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Stitch Fix (SFIX) Q2 Loss Widens & Revenues Decrease Y/Y

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Stitch Fix, Inc. (SFIX - Free Report) posted dismal second-quarter fiscal 2023 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 reported figures. Results were hurt by a tough macroeconomic backdrop and tighter consumer wallet.

Following the dismal results, Stitch Fix shares declined 7.9% after the trading session on Mar 7.

Q2 Details

Stitch Fix posted a loss of 58 cents a share, which included restructuring cost and other one-time cost. Adjusting for the above-mentioned costs, Stitch Fix reported adjusted loss of 34 cents a share, wider than the Zacks Consensus Estimate of a loss of 33 cents. The bottom line widened year over year from a loss of 28 cents per share.

SFIX recorded net revenues of $412.1 million which was in line with the Zacks Consensus Estimate. The metric declined 20% from the year-ago fiscal quarter’s figure due to lower net active clients and higher promotional activity.

Stitch Fix, Inc. Price, Consensus and EPS Surprise

Stitch Fix, Inc. Price, Consensus and EPS Surprise

Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote

Margins & Costs

In the fiscal second quarter, gross profit declined to $169.1 million from $232.8 million reported in the year-ago period. Also, the gross margin contracted 400 basis points year over year to 41% mainly due to increased promotional activity and higher product cost.

Selling, general and administrative expenses fell from $263.5 million reported in the year-ago period to $235.8 million in the fiscal second quarter. Stitch Fix reported an adjusted EBITDA of $3.8 million for the fiscal quarter under review compared with the adjusted EBITDA of $10.1 million posted in the year-ago fiscal quarter. The company’s total advertisement spend declined 46% year over year to 5% in the fiscal second quarter.

Other Financial Aspects

Stitch Fix ended the fiscal second quarter with cash and cash equivalents, including short term investments of $222 million, net inventory of $159 million and shareholders’ equity of $255.3 million.

SFIX generated $11 million in cash from operating activities during the second quarter of fiscal 2023. Also, the company had a free cash flow of $15.4 million in the aforementioned period.


For the third quarter of fiscal 2023, management projects net revenues of $385-$395 million, indicating a 20-22% decline from the year-ago fiscal quarter’s reported figure. This is due to challenges faced in the highly promotional operating environment. Stitch Fix expects adjusted EBITDA in the bracket of a negative $5 million to a positive $5 million with a margin of minus 1% to plus 1%.

For fiscal 2023, management projects revenues between $1.625 billion and $1.645 billion and adjusted EBITDA between breakeven to a positive $10 million. Management anticipates a gross margin of 42% for fiscal 2023. For the rest of the fiscal year, advertising is likely to be approximately 6-7% of revenues. The company is in line to achieve its target of $135 million in cost reduction in fiscal 2023.

This Zacks Rank #2 (Buy) stock has rallied 28.1% in the past three months compared with industry’s rise of 4%.

Stocks to Consider

Here we highlighted three better-ranked stocks, namely Ulta Beauty, Inc. (ULTA - Free Report) , Deckers Outdoor Corporation (DECK - Free Report) and The Kroger Co. (KR - Free Report) .

Ulta Beauty currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 15.8% from the year-ago period. This beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services have a trailing four-quarter earnings surprise of 26.2%, on average.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK has a Zacks Rank #2 at present.

The Zacks Consensus Estimate for Deckers’ current financial-year sales and EPS suggests growth of 12.2% and 13.6%, respectively, from the year-ago corresponding figures. DECK has a trailing four-quarter earnings surprise of 31%, on average.

Kroger, which operates in the thin-margin grocery industry, carries a Zacks Rank of 2 at present. KR’s current financial-year revenues and EPS suggests growth of 2.6% and 5%, respectively. KR gave an earnings surprise of 10% in the last reported quarter. KR has a trailing four-quarter earnings surprise of 9.76%, on average.

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