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Stitch Fix (SFIX) Gains on Rising Demand, Active Client Growth
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With easing of pandemic related-restrictions, thanks to mass vaccinations and individuals spending more time outdoors, there has been a revival in apparel demand. Such trends have been favoring the well-known personalized styling retailer, Stitch Fix, Inc. (SFIX - Free Report) . Markedly, the company’s robust third-quarter fiscal 2021 results exemplify favorable demand conditions. Moreover, it is gaining from growing base of active clients as well as prudent efforts undertaken to boost assortment categories and consumers’ shopping experience. Shares of the company have gained 27.1% in the past three months compared with the industry’s rise of 8.8%. That said, let’s take a closer look at the aspects aiding this Zacks Rank #3 (Hold) company.
Favorable Demand Scenario & Expanding Clientele
During the third quarter, the company witnessed solid demand for its Fix offering from first-time as well as reactivated clients. Management highlighted that strong Fix and direct buy offerings have helped the company meet demand. Further, Stitch Fix saw better success rates across the Women’s, Men’s and Kids categories on a year-over-year and sequential basis.
Additionally, consistent growth in active client base is a significant upside for Stitch Fix. Markedly, active clients rose 20% year on year to 4.1 million in the third quarter. Sequentially, the company’s active clients went up 234,000, marking the second-highest quarter-over-quarter increase. This can be attributed to strong Fix demand, re-engagement of old clients and reduced dormancy rates (as the company lapped the pandemic-led weakness in the year-ago period). We note that the company has been evolving its Fix offering to drive conversion and retention of new and existing clients.
Image Source: Zacks Investment Research
Strategic Growth Measures
Stitch Fix is on track with efforts to boost assortments as well as shopping features on its website. The company expanded its offerings to include more affordable products across categories. In fact, new products and features boosted client adoption during the third quarter. We note that the company’s direct-buy penetration has continued to grow across men's and women's client base. As the company continues to expand its direct buy facility, it expects to generate stronger margins and client outcome. It also started collecting client feedback data on shipped direct buy items, which will further reinforce the company’s personalized recommendation. The company is also leveraging the usage of Style Shuffle for collecting data. Last year, Stitch Fix rolled out Trending For You, which enhances feed-based shopping experience. It will help new Stitch Fix customers to engage via direct buy in the upcoming quarters.
Management is also optimistic about Fix Preview, which offers the opportunity to view proposed items for clients’ next Fix before it is shipped. Markedly, management has expanded the availability of Fix Preview to its entire client base in the U.K. as well as to more than half of its U.S. clients and experienced impressive response. The company plans to keep rolling out the Fix Preview to more clients in the forthcoming periods. Apart from these, the company introduced Shop by Category to the current clients, helping them to shop more conveniently, with personalized recommendations in every category.
Wrapping Up
The momentum seen in new clients during the third quarter is expected to continue in the fourth quarter as well. Hence, management provided an optimistic view for the final quarter of fiscal 2021. Stitch Fix expects net revenues of $540-$550 million, which suggests year-over-year growth of 21.8-24%. Also, management raised its net revenue guidance for fiscal 2021. Management now projects net revenues in the band of $2.07-$2.08 billion for fiscal 2021, indicating 20.9-21.5% growth from the year-ago quarter’s figures. The Zacks Consensus Estimate for revenues in the fourth quarter and fiscal 2021 is currently pegged at $547.8 million and $2.08 billion, respectively.
Looking For Retail Stocks? Check these 3 Key Picks
Foot Locker, Inc. (FL - Free Report) boasts a Zacks Rank #1 and has a long-term earnings growth rate of 4%.
L Brands, Inc. has a long-term earnings growth rate of 13%. It currently carries a Zacks Rank #2 (Buy).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
Stitch Fix (SFIX) Gains on Rising Demand, Active Client Growth
With easing of pandemic related-restrictions, thanks to mass vaccinations and individuals spending more time outdoors, there has been a revival in apparel demand. Such trends have been favoring the well-known personalized styling retailer, Stitch Fix, Inc. (SFIX - Free Report) . Markedly, the company’s robust third-quarter fiscal 2021 results exemplify favorable demand conditions. Moreover, it is gaining from growing base of active clients as well as prudent efforts undertaken to boost assortment categories and consumers’ shopping experience. Shares of the company have gained 27.1% in the past three months compared with the industry’s rise of 8.8%. That said, let’s take a closer look at the aspects aiding this Zacks Rank #3 (Hold) company.
Favorable Demand Scenario & Expanding Clientele
During the third quarter, the company witnessed solid demand for its Fix offering from first-time as well as reactivated clients. Management highlighted that strong Fix and direct buy offerings have helped the company meet demand. Further, Stitch Fix saw better success rates across the Women’s, Men’s and Kids categories on a year-over-year and sequential basis.
Additionally, consistent growth in active client base is a significant upside for Stitch Fix. Markedly, active clients rose 20% year on year to 4.1 million in the third quarter. Sequentially, the company’s active clients went up 234,000, marking the second-highest quarter-over-quarter increase. This can be attributed to strong Fix demand, re-engagement of old clients and reduced dormancy rates (as the company lapped the pandemic-led weakness in the year-ago period). We note that the company has been evolving its Fix offering to drive conversion and retention of new and existing clients.
Strategic Growth Measures
Stitch Fix is on track with efforts to boost assortments as well as shopping features on its website. The company expanded its offerings to include more affordable products across categories. In fact, new products and features boosted client adoption during the third quarter. We note that the company’s direct-buy penetration has continued to grow across men's and women's client base. As the company continues to expand its direct buy facility, it expects to generate stronger margins and client outcome. It also started collecting client feedback data on shipped direct buy items, which will further reinforce the company’s personalized recommendation. The company is also leveraging the usage of Style Shuffle for collecting data. Last year, Stitch Fix rolled out Trending For You, which enhances feed-based shopping experience. It will help new Stitch Fix customers to engage via direct buy in the upcoming quarters.
Management is also optimistic about Fix Preview, which offers the opportunity to view proposed items for clients’ next Fix before it is shipped. Markedly, management has expanded the availability of Fix Preview to its entire client base in the U.K. as well as to more than half of its U.S. clients and experienced impressive response. The company plans to keep rolling out the Fix Preview to more clients in the forthcoming periods. Apart from these, the company introduced Shop by Category to the current clients, helping them to shop more conveniently, with personalized recommendations in every category.
Wrapping Up
The momentum seen in new clients during the third quarter is expected to continue in the fourth quarter as well. Hence, management provided an optimistic view for the final quarter of fiscal 2021. Stitch Fix expects net revenues of $540-$550 million, which suggests year-over-year growth of 21.8-24%. Also, management raised its net revenue guidance for fiscal 2021. Management now projects net revenues in the band of $2.07-$2.08 billion for fiscal 2021, indicating 20.9-21.5% growth from the year-ago quarter’s figures. The Zacks Consensus Estimate for revenues in the fourth quarter and fiscal 2021 is currently pegged at $547.8 million and $2.08 billion, respectively.
Looking For Retail Stocks? Check these 3 Key Picks
Abercrombie & Fitch Company (ANF - Free Report) flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Foot Locker, Inc. (FL - Free Report) boasts a Zacks Rank #1 and has a long-term earnings growth rate of 4%.
L Brands, Inc. has a long-term earnings growth rate of 13%. It currently carries a Zacks Rank #2 (Buy).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>