It has been about a month since the last earnings report for Stitch Fix (SFIX Quick QuoteSFIX - Free Report) . Shares have lost about 26.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Stitch Fix’s Q4 Loss Widens & Revenues Decrease Y/Y

Stitch Fix posted soft fourth-quarter fiscal 2022 results. SFIX reported a wider-than-expected loss per share and lower-than-expected revenues. Both metrics also deteriorated from the year-earlier quarter’s respective reported figures.

Q4 Details

Stitch Fix posted a loss of 89 cents a share, wider than the Zacks Consensus Estimate of a loss of 60 cents. The bottom line compared unfavorably with earnings of 19 cents a share recorded in the prior-year quarter.

SFIX recorded net revenues of $481.9 million, down 16% from the year-ago quarter’s figure due to weak fixed volumes, partly offset by demand in Freestyle. The metric came below the Zacks Consensus Estimate of $489 million.

Stitch Fix has active clients of 3,795,000 as of Jul 30, 2022, down 9% from the prior-year quarter’s level. Revenue per active client or RPAC reached $546, increasing 8% year over year.

Margins & Costs

In the fiscal fourth quarter, gross profit tumbled 27.4% to $192.7 million. Also, gross margin contracted 400 basis points (bps) year over year to 42.5% due to elevated transportation costs coupled with tightening product margins from inflation and higher penetration of national brands.

Selling, general and administrative (SG&A) expenses climbed 19% to $291.3 million. Other SG&A, excluding advertising and stock-based compensation, was essentially flat with the previous fiscal year’s reading.

Stitch Fix reported an adjusted EBITDA loss of $31.8 million for the fiscal quarter under review against the adjusted EBITDA of $55.4 million posted in the year-ago fiscal quarter.

Other Financial Aspects

Stitch Fix ended the fiscal fourth quarter with cash and cash equivalents of $130.9 million minus debt and shareholders’ equity of $322.7 million. SFIX had an undrawn $100 million revolving line of credit at the end of the period.

SFIX provided $55.4 million cash from operating activities during fiscal 2022. Also, Stitch Fix had a free cash flow of $9 million in the aforementioned period.

Outlook

For the first quarter of fiscal 2023, management projects net revenues of $455-$465 million, indicating a decline of 20-22% from the year-ago fiscal quarter’s reported figure. Stitch Fix expects adjusted EBITDA in the bracket of a negative $10 million to a negative $15 million with a margin contraction of 2-3%. This view assumes net active clients to decline quarter over quarter.

For fiscal 2023, management projects revenues between $1.76 billion and $1.86 billion, and adjusted EBITDA in the bracket of a negative $25 million to a negative $45 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Stitch Fix has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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.