Why Is Stitch Fix (SFIX) Down 14.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Stitch Fix (SFIX). Shares have lost about 14.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stitch Fix due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Stitch Fix Q3 Loss Narrows, Revenues Decline Y/Y
Stitch Fix posted third-quarter fiscal 2023 results. SFIX reported a narrower-than-expected loss per share and better-than-expected revenues. The bottom line fared better year-over-year, while the top line deteriorated from the year-earlier quarter’s reported figure. Results were hurt by a tough macroeconomic backdrop and tighter consumer wallet.
Q3 Details
Stitch Fix posted a loss of 19 cents per share, which included restructuring costs and other one-time costs. Adjusting for the above-mentioned costs, Stitch Fix reported an adjusted loss of 17 cents per share, narrower than the Zacks Consensus Estimate of a loss of 32 cents. The metric narrowed from a loss of 72 cents per share reported in the year ago quarter.
SFIX recorded net revenues of $394.9 million, which outpaced the Zacks Consensus Estimate of $389 million. However, the metric declined 20% from the year-ago fiscal quarter’s figure due to lower net active clients.
Margins & Costs
In the fiscal third quarter, gross profit declined to $167.9 million from $210.1 million reported in the year-ago period. Also, the gross margin contracted 10 basis points year over year to 42.5%, primarily due to lower revenues in the quarter.
The company’s cost of goods sold declined from $282.6 million reported in the year-ago period to $227 million in the fiscal third quarter. Selling, general and administrative expenses fell from $287 million in the prior-year quarter to $192.7 million in the quarter under review. Stitch Fix reported an adjusted EBITDA of $10.1 million for the fiscal quarter under review compared with the adjusted EBITDA loss of $36 million posted in the year-ago fiscal quarter.
Other Financial Aspects
Stitch Fix ended the fiscal third quarter with cash and cash equivalents, including short-term investments of $243.7 million, net inventory of $151.6 million and shareholders’ equity of $253.8 million.
SFIX generated $25.7 million in cash from operating activities and had a free cash flow of $21.9 million during the third quarter of fiscal 2023.
Outlook
For the fourth quarter of fiscal 2023, management projects net revenues of $365-$375 million, indicating a 22-24% 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 bracket of a break-even level to $10 million with a margin of 0% to 3%.
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 fiscal 2023, management anticipates a gross margin of approximately 42%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 12.35% due to these changes.
VGM Scores
Currently, Stitch Fix has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Stitch Fix has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Stitch Fix is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, Urban Outfitters (URBN), a stock from the same industry, has gained 3.5%. The company reported its results for the quarter ended April 2023 more than a month ago.
Urban Outfitters reported revenues of $1.11 billion in the last reported quarter, representing a year-over-year change of +5.9%. EPS of $0.56 for the same period compares with $0.33 a year ago.
Urban Outfitters is expected to post earnings of $0.85 per share for the current quarter, representing a year-over-year change of +32.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Urban Outfitters. Also, the stock has a VGM Score of C.
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Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report
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