Stitch Fix Shares Drop 15% After Cut to Revenue Outlook, Views for Lower Client Base
Shares of Stitch Fix dropped 15% to $2.79 in post-market trading after the company guided for a deeper cut in revenue for its fiscal year amid lower active clients.
The online personal styling services company on Monday said it forecasts revenue for the year ending in July of $1.29 billion to $1.32 billion compared with $1.64 billion for the prior year. The company had most recently guided for full-year revenue of $1.3 billion to $1.37 billion, while Wall Street analysts anticipated revenue of $1.35 billion.
The company ended its December quarter with an active client base of 2.8 million, declining by 184,000 from the prior quarter and by 572,000 from the same period a year earlier.
Stitch Fix’s current levels of client conversations haven’t met management expectations, Chief Executive Matt Baer said. “We don’t specifically guide to active clients, but we do expect the sequential decline in active clients to continue in the back half of the year.”
The company is now strengthening the foundation of its business, he said.
Stitch Fix is further strengthening its portfolio of private brands and investing in the customer experience to attract more active clients.
However, “it will take time to accomplish our ambitious plan to reimagine the Stitch Fix client experience,” Baer added.
For its fiscal third quarter, the company expects revenue of $300 million to $310 million, down as much as 22% from a year earlier.
Analyst comment
The news is negative for Stitch Fix as the shares dropped 15% and the company cut its revenue outlook. The decline in the active client base is a concern. The market is likely to react negatively to this news as investors may perceive the company’s growth prospects to be weaker than expected.
