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Stitch Fix (SFIX) Down 18% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Stitch Fix (SFIX - Free Report) . Shares have lost about 18% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Stitch Fix due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Stitch Fix Reports Q4 Earnings & Revenues Beat

Stitch Fix reported better-than-expected earnings and revenue results for fourth-quarter fiscal 2021. Both metrics compared favorably with the year-earlier quarter’s tallies as well. Robust performance across its business in Women’s, Kids and the UK aided its overall results. Management highlighted that the company crossed revenues of $2 billion, annually, in fiscal 2021 for the first time. Net revenues also grew 22.8% from the last fiscal year’s figure to $2.1 billion.

Q4 Details

After witnessing losses in the preceding two quarters, Stitch Fix posted a surprise profit in the fourth quarter of fiscal 2021. The company posted earnings of 19 cents a share. The Zacks Consensus Estimate was of a loss of 14 cents per share. The bottom line also compared favorably with the loss of 44 cents per share reported in the prior-year quarter.

The company recorded net revenues of $571.2 million, reflecting an increase of 29% from the year-ago quarter’s figure. The metric also outpaced the Zacks Consensus Estimate of $548 million. Continued strength across Women’s Fix, outsized growth in Kids and the UK, and an advancement in the Freestyle channel fueled the top-line performance. The company witnessed progress in both the fixed and direct buy offering. Robust demand trends and a solid momentum in its fundamentals also contributed to the performance.

Stitch Fix witnessed strength in product categories. Footwear delivered a higher percentage of revenues for Freestyle than for Fix across women’s and men’s sections.

Stitch Fix has active clients of 4,165,000 as of Jul 31, 2021, up 18% from the prior-year quarter’s level. Net revenue per active client jumped nearly 4% year over year to $505. The company experienced positive trends in client engagement and retention with keep rates touching all-time highs and client churn rates closing the year at all-time lows.

In the fiscal fourth quarter, gross profit surged 33.4% to $265.5 million. Also, gross margin increased 160 basis points (bps) to 46.5% on elevated product margins and lower transportation costs through efficiency gains in spite of supply-chain issues and higher carrier freight rates.

Selling, general and administrative (SG&A) expenses increased 14.7% to $244.7 million. Excluding advertising, other SG&A as a rate of sales decreased 110 bps to 37.2%. The company reported an adjusted EBITDA of $55.4 million in the quarter under review, significantly up from the adjusted EBITDA of $11.8 million reported in the year-ago quarter. The upside was driven by higher revenues along with robust gross margins on higher product margins and efficiency in transportation costs.

Other Financial Aspects

Stitch Fix ended the quarter with no debt along with cash and cash equivalents of $129.8 million and shareholders’ equity of $460.8 million.

The company used $15.7 million cash from operating activities during fiscal 2021. Also, it reported a negative free cash flow of $50.9 million for the same period.

Things to Note

The company’s Plus offering delivered 51% revenue growth in fiscal 2021. Its Plus penetration presently represents nearly half the penetration of the overall women’s market. The UK business also registered triple-digit revenue growth this fiscal with a solid client base and higher unit economics. Kids’ unit is also growing rapidly with revenues exceeding 75% in fiscal 2021.

Management is on track with a significant transformation of its business in several areas including the expansion of Shop to the existing client base, the launch and scale of Fix Preview, and investments in systems and people.

Management is constantly leveraging its product innovation, evolving assortments and using personalized experience to gain more clients. The expansion of personalized direct purchases for the clients is also impressive. In fiscal 2022, management looks to enhance and broaden its Freestyle offering in several ways.

The company has also announced the launch of Stitch Fix Freestyle, which offers quite a distinct shopping experience. This platform allows any customer to discover and buy curated items according to their style preferences, fit and size. Anyone can buy items directly from Stitch Fix, irrespective of ordering a Fix first.


For the first quarter of fiscal 2022, Stitch Fix expects net revenues in the range of $560-$575 million, suggesting growth of 14-17% from the year-ago period’s reported figure. Adjusted EBITDA is envisioned in the bracket of 15-20 million with a margin of 2.7-3.5%. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $598.8 million.

For fiscal 2022, management projects net revenue growth of 15% or higher from the year-ago reported figure and an adjusted EBITDA margin at 2% or more of net revenues.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 13.3% due to these changes.

VGM Scores

Currently, Stitch Fix has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Stitch Fix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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