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Why Is Stitch Fix (SFIX) Up 1.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Stitch Fix (SFIX - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Stitch Fix due for a pullback? 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 Loss Narrows in Q4, Revenues Decline Y/Y
Stitch Fix posted a narrower-than-expected loss per share and better-than-expected revenues in its fourth-quarter fiscal 2023 results. While the bottom line fared better year over year, the top line deteriorated from the year-earlier quarter figure. Results were hurt by a tough macroeconomic backdrop and a tighter consumer wallet.
Q4 Details
Stitch Fix posted a loss of 24 cents per share, which included restructuring costs and other one-time costs. Adjusting for the above-mentioned costs, the company reported an adjusted loss of 19 cents per share, narrower than the Zacks Consensus Estimate of a loss of 22 cents. The metric narrowed from a loss of 65 cents per share reported in the year-ago quarter.
SFIX recorded net revenues of $375.8 million, which outpaced the Zacks Consensus Estimate of $372 million. However, the metric declined 22% from the year-ago quarter figure due to lower net active clients.
For fiscal 2023, Freestyle revenues declined 21% year over year to $1,638.4 million. For the fiscal year, it posted a loss of $1.50 per share, which included restructuring costs and other one-time costs.
Margins & Costs
In the fiscal fourth quarter, gross profit declined to $162.7 million from $192.7 million reported in the year-ago period. However, the gross margin expanded 330 basis points (bps) year over year to 43.3% as the company continued its efforts to align its inventory position with the demand environment. We expected the figure to expand by 220 bps to 42.2% for the quarter under review.
The company’s cost of goods sold declined from $289.2 million reported in the year-ago period to $213.1 million in the fiscal fourth quarter. Selling, general and administrative expenses (SG&A) fell from $291.3 million in the prior-year quarter to $194 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 51.6%, down 880 bps from 60.4% reported in the prior-year quarter. We expected the metric to decline by 1,080 bps to 49.6% for the quarter.
Stitch Fix reported an adjusted EBITDA of $10.4 million for the fiscal quarter under review compared with the adjusted EBITDA loss of $31.8 million posted in the year-ago fiscal quarter.
Other Financial Aspects
The company ended the fiscal fourth quarter with cash and cash equivalents of $239.4 million, short-term investments of $18.2 million, net inventory of $137.2 million and shareholders’ equity of $247.3 million.
SFIX generated $21.1 million in cash from operating activities and had a free cash flow of $17.7 million during the fourth quarter of fiscal 2023.
Outlook
For the first quarter of fiscal 2024, management projects net revenues of $355-$365 million, indicating an 18-20% decline from the year-ago fiscal quarter’s reported figure. This is due to challenges related to the tough macroeconomic backdrop. Stitch Fix expects adjusted EBITDA in the band of $2-$7 million, with a margin of 1% to 2%.
Management is persistently navigating the ongoing macroeconomic uncertainties and remains committed to improving gross margins with better product margins, transportation efficiency and inventory efficiency over time. For both first-quarter fiscal 2024 and fiscal 2024, management anticipates a gross margin of 43-44%.
For fiscal 2024, SFIX projects net revenues of $1.30-$1.37 billion, indicating a 14-18% decline from the year-ago fiscal quarter’s reported figure. For the fiscal year, Stitch Fix expects adjusted EBITDA in the range of $5-$30 million with a margin of 0% to 2%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -11.31% due to these changes.
VGM Scores
Currently, Stitch Fix has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Stitch Fix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Stitch Fix belongs to the Zacks Retail - Apparel and Shoes industry. Another stock from the same industry, American Eagle Outfitters (AEO - Free Report) , has gained 25.7% over the past month. More than a month has passed since the company reported results for the quarter ended July 2023.
American Eagle reported revenues of $1.2 billion in the last reported quarter, representing a year-over-year change of +0.2%. EPS of $0.25 for the same period compares with $0.04 a year ago.
American Eagle is expected to post earnings of $0.46 per share for the current quarter, representing a year-over-year change of +9.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.3%.
