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Category: Stock Market and Stitch Fix
Date: 9 June 2020 Stock Price: $24.92 We take a look at the 3rd 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 3.4 million active clients. Their revenues declined compared to the 3rd quarter of 2019 but net revenues per client increased sharply.
We are proud of the way our team has responded quickly and thoughtfully to unprecedented challenges over the past several months, and the results we delivered in these extraordinary times said Stitch Fix founder and CEO Katrina Lake" |
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.
Since our founding in 2011, we have helped millions of men, women, and kids discover and buy what they love through personalized shipments of apparel, shoes, and accessories, hand-selected by Stitch Fix stylists and delivered to our clients’ homes. We call each of these shipments a Fix. Clients can choose to schedule automatic shipments or order a Fix on demand after they fill out a style profile on our website or mobile app. For each Fix, we charge clients a styling fee that is credited toward items they purchase. Alternatively, select U.S. clients may purchase an annual Style Pass, which offers unlimited styling for the year for a $49 fee that is also credited towards items they purchase. After receiving a Fix, our clients purchase the items they want to keep and return the other items, if any, at no additional charge. In addition, our Extras feature allows clients to select items such as socks, bras, underwear, and other intimates that are then added to the items their stylist selects for their Fix. Stitch Fix was founded with a focus on Women’s apparel. In our first few years, we were able to gain a deep understanding of our clients and merchandise and build the capability to listen to our clients, respond to feedback, and deliver the experience of personalization. More recently, we have extended those capabilities into Petite, Maternity, Men’s, Plus, and Kids apparel, as well as shoes and accessories.
Find out more About Stitch Fix here
Since our founding in 2011, we have helped millions of men, women, and kids discover and buy what they love through personalized shipments of apparel, shoes, and accessories, hand-selected by Stitch Fix stylists and delivered to our clients’ homes. We call each of these shipments a Fix. Clients can choose to schedule automatic shipments or order a Fix on demand after they fill out a style profile on our website or mobile app. For each Fix, we charge clients a styling fee that is credited toward items they purchase. Alternatively, select U.S. clients may purchase an annual Style Pass, which offers unlimited styling for the year for a $49 fee that is also credited towards items they purchase. After receiving a Fix, our clients purchase the items they want to keep and return the other items, if any, at no additional charge. In addition, our Extras feature allows clients to select items such as socks, bras, underwear, and other intimates that are then added to the items their stylist selects for their Fix. Stitch Fix was founded with a focus on Women’s apparel. In our first few years, we were able to gain a deep understanding of our clients and merchandise and build the capability to listen to our clients, respond to feedback, and deliver the experience of personalization. More recently, we have extended those capabilities into Petite, Maternity, Men’s, Plus, and Kids apparel, as well as shoes and accessories.
Find out more About Stitch Fix here
Growth in number of active clients of Stitch Fix over time
We grew active clients to 3.4 million, an increase of 9% year over year, and grew net revenue per active client by 6% year over year, our eighth consecutive quarter of growth and a reflection of our loyal and engaged client base
Growth in Stitch Fix Revenue over timeThe image above shows the year on year growth in Stitch Fix's reevnue over the last number of years. Comparing Q3 2020 revenue to that of Q3 2019 we can see that revenues declined by -9% over this period
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Growth in Stitch Fix Net Revenue per clientThe image above shows the net revenues per active client over the last number of years. It also shows that net reveues per active client increased by 6% when comparing Q3 2020 to Q3 2019
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Overview of Stitch Fix's 3rd quarter 2020 earnings report
- Net Revenue: $371.726 million (down from $408.893 million for the same quarter of the previous year
- Revenue decreased by -9.1% over the last 12 months
- Cost of sales: $220.115 million (up from $224.445 million for the same quarter of the previous year)
- Cost of sales decreased by -1.9% over the last 12 months
- Net loss: -$33.9 million (down from $7.084 million for the same quarter of the previous year)
- Diluted loss per share: -$0.33 (down from $0.07for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 102.650 million (up from 103.615 million for the same quarter of the previous year)
- Cash and cash equivalents: $96.840 million
- Cash and cash equivalents per share: 0.94
- Cash and cash equivalents makes up 3.8% of Stitch Fix's market capital
- Cash and cash equivalents makes up 12.4% of Stitch Fix's total assets
- Inventories: $165.077 million
- Inventories makes up 21.1% of Stitch Fix's total assets
- Stitch Fix inventories grew by 39.6% over the last 12 months. An indication that the group struggled to move stock during the last quarter due to Covid-19 related issues?
- Stockholders equity of Stitch Fix's: $422.580 million
- Stockholders equity per share for Stitch Fix $4.12
- So Stitch Fix's is trading at 6.04 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
Stitch Fix' management commentary on the results and earnings guidance
SAN FRANCISCO, June 8, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the third quarter of fiscal year 2020 ended May 2, 2020, and posted a letter to its shareholders on its investor relations website.
As we look back on our third quarter, we’re proud of our ability to react quickly to the challenges posed by COVID-19 and the decisions we made to support the health and safety of our employees. We’re also heartened by the resilience we’ve seen from our clients, and by the continued success of direct buy and the growth vector it represents to expand our business. We are pleased to share our results for Q3 fiscal 2020, which ended May 2, 2020. We grew active clients to 3.4 million, a 9.1% increase year over year, and generated net revenue of $371.7 million, a 9.1% decline year over-year. During the quarter, we generated a net loss of $33.9 million and a diluted loss per share of 0.33. We also delivered an adjusted EBITDA loss of $40.3 million and an adjusted EBITDA ex. SBC loss of $20.7 million.
