Stitch Fix (SFIX) Loss Narrows in Q1, Revenues Down Y/Y
Stitch Fix, Inc. SFIX posted a narrower-than-expected loss per share and better-than-expected revenues in its first-quarter fiscal 2024 results. While the bottom line fared better year over year, the top line deteriorated from the year-earlier quarter’s figure. The results were hurt by a tough macroeconomic backdrop and a tighter consumer wallet.
Q1 Details
Stitch Fix reported an adjusted loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 23 cents. The metric also narrowed from a loss of 46 cents per share reported in the year-ago quarter.
SFIX recorded net revenues of $364.8 million, which outpaced the Zacks Consensus Estimate of $362 million. However, the metric declined 18% from the year-ago quarter figure due to lower net active clients.
Stitch Fix, Inc. Price, Consensus and EPS Surprise
Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote
Margins & Costs
In the fiscal first quarter, gross profit declined to $159.1 million from $187.3 million reported in the year-ago period. However, the gross margin expanded 140 basis points (bps) year over year to 43.6%, supported by improvements in SFIX’s inventory position and transportation leverage. We expected the figure to expand by 130 bps to 43.5% for the fiscal quarter under review.
The company’s cost of goods sold declined from $256.4 million reported in the year-ago period to $205.7 million in the fiscal first quarter. Selling, general and administrative expenses (“SG&A”) fell from $235.8 million in the prior-year quarter to $187.8 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 51.5%, down 160 bps from 53.1% reported in the prior-year quarter. We expected the metric to be 53.2% for the quarter.
Stitch Fix reported an adjusted EBITDA of $8.6 million for the fiscal quarter under review compared with the adjusted EBITDA loss of $1.7 million posted in the year-ago fiscal quarter.
Other Financial Aspects
The company ended the fiscal first quarter with cash and cash equivalents of $256.9 million, short-term investments of $5.4 million, net inventory of $160.7 million and shareholders’ equity of $230.7 million.
SFIX generated $20.6 million in cash from operating activities and had a free cash flow of $16.9 million during the first quarter of fiscal 2024.
Outlook
For the second quarter of fiscal 2024, management projects net revenues of $325-$335 million, indicating a 16-19% decline from the year-ago fiscal quarter’s reported figure. This decline is due to challenges related to the tough macroeconomic backdrop. Stitch Fix expects adjusted EBITDA in the band of $2-$7 million, with a margin of 1% to 2%.
Management is persistently navigating the ongoing macroeconomic uncertainties and remains committed to improving gross margins with better product margins, transportation efficiency and inventory efficiency over time. For both second-quarter fiscal 2024 and fiscal 2024, management anticipates a gross margin of 43-44%.
For fiscal 2024, SFIX continues to project net revenues of $1.30-$1.37 billion, indicating a 14-18% decline from the year-ago fiscal quarter’s reported figure.
For the fiscal year, Stitch Fix currently expects adjusted EBITDA in the range of $10-$30 million with a margin of 1% to 2% compared with an adjusted EBITDA of $5-$30 million with a margin of 0% to 2% envisioned earlier.
This Zacks Rank #3 (Hold) stock has lost 4.2% in the past three months against the industry’s growth of 12.3%.
3 Red-Hot Stocks
Some better-ranked stocks are MINISO Group Holding Limited MNSO, Deckers Outdoor Corporation DECK and MarineMax HZO. While MINISO Group sports a Zacks Rank #1 (Strong Buy), Deckers Outdoor and MarineMax, each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MINISO Group operates as a retailer and wholesaler of lifestyle products. The Zacks Consensus Estimate for MNSO’s current financial-year earnings per share and sales suggests growth of 43.6% and 29.9%, respectively, from the corresponding year-ago reported figures.
Deckers Outdoor is a leading producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter earnings surprise of 26.3% on average.
MarineMax is a recreational boat and yacht retailer and a superyacht services company. MarineMax’s earnings came in line with the Zacks Consensus Estimate in the last reported quarter. The Zacks Consensus Estimate for HZO’s current financial year sales suggests growth of 3.1% from the year-ago period’s figures.
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