Stitch Fix (SFIX) Q3 Revenue: What to Expect

IIt has been said that “patience is a virtue”, but being too patient can often just become stubbornness. And in the stock market, stubbornness can leave investors holding the bag.

While it could be argued that Stitch Fix (SFIX) stock is a bargain at current levels, investors who have seen the stock price drop by as much as 90% pending execution are likely regretting it. ‘have done. But with the stock now seemingly thrown into the market and trading at historic lows, is it time to bet on a rebound? Ahead of the third-quarter fiscal 2022 results after the closing bell on Thursday, that’s the main question analysts want answered.

Shares of online personal styling firm Stitch Fix have been sanctioned over the past year, plunging nearly 85%, including a 15% drop in the past thirty days. Now down 55% year-to-date against the S&P 500’s 12% drop, management needs to give investors a new reason to be patient. In addition to fears of competitive pressures, investors worried about Stitch Fix’s ability to maintain profitability over time.

The company’s inability to effectively market its Freestyle product, which forced it to cut its guidance, is a glaring headwind. The product allows consumers to buy clothes on Stitch Fix via artificial intelligence data for immediate purchase, unlike the standard service where a bundle of four items is sent for customers to choose from. To reverse the stock’s decline on Thursday, the market will want to see an acceleration in revenue growth, as well as improved profit margins.

For the three months ending in April, Wall Street expects the San Francisco-based company to lose 54 cents per share on revenue of $493.29 million. That compares to the year-ago quarter loss of 18 cents per share on revenue of $535.59 million. For the full year, ending July, the loss is expected to be $1.34, down from 8 cents a year ago, while annual revenue is expected to decline 0.60% year-over-year to reach $2.09 billion.

Part of the stock’s decline stemmed from what investors perceived as an erosion of fundamentals within the company. For example, at the start of the quarter, the full-year loss was expected to be 94 cents per share. The expected loss has since increased by 40 cents. Similarly, revenue for the full year was estimated at $2.28 billion, which has since been lowered to $2.09 billion. Decelerating revenue growth, which triggered a downgrade in forecasts, was the main driver of the stock’s sanction.

The company also lost active customers. Most recently, active customers were just 4.02 million, down from 4.17 at the end of fiscal 2021. As noted, the company recently launched its Freestyle service to help drive engagement and volumes . If executed correctly, the service can increase key metrics such as user engagement, average revenue per user, as well as overall business customer base expansion. And that’s what Stitch Fix needs to jump-start revenue growth.

In the second quarter, revenue came in mostly in line with consensus estimates, coming in at $517 million. However, this translated to growth of 3%, while the Street was expecting growth close to 20%. Net revenue per active customer for the quarter was $549, an 18% year-over-year increase. However, this figure is slightly lower than some growth estimates of 22%.

Evidenced by the recent reduction in price targets and lower-revised revenue and earnings for the full year, it appears that Wall Street has turned even more bearish. All told, Stitch Fix has a lot to fix on Thursday.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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