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Stitch Fix (SFIX) Q4 Loss Widens & Revenues Decrease Y/Y

·5 min read

Stitch Fix, Inc. SFIX posted soft fourth-quarter fiscal 2022 results. SFIX reported a wider-than-expected loss per share and lower-than-expected revenues. Both metrics also deteriorated from the year-earlier quarter’s respective reported figures. Results were hurt by a tough macroeconomic backdrop. Record inflation levels and a deteriorating retail environment caused slower discretionary spend in apparel.

Shares of this currently Zacks Rank #4 (Sell) Stitch Fix have decreased 24.1% in the past six months compared with the industry’s 15.6% decline.

In fiscal 2022, Freestyle revenues rose 21% year over year. Freestyle and SFIX’s original Fix offering appears encouraging.
 
Stitch Fix is consistently working on its transformation efforts to revert to profitability. It is focused on returning to active client growth and optimizing the cost base. It focuses on lowering fixed cost and increasing variable productivity. SFIX is on track to surpass the upper end of its anticipated annual savings in fiscal 2023.

Management also remains committed to its go-forward strategy. Stitch Fix has been capitalizing on the health of its present customer base by enhancing the unique experience, growing net active client marketing portfolio expansion, refining the on-boarding experience, controlling costs efficiently and reinforcing the infrastructure.

Q4 Details

Stitch Fix posted a loss of 89 cents a share, wider than the Zacks Consensus Estimate of a loss of 60 cents. The bottom line compared unfavorably with earnings of 19 cents a share recorded in the prior-year quarter.

SFIX recorded net revenues of $481.9 million, down 16% from the year-ago quarter’s figure due to weak fixed volumes, partly offset by demand in Freestyle. The metric came below the Zacks Consensus Estimate of $489 million.

Per management, the month of July was particularly challenging with macroeconomic headwinds. Such trends entered the first half of the fiscal first quarter.

Stitch Fix has active clients of 3,795,000 as of Jul 30, 2022, down 9% from the prior-year quarter’s level. Revenue per active client or RPAC reached $546, increasing 8% year over year.

Margins & Costs

In the fiscal fourth quarter, gross profit tumbled 27.4% to $192.7 million. Also, gross margin contracted 400 basis points (bps) year over year to 42.5% due to elevated transportation costs coupled with tightening product margins from inflation and higher penetration of national brands.

Selling, general and administrative (SG&A) expenses climbed 19% to $291.3 million. Other SG&A, excluding advertising and stock-based compensation, was essentially flat with the previous fiscal year’s reading.

Stitch Fix reported an adjusted EBITDA loss of $31.8 million for the fiscal quarter under review against the adjusted EBITDA of $55.4 million posted in the year-ago fiscal quarter.

Other Financial Aspects

Stitch Fix ended the fiscal fourth quarter with cash and cash equivalents of $130.9 million minus debt and shareholders’ equity of $322.7 million. SFIX had an undrawn $100 million revolving line of credit at the end of the period.

SFIX provided $55.4 million cash from operating activities during fiscal 2022. Also, Stitch Fix had a free cash flow of $9 million in the aforementioned period.

Outlook

For the first quarter of fiscal 2023, management projects net revenues of $455-$465 million, indicating a decline of 20-22% from the year-ago fiscal quarter’s reported figure. Stitch Fix expects adjusted EBITDA in the bracket of a negative $10 million to a negative $15 million with a margin contraction of 2-3%. This view assumes net active clients to decline quarter over quarter.

For fiscal 2023, management projects revenues between $1.76 billion and $1.86 billion, and adjusted EBITDA in the bracket of a negative $25 million to a negative $45 million.

The Zacks Consensus Estimate for earnings is pegged higher at $525 million for the fiscal first quarter and $2.12 billion for fiscal 2023.

Key Picks in Retail

Some better-ranked stocks are Designer Brands DBI, Buckle BKE and Capri Holdings CPRI.

Designer Brands, the leading footwear and accessories designer, presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Designer Brands’ fiscal 2022 sales and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago levels. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.

Buckle, a leading retailer of apparel, footwear and accessories, has a Zacks Rank #2 (Buy) at present. BKE has a trailing four-quarter earnings surprise of 8.3%, on average.

The Zacks Consensus Estimate for Buckle’s fiscal 2022 sales and EPS suggests growth of 6.8% and 4.5%, respectively, from the year-ago corresponding figures.

Capri Holdings, a global fashion luxury group consisting of iconic brands, namely Versace, Jimmy Choo and Michael Kors, carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales and EPS suggests growth of 3.3% and 10.1%, respectively, from the corresponding year-ago period’s actuals. CPRI has a trailing four-quarter earnings surprise of 32.4%, on average.


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Buckle, Inc. The (BKE) : Free Stock Analysis Report
 
Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report
 
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