Amid expansion in its selection and growth of data sets from its Style Shuffle game, Stitch Fix reported first-quarter fiscal year 2019 earnings that beat analysts’ estimates, but fell short on Wall Street's forecasts for active client count growth. The apparel subscription box service reported revenues of $366.2 million and earnings per share of 10 cents compared to analysts’ estimates of $358 million and 3 cents, respectively.
Stitch Fix COO and President Mike Smith said in an earnings call with analysts on Monday (Dec. 10) that the company grew its active client count to 2.9 million as of October 27, marking an increase of 534,000 and 22 percent year over year (YOY). That figure, however, was just short of the 2.95 million forecasted by analysts. On the news, shares of Stitch Fix tumbled by almost 14 percent in after-hours trading on the day of the call and was down more than 26 percent as of 10:48 a.m. on Tuesday (December 11).
Over the quarter, Smith said the company continued to leverage additional data sets from Style Shuffle, which has been described as a game to help shoppers choose clothing and accessories in an effort to drive “enhanced personalization.” As of the quarter, Smith noted that more than 75 percent of active clients have played the game, and they have created more than one billion readings.
This fall, Smith said the company marked the two-year anniversary of its men’s offering launch. Since that time, Smith said the company has used client data to improve and expand fit and size options. In one example, he said the company has recently introduced a short offering with 28-inch pant inseams and shorter sleeve lengths. Stitch Fix has also launched big and tall items with shirt sizes up to 3XL and waist sizes up to 48 inches.
Smith said the company can serve the needs of “approximately 95 percent of our addressable men’s market” with the expanded selections. Beyond improved fit, the company has also leveraged client feedback data to broaden the portfolio of men’s exclusive brands. The men’s assortment has grown to include a wide array of aesthetics and price points to serve its customers' lifestyle preferences and needs. (Overall, the company has brought new brands on board, such as The North Face, Bonobos, Converse, Michael Kors and Madewell.)
Smith said the company continues to focus on better serving women with an improved assortment and data set. As a result of the company’s efforts in the quarter, he noted that the number of women's items bought per fix “reached its highest level on record.” Commenting on the results, he said, “we believe this reflects the strength of our women’s offering, as well as our ability to serve our clients well, and ultimately drives revenue per client.”
In addition, Smith noted that the company launched a Stitch Fix Kids offering in the fourth quarter of 2018 that enables the company to serve the needs of an entire household. In the first full quarter of the service, he said the company saw “higher than anticipated success rates,” as well as strength across market and exclusive brands. “Our offering is both fun and engaging for kids,” he said, adding that he is looking forward to sharing more about the offering in future quarters.
When it comes to logistics, the company introduced an automated outbound conveyor belt and labeling system in its Phoenix fulfillment center in the first quarter, which is lowering the labor cost per fix and improving the accuracy of shipments. Smith said the company intends to start bringing the system to other centers in the second half of FY 2019. He also anticipates “additional investments in automation and cost savings as we move forward.”