Stitch Fix earnings came in flat, beating estimates by 6 cents per share. The company reported quarterly sales of $444.8 million, which beat the analyst consensus estimate of $441 million. This is a 21.45% increase over sales of $366.236 million the same period last year.
Bullish On 'Direct Buy'
Amid the stock's recent recent, Wells Fargo analyst Ike Boruchow still sees the stock moving higher, driven by strong quarter, lack of negative catalysts and the company’s new "direct buy" feature.
Boruchow says Stitch Fix provided a positive read on its direct buy initiative, and is now available to 33% of women’s clients, up from 20% just two months ago. The company is planning for a full rollout by the end of the fiscal year.
Wells Fargo maintains an Equal-weight rating and raised its price target from $24 to $29.
KeyBanc analyst Edward Yruma believes Stitch Fix can drive stronger sales and margin expansion simultaneously, and also lauded the direct buy feature.
“Direct Buy remains an important top-line driver and Stitch Fix believes it can accelerate second half sales,” Yruma wrote in a note. “We believe Direct Buy will be largely incremental, as it addresses an audience that does not want to continually shop in the Fix format.”
Yruma said the company’s two direct buy features, Shop Your Looks and Shop New Colors, are improving Stitch Fix’s customer experience.
Shop Your Looks provides customer with 30 to 40 curated shoppable items tailored to customers style preferences. Through this feature, around 60% of customers bought two or more items, and it has driven expansion of non-apparel items including handbags and shoes.
Yruma maintains an Overweight rating with a $34 price target.
Significant Whitespace Growth Ahead
Baird analyst Mark Altschwager said Stitch Fix’s strong first quarter is reinforcing his positive view of the business and sees “significant whitespace ahead as the company invests in new categories, new geographies, and new ways to shop.
“Results and updated EBITDA guidance increase our confidence that management can deliver margin expansion in the years ahead - supportive of a higher valuation multiple,” he wrote.
Baird maintains an Outperform rating and raised its price target from $28 to $33.
Stitch Fix's stock traded higher by 7.7% to $26.95 per share at time of publication.
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