Monday, June 17, 2024
HomeFinanceWhy Stitch Fix Stock Is Up Big Today

Why Stitch Fix Stock Is Up Big Today

The last quarter was not as bad as analysts feared.

It’s too early for the new management of stitch arrangement (SFIX 28.46%) say “mission accomplished,” but the latest quarterly results certainly suggest things are heading in the right direction.

Shares of Stitch Fix soared as much as 44.9% at Wednesday’s open and remained up 24% as of 1:30 p.m. ET after the apparel company reported better-than-expected quarterly results.

Style in a box

Stitch Fix is ​​one of the creators of the “wardrobe in a box” concept, sending subscribers a collection of clothing customized to their tastes. Customers pay only for the clothes they keep and the rest are sent back for free.

It is a very promising concept, but the results have not yet lived up to expectations. Stitch Fix stock is down more than 95% from its all-time highs due to repeated losses and questions about strategic direction.

The company hired CEO Matt Baer to lead a turnaround about a year ago, and the latest results suggest it’s making progress. Stitch Fix lost $0.18 per share in its fiscal third quarter on revenue of $322.7 million, beating Wall Street expectations for a loss of $0.25 per share on sales of $306 million.

The company also forecast fourth-quarter revenue of between $312 million and $322 million, ahead of the consensus of $307 million.

In a statement, Baer said transformation efforts are beginning to work, adding: “I am confident that our strategic focus on strengthening our foundation and reimagining the customer experience will put us on the right path to achieving sustainable and profitable growth in the future. “

Is Stitch Fix a buy?

The number of active clients continues to fall, 6% less than the previous quarter and 20% less than a year ago. Customers who stay are doing more business with the company, helping Stitch Fix increase net revenue per active user by 2% over last year. And the gross margin, 45.5%, increased 280 basis points compared to the same three months of 2023.

Stitch Fix appears to be stabilizing, but the company is still far from proving it can sustainably generate profits and growth. Long-suffering stockholders finally have reason to hope, but it’s too early to say the company is finally ready to deliver on all of its initial promise.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Stitch Fix. The Motley Fool has a disclosure policy.

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