Not every earnings report can be a winner, a reality confronted by Stich Fix last week when increased costs and slowing customer growth depressed its quarterly outcomes.
The digital personal styling service reported a $21 million loss last quarter as shipping costs crept up, inventory reserves rose and benefits and comp figures picked up — overshadowing a 12 percent gain in revenues and the addition of 110,000 new customers for the three months ending Jan. 30.
Moreover, though the per-share loss of 20 cents was smaller than analysts had expected, revenues of $504 million were below the average estimate of $512 million. The company’s current quarter revenue forecast of $505 to $516 million was also less than the average analyst estimate of $523 million. Despite the setbacks, however, Founder and CEO Katrina Lake said Stitch Fix was well-positioned to capture the ongoing digital shift in the retail landscape to where 50 percent of apparel is purchased online, and that the firm remains confident in its long-term prospects.
“In our first two quarters we had more net active client additions than in our entire past fiscal year, and we delivered one of our strongest Januarys on record,” Lake said, noting 110,000 new clients in Q4 and the firm’s total active user base of nearly 3.9 million customers.
But a bad day is just that, a single day. On Monday (March 15) Stitch Fix made more than half that lost ground back — after the price climbed consistently throughout the day before a surprising end-of-the-day pop that left its stock price up 10.9 percent over the start of the day.
As for what comes next for Stitch Fix, market experts seem sincerely divided on the subject. Some are dubious about Stitch Fix’s future noting the fact that the digital apparel market has become an incredibly crowded place in the last several years, pushed forward even faster in the 12 months that had consumers shopping from their couches instead of in stores. In the apparel field adjacent to Stitch Fix’s category, reCommerce, the action has been particularly fast paced.
Online second-hand retailer thredUP has officially filed for its initial public offering (IPO) with the Securities and Exchange Commission as of last week. And thredUP is far from the first player in the retail resale game to make a move on the public markets. Competitor The RealReal went public in June of 2019, while Poshmark first threw its hat into the public markets in early January.
And some of them are demonstrably soaring through the pandemic period — Poshmark announced net revenues of $69.3 million for the fourth quarter of last year, a 27 percent boost year over year. Gross merchandise value (GMV) grew 28 percent year over year, with the number growing from $302.1 million in 2019 to $387.2 million this year.
“We reported a strong first quarter as a public company and our third consecutive quarter of operating profitability as our community of buyers and sellers continued to embrace social commerce,” said Manish Chandra, founder and CEO of Poshmark. “During these unprecedented times, we are proud to provide an easy and accessible way for anyone to sell and everyone to thrive on our social marketplace. We will continue to make investments in product, technology and marketing to grow our business, support our community and strengthen our social marketplace over the long term.”
But like Stitch Fix, The RealReal faced a rougher ride through Q4, losing $53 million, or 60 cents a share, in the fourth quarter, compared with a loss of $23 million, or 25 cents a share, in 2019. Sales fell to $84.6 million from $93.7 million.
Nonetheless, Founder and CEO Julie Wainwright remains positive in her outlook for 2021.
“With improving trends in Q4, culminating in December GMV increasing 6 percent year on year, we exited the year with strong momentum,” Wainwright noted in a statement. “Q1 2021 GMV grew 14 percent year on year quarter to date through Feb. 19, 2021, so that momentum continues, and we are optimistic about the year ahead.”
Whether the year ahead will reward optimism remains to be seen, as all of these online players apparently will have a competitor they haven’t faced in over a year returning in earnest to the market in the coming months as vaccines continue to roll out nationwide. Physical stores will be back, and consumers might just find they even want to return to them from time to time. The online players, it seems will have to once again raise the level of their game to compete against each other — and the returning real world.
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