Stitch Fix Impressively Stitched Up Its Costs But Revenue Continues To Tear

On Monday, Stitch Fix Inc SFIX reported its fourth quarter results. The fashion subscription service succeeded to narrow its losses but it is still struggling with declining revenue that marked its fiscal year. As the holiday season approaches, consumers are navigating through a tough environment shaped by rising prices and other headwinds that are emptying their wallets.

Fiscal Fourth Quarter Results

For the quarter that ended on July 31st, the online styling service reported a 22% YoY revenue drop to $375.8 million and made a net loss of $28.7 million, which is a 70% improvement from last year’s comparable quarter when it lost $96.3 million. The diluted loss per share amounted to $0.24.

The Fiscal Year 

The San Francisco-based fashion service reported its annual revenue fell 21% YoY to $1.6 billion, resulting in a net loss of $172 million which is an improvement from last fiscal year’s $207.1 million as cost-cutting iniatives paid off. The diluted loss per share amounted to $1.50.

A Tough Environment For A Comeback

Another piece of bad news was that the number of active clients tanked 13% YoY with net revenue per such client dropping 9%. While its focus on slashing expenses is to be praised as it improved the bottom line, Stitch Fix needs to work on its top line weakness and it has to do that in an unfavorable macroeconomic environment that is limiting discretionary spending. 

Back in August, Stitch Fix confirmed it will be shutting its operations in the UK by the end of the undergoing quarter. Former Macy’s Inc M executive, Matt Baer, who has been at the CEO helm for almost three months will undoubtedly have a hard time in trying to stage a comeback. Baer’s initial approach includes sending more private labels but he is yet to uncover the long-term rebounding strategy. 

A Gloomy Guidance

Stitch Fix management is expecting further hits, with first quarter revenue expected to decline between 18% and 20%, which would be the seventh straight quarter of YoY revenue declines. Revenue is expected to continue eroding during the entire fiscal year with a drop between 14% and 18%. Although Stitch Fix did a great job at stitching up its bottom line, but it can’t cost-cut its way out of declining top line, especially in such an unfavorable macroeconomic environment.

A Not-So-Merry-And-Bright Holiday Season

While Amazon.com Inc AMZN announced it will be adding 250,000 U.S. workers which is a 67% increase compared to the number of staff it added during the last two years, other U.S. retailers are telling a different story. Target Corporation TGT plans to add 100,000 employees which translates to flat YoY growth. Target also plans to begin its discounting season in October in attempt to get ahead of Amazon and Walmart WMT who still didn’t reveal its holiday staffing plans. Macy’s will be hiring less people compared to last year’s holiday season, about 38,000 staff both full and part-time. However, Amazon did add 50 new fulfilment centers, delivery stations and same-day delivery in the U.S. Amazon also scheduled an expanded fall Prime Event on October 10th and 11th ahead of the Black Friday and Cyber Monday. But even the mighty Amazon isn’t immune to macroeconomic challenges as it joined the wave of tech layoffs earlier this year, letting go about 9% of its workforce or 27,000 employees from advertising, cloud computing and HR departments. 

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