Stitch Fix Shares Fall 27% Wednesday After Beating Analysts Expectations

Dec 8, 2021 By MarketDepth

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Stitch Fix (NASDAQ: SFIX) shares fell over 27% Wednesday despite beating analyst sales expectations in its fiscal first quarter. Investors were hoping Freestyle, the company’s direct-buy option, to offer a larger boost. One analyst says the company has run into a “growth wall.”

“We’re in this big learning phase of onboarding new clients to the Freestyle and the Fix experience. And there’s this broader supply chain backdrop. We wanted to make sure we were being appropriately conservative for the year.”

CEO Elizabeth Spaulding in a phone interview

In the three-month period ended October 30, the online personal styling service reported a loss of USD0.02 per share, compared to the expected loss of USD0.14 a share. Revenue amounted to USD581 Million, higher than analysts anticipated USD571 Million. Furthermore, active users rose 11% to 4.18 million from the previous year.

Reduced Revenue Outlook

The company reduced its revenue outlook for the fiscal year after saying that it is in the midst of attracting new users amid continuous supply-chain disruptions.   

“The supply chain issues we would expect to subside over the coming year. We’re learning a lot right now. We’re confident we’re going to improve over the coming quarters.”

CEO Elizabeth Spaulding in a phone Interview

Evercore ISI analyst Mark Mahaney cut his price target on Stitch Fix shares to USD24 from USD68. Additionally, he downgraded the stock to “in line” from “outperform,” following the recent report.

Hit Growth Wall

“Our call is that Stitch Fix has hit a growth wall, with its core Fix offering likely having matured out in the U.S. market,” Mahaney said in a note to clients. “The newish Freestyle offering may provide another leg of growth, but it has taken longer than we had expected to kick in … and maybe [it will] still not turn out to be material.”

Stitch Fix shares have fallen 57% throughout the year and have a current market cap of USD2.10 Billion.