Stitch Fix Revenues In Q3 To Be Dragged By Active Client Declines, Macroeconomic Woes, Analyst Says

  • Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on Stitch Fix, Inc. SFIXwith a price target of $5.
  • The company will report fiscal third-quarter earnings results on Tuesday, June 6, after the market close. 
  • The analyst anticipates a revenue decline for the fifth consecutive quarter driven by active client declines.
  • The analyst remains particularly cautioned on Stitch Fix's continuing challenges in onboarding new customers since the rollout of the direct-buy Freestyle program.
  • Stitch Fix is searching for a permanent CEO, and the analyst thinks there could be additional executive leadership turnover following the prior CFO's departure in March.
  • These apart, Stitch Fix is rife with macroeconomic challenges that continue to pressure consumers, making shoppers more selective with their spending, particularly apparel.
  • Considering these, the analyst expects quarterly sales to decline 20.9% year over year to $390 million. 
  • The analyst sees 60 bps of gross margin contraction to 42% and 700 bps of operating expense leverage to 51.2% in the quarter to be reported.
  • That said, possible headwinds to monitor for customer weakness include conversion, acquisition, fixed frequency, and inactivity.
  • Price Action: SFIX shares are trading lower by 8.6% to $3.53 on the last check Wednesday.
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