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Category: Stock Market and Stitch Fix
Date: 17 May 2020 Stock Price: $21.41 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Stitch Fix a leading online personal styling service available to men, women and kids. The group currently has 3.5 million active clients
This quarter, we are excited to expand our new direct buy offerings to even more clients. As we continue to evolve our personalization capabilities we're confident in our ability to capture additional market share" |
About Stitch Fix
Stitch Fix is the world’s leading online personal styling service. We combine data science and human judgment to deliver apparel, shoes, and accessories personalized to our clients’ unique tastes, lifestyles, and budgets. Our service is available for women, men, and kids, and designed to help all our clients look, feel, and be their best selves.
Growth in number of active clients of Stitch Fix over time
We grew our active client count to 3.5 million as of February 1, 2020, an increase of 504,000 or 17.0% year over year. We define an active client as a client who checked out a Fix or was shipped an item using our direct-buy functionality in the preceding 52 weeks, measured as of the last day of that period. A client checks out a Fix when he or she indicates which items he or she is keeping through our mobile app or website. We consider each Men’s, Women’s, or Kids account as a client, even if they share the same household.
Overview of Stitch Fix's 2nd quarter 2020 earnings report
- Net Revenue: $451.784 million (up from $370.280 million for the same quarter of the previous year
- Revenue increased by 22% over the last 12 months
- Cost of sales: $249.597 million (up from $207.131 million for the same quarter of the previous year)
- Cost of sales increased by 20.5% over the last 12 months
- Net income: $11.431 million (down from $11.976 million for the same quarter of the previous year)
- Diluted earnings per share: $0.11 (down from $0.12 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 104.637 million (up from 102.817 million for the same quarter of the previous year)
- Cash and cash equivalents: $165.989 million
- Cash and cash equivalents per share: $1.59
- Cash and cash equivalents makes up 7.41% of Stitch Fix's market capital
- Cash and cash equivalents makes up 20.7% of Stitch Fix's total assets
- Inventories: $147.236 million
- Inventories makes up 18.4% of Stitch Fix's total assets
- Stockholders equity of Stitch Fix's: $438.910 million
- Stockholders equity per share for Stitch Fix $4.19
- So Stitch Fix's is trading at 5.11 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- For some perspective the average price to book value that firms in the S&P 500 trade at is 3.7. Read more about the S&P 500 here
- Cash provided by operating activities: $38.242 million
- Cash provided by operating activities per share: $0.37
Stitch Fix' management commentary on the results and earnings guidance
SAN FRANCISCO, March 9, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the second quarter of fiscal year 2020 ended February 1, 2020, and posted a letter to its shareholders on its investor relations website
“We are pleased to deliver another strong quarter in Q2,” said Stitch Fix founder and CEO Katrina Lake. “Net revenue was $452 million, representing 22% year-over-year growth, in line with our guidance. We grew active clients to 3.5 million, an increase of 17% year over year, and grew net revenue per active client by 8% year over year, our seventh consecutive quarter of growth and a reflection of our unique personalization capabilities.” Lake added, “This quarter, we are excited to expand our new direct buy offerings to even more clients. As we continue to evolve our personalization capabilities we're confident in our ability to capture additional market share, and deliver on our mission to transform the way people find what they love.”
Stitch Fix (NASDAQ: SFIX) stock price history
The image below, obtained from Google, shows the stock price history of Stitch Fix (NASDAQ:SFIX) since their listing. And it's been a very volatile and mildly successful time for Stitch stockholders. At their listing in November 2017 they were trading around $15.50 a stock and they are currently trading at $21.41 a stock. That is a return of 44.18% provided in basically the last two and a half years which is not to bad.
The stock of Stitch Fix is trading at close to the mid point between its 52 week low and and 52 week high which to us is a clear indication that the sentiment and momentum of Stitch Fix's stock is neutral at this point in time.
The stock of Stitch Fix is trading at close to the mid point between its 52 week low and and 52 week high which to us is a clear indication that the sentiment and momentum of Stitch Fix's stock is neutral at this point in time.
Recent coverage of Stitch Fix
The extract below shows the latest coverage of Stitch Fix as obtained from Fool.com
As the coronavirus pandemic grinds on, the fates of various retailers hang in the balance. The TJX Companies (NYSE:TJX) and Stitch Fix (NASDAQ:SFIX) both sell clothing, but they occupy different spaces in the retail industry. The COVID-19 health crisis has hit consumer discretionary companies hard, and not all will recover quickly -- or at all. Let's evaluate which of these two stocks is the better buy right now, as we position our portfolios for when the crisis eventually passes. (For this article we will focus on the content of the article related to Stitch Fix
Personal styling for the masses
Stitch Fix is an online personal styling service, using customer preferences and its own algorithms to come up with customized clothing shipments. It was founded in 2010 and went public in 2017, giving it about 10 years of experience. CEO Katrina Lake characterizes shopping with Stitch Fix this way: "Everything that we sell is one-to-one personalized."
On April 8, Stitch Fix withdrew guidance for next quarter and the fiscal year. In a special call the same day, Lake said that while three of the six distribution centers the company uses had been closed temporarily, all were now open -- though staffed on a volunteer basis, causing fulfillment delays. She reported overall softness in demand due to lower conversion rates of new customers but said longtime customers are continuing to order.
