Stitch Fix stock fell more than 14% after close of trading Tuesday as the company posted heavy losses for the fourth quarter of its fiscal year.
Here's how the company behaved in its fourth fiscal quarter ending August 1, compared to Refinitiv's estimates:
Loss per share: 44 cents versus 16 cents per share, expected Revenue: $ 443.4 million versus $ 414.9 million, expected
The online personal styling service posted a loss of $ 44.5 million, or 44 cents per share, for the fourth quarter, compared to earnings of $ 7.2 million, or 7 cents per share, a year ago.
Revenue for the quarter rose to $ 443.4 million, an increase of approximately 11% from $ 432.1 million last year after adjusting for an additional week in the fourth quarter of 2019.
Stitch Fix's active customers increased 9% year over year to 3.5 million. The company defines active customers as those who, in the 52 weeks from the last day of the quarter, have purchased an item called a "fix" directly from their website.
The company – a styling service that sells boxes of clothes that people pay to keep on subscription or return – bounced back from a difficult third fiscal quarter. Revenue declined 9% in the quarter as it was hampered by new orders due to the coronavirus pandemic. At the time, executive director and founder Katrina Lake said she expected a return to revenue growth by the fourth quarter of the fiscal year as more warehouses reopened.
When people searched for casual and comfortable clothing during the pandemic, the company said sales of plus size womenswear and active clothing saw growth in the fourth quarter. Sales of men's clothing also increased in the quarter.
On a conference call with investors, Lake said the company had shuffled its inventory mix to focus on sports rather than blazers and other items typically worn in the office. She said women's active wear revenue increased more than 350% in the fourth quarter, compared to a year earlier after adjustments. She said key brands like Reebok and Beyond Yoga are popular with customers.
One of the other bright spots that Stitch Fix executives have pointed out is the direct purchase offering, an option that allows customers to purchase individual items versus a whole box of clothing. It's also an entry point for new buyers who haven't tried Stitch Fix yet.
During the quarter, the company added a “feed-based” feature of shoppable looks called “Trending for You”. According to Stitch Fix, weekly direct buy orders increased by over 30% in the first two weeks after adding the feature. An algorithmic recommendation engine is also used to personalize choices for direct buy customers.
Mike Smith, Stitch Fix's chief operating officer, told investors on a conference call that the company plans to automate more and improve efficiency.
In June, Stitch Fix announced it would lay off 1,400 stylists in California, or about 18% of the workforce, by the end of September. Stitch Fix plans to hire 2,000 stylists in other parts of the US where the cost of living is lower, like Dallas or Minneapolis.
In Tuesday's trading, Stitch Fix shares hit a 52-week high of $ 31.60. Shares are up 23% this year for a market cap of $ 3.2 billion.
On a conference call with investors, Lake admitted that people's appetites for shopping have decreased, but patterns are recovering and Stitch Fix is more adaptable than its competitors.
"One of the really big advantages of our model is that we have been able to adapt our range to the needs of our customers," she said. "You may not have thought that a year, two years ago, Stitch Fix would be known for active wear and exercise, and now we can really effectively sell that to our customers and really meet our customers where they are."
And the convenience of consumers when shopping online will also help the company.
"We really believe that the behavior changes that are taking place today will be permanent and that this will be a pretty significant tailwind and benefit to our business in the long run."
Read the full results publication here.