As we look back on our third quarter, we’re proud of our ability to react quickly to the challenges posed by COVID-19 and the decisions we made to support the health and safety of our employees. We’re also heartened by the resilience we’ve seen from our clients, and by the continued success of direct buy and the growth vector it represents to expand our business. We are pleased to share our results for Q3 fiscal 2020, which ended May 2, 2020. We grew active clients to 3.4 million, a 9.1% increase year over year, and generated net revenue of $371.7 million, a 9.1% decline year over-year. During the quarter, we generated a net loss of $33.9 million and a diluted loss per share of 0.33. We also delivered an adjusted EBITDA loss of $40.3 million and an adjusted EBITDA ex. SBC loss of $20.7 million.
“We are proud of the way our team has responded quickly and thoughtfully to unprecedented challenges over the past several months, and the results we delivered in these extraordinary times,” said Stitch Fix founder and CEO Katrina Lake. “We grew active clients to 3.4 million, an increase of 9% year over year, and grew net revenue per active client by 6% year over year, our eighth consecutive quarter of growth and a reflection of our loyal and engaged client base. In a time period where the broader apparel and accessories market saw sales decline 80%, we delivered $372 million in net revenue and expect a return to positive growth in Q4. We believe our business model and balance sheet uniquely position us to thrive in retail’s next era, and we’re excited to demonstrate that in the quarters ahead.” Lake added, “Our results give us confidence in the resilience and increasing relevance of our model as more people than ever before seek out a better online shopping experience, rooted in what is meaningful and right for them. Through a combination of innovating the Fix model and expanding Direct Buy, we are excited to expand the Stitch Fix ecosystem, and unlock personal styling for everybody.”
On our topline trends, we have driven meaningful improvement in the past several weeks. In April, our net merchandise revenue grew week-over-week each week. In May, that momentum continued as we delivered positive yearover-year growth in net merchandise revenue compared to May 2019. We see this return to positive growth in May as an important milestone, and one that reflects the resilience of our U.S. warehouse network, ongoing improvement in client demand as we begin to increase marketing spend, and early momentum resulting from a much larger migration of retail spend online. As a result, we expect to deliver positive year-over-year net revenue growth in Q4’20, adjusted for the impact of the 14th week in Q4’19. As a reminder, fiscal 2019 was a 53-week year with Q4’19 consisting of 14 weeks, which added approximately 2.5% to revenue growth in fiscal 2019. In fiscal 2020, we returned to a 52-week year
On our topline trends, we have driven meaningful improvement in the past several weeks. In April, our net merchandise revenue grew week-over-week each week. In May, that momentum continued as we delivered positive yearover-year growth in net merchandise revenue compared to May 2019. We see this return to positive growth in May as an important milestone, and one that reflects the resilience of our U.S. warehouse network, ongoing improvement in client demand as we begin to increase marketing spend, and early momentum resulting from a much larger migration of retail spend online. As a result, we expect to deliver positive year-over-year net revenue growth in Q4’20, adjusted for the impact of the 14th week in Q4’19. As a reminder, fiscal 2019 was a 53-week year with Q4’19 consisting of 14 weeks, which added approximately 2.5% to revenue growth in fiscal 2019. In fiscal 2020, we returned to a 52-week year
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 $24.92 a stock. That is a return of 60.7% 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 CNBC.com
Stitch Fix on Monday reported a quarterly sales decline of 9%, and a wider-than-expected net loss, as its supply chain hit a snag amid the coronavirus pandemic, and orders were backlogged. Absent the fulfillment constraints it experienced, the company said it would have reported sales growth during the period. By the end of March, Stitch Fix said its U.S. warehouse capacity had fallen by nearly 70%, as it was forced to close some buildings due to the pandemic.
The company — which sells boxes of clothes for people to either pay to keep, or return, on a subscription basis — said it intends to eliminate all of its remaining order backlog by the end of June. Chief Executive Katrina Lake expects Stitch Fix to return to revenue growth by its fiscal fourth quarter, as more of its warehouses are back up and running. It has, meantime, forecast its gross margin will widen 2 to 3 percentage points from the 40.8% it reported during the latest quarter. The online personal styling service’s shares were recently down about 6% in after-hours trading following the report.
Read the full artcile here
Stitch Fix on Monday reported a quarterly sales decline of 9%, and a wider-than-expected net loss, as its supply chain hit a snag amid the coronavirus pandemic, and orders were backlogged. Absent the fulfillment constraints it experienced, the company said it would have reported sales growth during the period. By the end of March, Stitch Fix said its U.S. warehouse capacity had fallen by nearly 70%, as it was forced to close some buildings due to the pandemic.
The company — which sells boxes of clothes for people to either pay to keep, or return, on a subscription basis — said it intends to eliminate all of its remaining order backlog by the end of June. Chief Executive Katrina Lake expects Stitch Fix to return to revenue growth by its fiscal fourth quarter, as more of its warehouses are back up and running. It has, meantime, forecast its gross margin will widen 2 to 3 percentage points from the 40.8% it reported during the latest quarter. The online personal styling service’s shares were recently down about 6% in after-hours trading following the report.
Read the full artcile 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 just managed to outperform the stock of TJX,with Stitch Fix returning 64.49% while TJX companies provided a return of 61.7%. 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 3nd 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 overvalued at its current price of $24.92
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 4th quarter 2020 and full fiscal 2020 earnings report in mid September 2020