American Eagle has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Stitch Fix (SFIX) Up 1.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Stitch Fix (SFIX - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Stitch Fix due for a pullback? 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 Loss Narrows in Q4, Revenues Decline Y/Y
Stitch Fix posted a narrower-than-expected loss per share and better-than-expected revenues in its fourth-quarter fiscal 2023 results. While the bottom line fared better year over year, the top line deteriorated from the year-earlier quarter figure. Results were hurt by a tough macroeconomic backdrop and a tighter consumer wallet.
Q4 Details
Stitch Fix posted a loss of 24 cents per share, which included restructuring costs and other one-time costs. Adjusting for the above-mentioned costs, the company reported an adjusted loss of 19 cents per share, narrower than the Zacks Consensus Estimate of a loss of 22 cents. The metric narrowed from a loss of 65 cents per share reported in the year-ago quarter.
SFIX recorded net revenues of $375.8 million, which outpaced the Zacks Consensus Estimate of $372 million. However, the metric declined 22% from the year-ago quarter figure due to lower net active clients.
For fiscal 2023, Freestyle revenues declined 21% year over year to $1,638.4 million. For the fiscal year, it posted a loss of $1.50 per share, which included restructuring costs and other one-time costs.
Margins & Costs
In the fiscal fourth quarter, gross profit declined to $162.7 million from $192.7 million reported in the year-ago period. However, the gross margin expanded 330 basis points (bps) year over year to 43.3% as the company continued its efforts to align its inventory position with the demand environment. We expected the figure to expand by 220 bps to 42.2% for the quarter under review.
The company’s cost of goods sold declined from $289.2 million reported in the year-ago period to $213.1 million in the fiscal fourth quarter. Selling, general and administrative expenses (SG&A) fell from $291.3 million in the prior-year quarter to $194 million in the quarter under review. SG&A expenses, as a percentage of net revenues, were 51.6%, down 880 bps from 60.4% reported in the prior-year quarter. We expected the metric to decline by 1,080 bps to 49.6% for the quarter.
Stitch Fix reported an adjusted EBITDA of $10.4 million for the fiscal quarter under review compared with the adjusted EBITDA loss of $31.8 million posted in the year-ago fiscal quarter.
Other Financial Aspects
The company ended the fiscal fourth quarter with cash and cash equivalents of $239.4 million, short-term investments of $18.2 million, net inventory of $137.2 million and shareholders’ equity of $247.3 million.
SFIX generated $21.1 million in cash from operating activities and had a free cash flow of $17.7 million during the fourth quarter of fiscal 2023.
Outlook
For the first quarter of fiscal 2024, management projects net revenues of $355-$365 million, indicating an 18-20% decline from the year-ago fiscal quarter’s reported figure. This is due to challenges related to the tough macroeconomic backdrop. Stitch Fix expects adjusted EBITDA in the band of $2-$7 million, with a margin of 1% to 2%.
Management is persistently navigating the ongoing macroeconomic uncertainties and remains committed to improving gross margins with better product margins, transportation efficiency and inventory efficiency over time. For both first-quarter fiscal 2024 and fiscal 2024, management anticipates a gross margin of 43-44%.
For fiscal 2024, SFIX projects net revenues of $1.30-$1.37 billion, indicating a 14-18% decline from the year-ago fiscal quarter’s reported figure. For the fiscal year, Stitch Fix expects adjusted EBITDA in the range of $5-$30 million with a margin of 0% to 2%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -11.31% due to these changes.
VGM Scores
Currently, Stitch Fix has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Stitch Fix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Stitch Fix belongs to the Zacks Retail - Apparel and Shoes industry. Another stock from the same industry, American Eagle Outfitters (AEO - Free Report) , has gained 25.7% over the past month. More than a month has passed since the company reported results for the quarter ended July 2023.
American Eagle reported revenues of $1.2 billion in the last reported quarter, representing a year-over-year change of +0.2%. EPS of $0.25 for the same period compares with $0.04 a year ago.
American Eagle is expected to post earnings of $0.46 per share for the current quarter, representing a year-over-year change of +9.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.3%.
American Eagle has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.