Stitch Fix (SFIX) Loss Narrows in Q4, Revenues Decline Y/Y
Stitch Fix, Inc. SFIX posted a narrower-than-expected loss per share and better-than-expected revenues in its fourth-quarter fiscal 2023 results. While the bottom line fared better year over year, the top line deteriorated from the year-earlier quarter figure. Results were hurt by a tough macroeconomic backdrop and a tighter consumer wallet.
Stitch Fix shares declined 5.6% after the trading session on Sep 18.
Q4 Details
Stitch Fix posted a loss of 24 cents per share, which included restructuring costs and other one-time costs. Adjusting for the above-mentioned costs, the company reported an adjusted loss of 19 cents per share, narrower than the Zacks Consensus Estimate of a loss of 22 cents. The metric narrowed from a loss of 65 cents per share reported in the year-ago quarter.
SFIX recorded net revenues of $375.8 million, which outpaced the Zacks Consensus Estimate of $372 million. However, the metric declined 22% from the year-ago quarter figure due to lower net active clients.
For fiscal 2023, Freestyle revenues declined 21% year over year to $1,638.4 million. For the fiscal year, it posted a loss of $1.50 per share, which included restructuring costs and other one-time costs.
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 fourth quarter, gross profit declined to $162.7 million from $192.7 million reported in the year-ago period. However, the gross margin expanded 330 basis points (bps) year over year to 43.3% as the company continued its efforts to align its inventory position with the demand environment. We expected the figure to expand by 220 bps to 42.2% for the quarter under review.
The company’s cost of goods sold declined from $289.2 million reported in the year-ago period to $213.1 million in the fiscal fourth quarter. Selling, general and administrative expenses (SG&A) fell from $291.3 million in the prior-year quarter to $194 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 51.6%, down 880 bps from 60.4% reported in the prior-year quarter. We expected the metric to decline by 1,080 bps to 49.6% for the quarter.
Stitch Fix reported an adjusted EBITDA of $10.4 million for the fiscal quarter under review compared with the adjusted EBITDA loss of $31.8 million posted in the year-ago fiscal quarter.
Other Financial Aspects
The company ended the fiscal fourth quarter with cash and cash equivalents of $239.4 million, short-term investments of $18.2 million, net inventory of $137.2 million and shareholders’ equity of $247.3 million.
SFIX generated $21.1 million in cash from operating activities and had a free cash flow of $17.7 million during the fourth quarter of fiscal 2023.
Outlook
For the first quarter of fiscal 2024, management projects net revenues of $355-$365 million, indicating an 18-20% decline from the year-ago fiscal quarter’s reported figure. This 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 first-quarter fiscal 2024 and fiscal 2024, management anticipates a gross margin of 43-44%.
For fiscal 2024, SFIX projects 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 expects adjusted EBITDA in the range of $5-$30 million with a margin of 0% to 2%.
This Zacks Rank #3 (Hold) stock has lost 18.2% in the past three months against the industry’s growth of 3.5%.
Key Picks
Some better-ranked stocks from the same sector are Abercrombie & Fitch ANF, Boot Barn BOOT and Brilliant Earth Group, Inc. BRLT. Abercrombie & Fitch and Boot Barn currently sport a Zacks Rank #1 (Strong Buy), and Brilliant Earth carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abercrombie & Fitch is a leading casual apparel retailer. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 10.4% and 1,644%, respectively, from the year-ago reported figures. ANF delivered an earnings surprise of 724.8% in the last reported quarter.
Boot Barn is a fashion retailer of apparel and accessories. The company has a trailing four-quarter earnings surprise of 13.5%, on average. The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 7.8% from the year-ago reported figure.
Brilliant Earth is a designer and seller of precious metals and jewelry in the United States. BRLT has a trailing four-quarter earnings surprise of 83.3%, on average. The Zacks Consensus Estimate for Brilliant Earth’s current financial-year sales suggests growth of 9.2% from the year-ago reported figure.
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