Dec 20, 2017
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Stitch Fix reports stronger-than-expected Q1 earnings, shares plummet

Dec 20, 2017

US styling service Stitch Fix reported stronger-than-expected quarterly earnings on Tuesday, the first financial announcement the start-up firm has made since its $120 million IPO debut at the end of November.

Stitch Fix

The company said adjusted earnings finished up at four cents per share during its first quarter, which bested Wall Street’s estimated three cents per share, according to Reuters. However, it was a massive decline compared to the same quarter last year, dropping 71.43% year-on-year from 14 cents per share.

A sign of company health, revenue also beat out expectations as the personalised shopping platform recorded $296 million in sales. Analysts polled by Reuters predicted sales of $295 million. The result equated to a 25% increase compared to last year.

Stitch Fix said it also witnessed solid growth in its subscription base as the number of active clients - or those accessing the service in the last twelve months - hit 2.4 million, up 30%. 

Speaking of the results, the company highlighted its unique sales position as an online fashion service, especially during the Christmas period.

“Seasonality in our business does not follow that of traditional retailers, such as typical concentration of revenue in the holiday quarter,” the company said in a statement.

Similar to a subscription-box model, Stitch Fix offers a personalised styling service that allows customers to receive curated selection of five items, whereby they can choose to keep or return items and receive a reimbursement. The only cost is a $20 shipping fee.

The website uses recommendations based on a series of tech algorithms and the suggestions of a remote stylist, including the customer’s previous preferences; popular items with similar customer profiles; budget and size. The business model has been a winner amongst its time-poor, style-conscious demographic.

Founded by entrepreneur Katrina Lake in 2011, Stitch Fix recorded annual sales of $977.1 million in the fiscal year ended July 29, up from $730 million in 2016, and from $73 million in 2014. However, company growth was down from 113% in 2015 to 34% over the last fiscal year, accompanied by a loss of $594,000.

For its fiscal 2018, Stitch Fix’s sales guidance sits in the range of $287 million to $297 million Full-year revenue is expected to be up to $1.22 billion.

Shares of the company fell 11.2 percent to $22 after its first quarterly report.

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