As the coronavirus pandemic grinds on, the fates of various retailers hang in the balance. The TJX Companies (NYSE:TJX) and Stitch Fix (NASDAQ:SFIX) both sell clothing, but they occupy different spaces in the retail industry. The COVID-19 health crisis has hit consumer discretionary companies hard, and not all will recover quickly -- or at all. Let's evaluate which of these two stocks is the better buy right now, as we position our portfolios for when the crisis eventually passes. (For this article we will focus on the content of the article related to Stitch Fix
Personal styling for the masses
Stitch Fix is an online personal styling service, using customer preferences and its own algorithms to come up with customized clothing shipments. It was founded in 2010 and went public in 2017, giving it about 10 years of experience. CEO Katrina Lake characterizes shopping with Stitch Fix this way: "Everything that we sell is one-to-one personalized."
On April 8, Stitch Fix withdrew guidance for next quarter and the fiscal year. In a special call the same day, Lake said that while three of the six distribution centers the company uses had been closed temporarily, all were now open -- though staffed on a volunteer basis, causing fulfillment delays. She reported overall softness in demand due to lower conversion rates of new customers but said longtime customers are continuing to order.
Lake said in a statement:
We believe our business remains well positioned to succeed long term. Stitch Fix has been cash flow positive since 2014, with a long history of strong unit economics. We believe this foundation, and our unique personalization capabilities, coupled with a convenient at-home model that offers an obvious advantage in the new reality ... effectively positions us for the future. Up until the coronavirus hit, Stitch Fix was increasing its customer base and revenue per customer. In the quarter ended Feb. 1, the company reported a 17% increase year over year in active customers, and revenue per customer that increased 8.2%. Sales were up 22% year over year for the same quarter. So the company was striking the right chord with consumers and growing nicely. But it seems likely that a big business contraction is coming, if it isn't here already, as recession and unemployment raise their ugly heads. It seems unlikely that the selected-for-you clothing segment will grow if consumers are struggling to pay bills. Or if they no longer have jobs to dress up for
The final verdict
As of midday Friday, TJX sports a price-to-earnings (P/E) ratio of 18, while Stitch Fix has a P/E of 63. TJX's stock price has declined 23% since the market peaked on Feb. 19, while Stitch Fix has declined 45%. The consumer environment is in a state of flux, and financial pressures will probably work against the more richly valued company, Stitch Fix.
TJX performed very well as the U.S. recovered from the Great Recession. The off-price retailer is poised to attract shoppers, hungry for new styles but at value prices, as soon as retail is allowed to reopen. TJX is ready to procure and sell fresh fashion, taking inventory off the hands of manufacturers and retailers, presumably at fire-sale prices. And it isn't completely dependent on fashion, as its HomeGoods stores contribute an entirely different product mix. While the economy doesn't look good for retail in the short run, and either stock could keep declining, I think Stitch Fix will take much longer to recover than TJX, and will probably fall further. I think TJX is the better buy now and for the foreseeable future.
Read the full article here
We believe our business remains well positioned to succeed long term. Stitch Fix has been cash flow positive since 2014, with a long history of strong unit economics. We believe this foundation, and our unique personalization capabilities, coupled with a convenient at-home model that offers an obvious advantage in the new reality ... effectively positions us for the future. Up until the coronavirus hit, Stitch Fix was increasing its customer base and revenue per customer. In the quarter ended Feb. 1, the company reported a 17% increase year over year in active customers, and revenue per customer that increased 8.2%. Sales were up 22% year over year for the same quarter. So the company was striking the right chord with consumers and growing nicely. But it seems likely that a big business contraction is coming, if it isn't here already, as recession and unemployment raise their ugly heads. It seems unlikely that the selected-for-you clothing segment will grow if consumers are struggling to pay bills. Or if they no longer have jobs to dress up for
The final verdict
As of midday Friday, TJX sports a price-to-earnings (P/E) ratio of 18, while Stitch Fix has a P/E of 63. TJX's stock price has declined 23% since the market peaked on Feb. 19, while Stitch Fix has declined 45%. The consumer environment is in a state of flux, and financial pressures will probably work against the more richly valued company, Stitch Fix.
TJX performed very well as the U.S. recovered from the Great Recession. The off-price retailer is poised to attract shoppers, hungry for new styles but at value prices, as soon as retail is allowed to reopen. TJX is ready to procure and sell fresh fashion, taking inventory off the hands of manufacturers and retailers, presumably at fire-sale prices. And it isn't completely dependent on fashion, as its HomeGoods stores contribute an entirely different product mix. While the economy doesn't look good for retail in the short run, and either stock could keep declining, I think Stitch Fix will take much longer to recover than TJX, and will probably fall further. I think TJX is the better buy now and for the foreseeable future.
Read the full article here
So lets compare the stock price of Stitch Fix and TJX Companies since Stitch Fix's listing
The image below shows the stock price performance of Stitch Fix (NASDAQ: SFIX) and TJX Companies (NYSE: TJX) since the listing of Stitch Fix. Over the period in question the stock of Stitch Fix has outperformed the stock of TJX,with Stitch Fix returning 44.16% while TJX companies provided a return of 32.5%. For more stock comparisons see our stock performance comparison page.
Stitch Fix (NASDAQ: SFIX) latest stock valuation
So what is Stitch Fix (NASDAQ: SFIX) stock worth based on the release of their 2nd quarter 2020 earnings report? Based on their earnings reported our valuation models provide a target (full value) price for Stitch Fix of $22.80 a stock. We therefore believe that the stock is slightly undervalued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $22.80 So a good entry point into Stitch Fix stock would be at $20.50 or below. We expect the stock of Stitch Fix to tick up to levels closer to our target price in coming weeks and months.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $22.80 So a good entry point into Stitch Fix stock would be at $20.50 or below. We expect the stock of Stitch Fix to tick up to levels closer to our target price in coming weeks and months.
Next earnings release of Stitch Fix
It is expected that Stitch Fix will release their 3rd quarter 2020 earnings report in mid June 2020