Stitch Fix's narrower loss, better guidance fuels stock's 24% rally

By Claudia Assis

Stitch Fix guides for better quarterly, yearly revenue as its 'transformation efforts' are underway

Stitch Fix Inc. shares rallied 24.3% in the extended session Tuesday after the online styling company posted a narrower-than-expected quarterly loss and unveiled a current-quarter guidance that was also better than hoped.

Stitch Fix's (SFIX) fiscal third-quarter beat was a sign that the company's "transformation efforts are beginning to work," Chief Executive Matt Baer said. The stock has lost a quarter of its value this year, and the company's market cap has slid under $350 million.

"While we are still in early days, I am confident that our strategic focus on strengthening our foundation and reimagining the client experience will put us on the right path to deliver sustainable, profitable growth in the future," Baer said in a statement.

Stitch Fix lost $21.3 million, or 18 cents a share, in the quarter, compared with a loss of $21.8 million, or 19 cents a share, in the year-ago quarter. Analysts polled by FactSet expected to company to report a loss of 24 cents a share.

Revenue fell 16% to $323 million, and the number of active Stitch Fix clients dropped 6% quarter-on-quarter and 20% year-on-year to 2.633 million people, the company said.

Analyst consensus called for revenue of $306 million, and for about 2.682 million active clients at quarter-end.

Stitch Fix guided for fourth-quarter revenue between $312 million and $322 million, ahead of FactSet consensus of $307 million.

For the fiscal year, the company called for revenue between $1.33 billion and $1.34 billion, which compares with FactSet estimates around $1.31 billion.

Stitch Fix said it reworked its lease asset related to its San Francisco headquarters and predicted it will record a non-cash impairment charge between $15 million and $20 million in the fiscal fourth quarter to reduce the lease's asset as related to its estimated fair-market value.

San Francisco and other large U.S. metropolitan areas continue to struggle with excess office space in its main commercial areas.

Related: Commercial real estate is itching for a rebound two years after start of Fed rate hikes

Shares of Stitch Fix have lost 25% so far this year, contrasting with an advance of about 11% for the S&P 500 index SPX.

-Claudia Assis

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06-04-24 2021ET

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