The online personal styling service Stitch Fix saw its shares plummet more than 30 percent on Tuesday (March 10) after the startup’s second-quarter sales for fiscal year 2020 missed analysts’ estimates, according to reports.
As of 3:55 p.m. on Tuesday (March 10), Stitch Fix shares were down about 25 percent, trading at $15.78. The stock dropped even more in after-hours trading to $15.40 as of 7:59 p.m. Analysts had forecast fiscal 2020 net revenue at $1.92 billion, while the company had projected from $1.9 billion to $1.93 billion. Net revenue is now estimated to be $1.8 billion to $1.84 billion.
Stitch Fix went public in 2017 with a per-share price of $15. The price hit a record low of $14.48 in November 2017 and hit an all-time high of $52.44 in September 2018.
Data compiled by Bloomberg indicates that the “average target for analysts now sits at about $20 compared with $31 a week ago.”
Some Stitch Fix investors are afraid the Silicon Valley firm has “grown large,” and that its recent direct buy option “is a validation that ‘fixes’ are reaching a saturation point,” said BMO Retail Analyst Simeon Siegel. “Fixes” are the company’s clothing shipments to customers.
“Now that we’ve seen a few company-specific, but also macro themes, play out in Q2 ’20, we’re leaning more conservatively in the back half of 2020 and shifting our full-year outlook,” the company said Monday (March 9) in a statement.
Stitch Fix launched a direct buy option in late 2019, which enables users to purchase one item instead of an entire box. The company anticipates that the move will give it a bigger market share in apparel.
The company ended the quarter with 3.5 million active clients, an increase of 17 percent from the year-ago period, according to the Stitch Fix earnings report.
Stitch Fix said the lower revenue was due in part to sluggish U.K. sales and Brexit. The company expanded into the U.K. in 2019. The coronavirus hasn’t yet seemed to affect the business, but Stitch Fix said that “it’s reasonable to expect that we’ll see some impact.”
Founded by Katrina Lake in 2011, Stitch Fix uses data culled from customer questionnaires to send clothes suited to their lifestyle and preferences. Customers can return any clothing they don’t want.
Subscription models that rent clothes instead of selling them have been growing their reach, with some brick-and-mortar retailers bringing the concepts to their own brands.