Stitch Fix Stock Tumbles After Q1 Earnings: Analysts React To Subscriber Miss, Guidance Cut

Stitch Fix Inc SFIX shares dropped 22.8% on Wednesday after the company slashed its full-year revenue guidance.

On Tuesday, Stitch Fix reported a fiscal first-quarter adjusted EPS loss of 2 cents, beating consensus analyst estimates of a 14-cent loss. First-quarter revenue of $581 million also topped analyst expectations of $571 million. Revenue was up 19% from a year ago.

Active clients were up 11% to 4.18 million, missing analyst estimates of 4.23 million. Net revenue per client was up 12% to a record $524 in the quarter.

Stitch Fix also said the platform added more than 20 additional product brands in the quarter, including Adidas AG - ADR ADDYY and Vans.

Looking ahead, Stitch Fix reduced its full-year revenue growth guidance from at least 15% to the high single-digit range. For the fiscal second quarter, Stitch Fix guided for revenue of between $505 million and $520 million, missing analyst expectations of $585 million.

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Voices From The Street: Wells Fargo analyst Ike Boruchow said the report was very damaging to the bull case for Stitch Fix.

“Active subs missed [the] plan in 1Q, and are guided to go negative in 2Q—with IDFA, supply chain and low quality customers (acquired via referral programs in 2H LY) the culprits,” Boruchow wrote.

Telsey Advisory Group analyst Dana Telsey said Stitch Fix will continue to expand its Freestyle program, which will reach new clients and create revenue growth opportunities.

“Therefore, with its flexible all-digital model, we continue to view SFIX as well-positioned to take share in the apparel category,” Telsey wrote.

KeyBanc analyst Edward Yruma said Stitch Fix simply doesn't have enough visibility for investors to be confident in the stock.

“We also believe that the business may have difficulty reattaining sustained 20%+ growth, making it more likely to remain valued relative to a traditional peer set,” Yruma wrote.

Ratings And Price Targets:

• Wells Fargo has an Underweight rating and $14 target.
• Telsey Advisory Group has an Outperform rating and $40 target.
• KeyBanc has a Sector Weight rating.

Also See: Stitch Fix Stock Cracks Support, Plummets