Stitch Fix Just Became an Earnings Growth Engine

Jon C. Ogg


Stitch Fix, Inc. (NASDAQ: SFIX) is one of those companies which could end up being huge down the road. It could also become one of the online has-been operators as large retailers and ecommerce players begin to take on similar business models of one-time, semi-regular, or subscription-based clothing and apparel purchases. Its earnings report and guidance just set the stage that Wall Street is likely to look at it as a winner.

The online personal styling service for apparel, shoes and accessories increased its active clients by 18% from a year ago to 3 million, and net revenues rose 25% to $370.3 million. Stitch Fix even posted net income of $12 million and adjusted EBITDA of $19.2 million. Its diluted earnings per share of $0.12 was up from just 2-cents per share in the same quarter a year ago.

Refinitiv (Thomson Reuters) was calling for just $0.05 in earnings per share and almost $265 million in revenues for the quarter.

Stitch Fix also ended the quarter with $167.5 million in cash and equivalents, another $109.3 million in short term investments and $66.7 million in long-term investments.

While the company is communicating that it remains on track to launch in the U.K. in its fiscal fourth quarter, the guidance is for more growth ahead: Stitch Fix sees third quarter revenue in a range of $388 million to $398 million. The company’s full 2019 view is for revenues of $1.53 billion to $1.56 billion and fiscal year 2019 adjusted EBITDA to come between $33 million and $43 million. Refinitiv (Thomson Reuters) has a consensus annual estimate of $1.51 billion in revenues.

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Stitch Fix Founder and CEO Katrina Lake said:

The second quarter was another strong quarter for us, delivering net revenue of $370.3 million, exceeding our guidance and representing 25% year-over-year growth. Since becoming a public company, we have posted six consecutive quarters of over 20% growth, which demonstrates our ability to drive consistent business performance. I’m proud that we’re now serving 3 million people across the U.S. and remain focused on delighting our existing clients and expanding our reach. We launched our first integrated brand campaign in February to increase awareness and consideration with new and existing clients and we’re excited to connect even more people to the power of personalized styling.

Stitch Fix shares closed up about 5% at $26.98 on Monday, but the after-hours trading reaction was last seen up about 19% at $32.05 with over 2 million shares trading hands in just an hour of the post-close trading session.

Stitch Fix had a consensus analyst target price of $28.67 and a 52-week range of $16.05 to $52.44.