Stitch Fix: Big Growth And A Surprise Turn To Profitability

Stitch Fix

Stitch Fix had a lot of happy investors Wednesday afternoon (June 5) when the market closed and its Q1 earnings report hit the wires. Earnings and revenue both came in well above expectations, as active client lists continued to grow at a double digit pace year on year.

Not bad for a firm from which the Street was expecting losses, instead of gains.

“These results demonstrate our ability to attract new clients and to serve our existing clients well,” Stitch Fix Founder and CEO Katrina Lake said in a statement. “The continued strength of our Women’s category and the growth of our Men’s category give us even more confidence in our ability to scale new categories and geographies. As I look forward, I’m excited about the opportunities ahead to delight even more clients around the world.”

By the numbers, the service reported fiscal third-quarter net income of $7 million, or 7 cents a share vs. the expected loss of 3 cents per share. Revenue clocked in at $408.9 million vs. $394.9 million predicted — up 29 percent year on year.

Among elements that got a special shout-out in the firm’s post-earnings release statement were enhancements to its predictive analytics that have helped it more accurately match its (largely female) client base with the right outfits. It also noted the quick start and rapid growth of its men’s line, particularly around the addition of options and styling choices for male clients.

Style Pass, Stitch Fix’s signature innovation in the quest to be the consumer digital personal stylist, was also credited as a major driver of loyalty and engagement. Style Pass is a $50 annual membership which offers users unlimited styling. The yearly fee is credited toward future purchases, and the extra help in selecting outfits boosts customer retention to over 70 percent among those who use the service.

But that number is, at present, limited, as the subscription is only available for select clients today — though Stitch Fix has said the plan is slated for a full rollout to all its customer by the end of 2019.

Stitch Fix’s outlook on the rest of the year is fairly optimistic — the firm has raised its revenue forecast for 2019 to a range of $1.57 billion to $1.58 billion, up from previous estimates of $1.53 billion to $1.56 billion. In the next fiscal quarter, the firm is predicting, revenue will be between $425 million and $435 million.

The company, which has a market cap of $2.4 billion, has seen its stock surge 38 percent since the start of the year. After today’s result were announced, its stock price shot up 25 percent in after-hours trading.


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