an earlier estimate of $18 million to $32 million.

For the current quarter ending in April, sales will be $465 million to $475 million, or growth of 14% to 16% year over year, San Francisco-based Stitch Fix said. Analysts, on average, projected $506.3 million, according to data compiled by Bloomberg.

“Now that we’ve seen a few company-specific, but also macro themes, play out in Q2 ’20, we’re leaning more conservatively in the back half of 2020 and shifting our full-year outlook,” the company said Monday in a statement.

While coronavirus hasn’t had a material impact on the business yet, Stitch Fix called the spreading virus a “dynamic situation” and said “it’s reasonable to expect that we’ll see some impact.”

Stitch Fix also attributed part of its weaker guidance to lower-than-expected revenue from the U.K. and the “macroeconomic climate” tied to Brexit, which has lasted longer than the company anticipated.

Shares declined to a low of $11.87 after closing at $21.21 in New York. The stock has dropped 17% in the past 12 months.

Stitch Fix was a pioneer in the data-driven shopping experience. Founded by Katrina Lake in 2011, the company asks customers questions about their style and sends them a box of clothes suited to their taste. Customers can send back pieces they don’t want, but get a discount if they keep all the items.

The company said active clients increased 17% to 3.5 million as of Feb. 1, the end of the fiscal second quarter.

Since going public more than two years ago, Stitch Fix has spent heavily to expand into new apparel categories such as kids and maternity wear, and made its first foray into the U.K. in 2019. It’s also facing increasing competition from other retailers such as Amazon.com Inc., which rolled out a similar feature for its Prime Wardrobe offering in July last year.

Revenue increased 22% to $451.8 million in the quarter, just short of analysts’ average estimate. Net income declined to $11.4 million, or 11 cents a share, from $12 million, or 12 cents, in the period a year earlier.

(Updates with number of active clients in the ninth paragraph.)

To contact the reporter on this story: Nikitha Sattiraju in New York at nsattiraju@bloomberg.net

To contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net, Andrew Pollack, Alistair Barr

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