Today's stock market
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Utilities were the strongest sector, with the Utilities Select SPDR ETF (NYSEMKT:XLU) rising 1.4%. Retail stocks fell after Amazon announced it is raising wages for its workers. The SPDR S&P Retail ETF (NYSEMKT:XRT) dropped 3.3%.
Stitch Fix plummets on concerns over slowing client growth
Shares of Stitch Fix fell 35.1% after the online personalized apparel company reported fiscal fourth-quarter profit well above expectations, but disappointed investors with client growth numbers and its forecast for next quarter. Revenue increased 23.2% to $318.3 million, about what analysts were expecting and toward the high end of earlier guidance of $310 million to $320 million. The company earned $0.18 per share compared with a loss of $0.18 per share in the period a year ago and the analyst consensus estimate for EPS of $0.04.
Net revenue per active client was $447 for the full year, an increase of 0.4%. Gross margin for the quarter improved 90 basis points year over year to 44.4% due in part to improved inventory management.
What likely triggered investor disappointment was the news that Stitch Fix added only 54,000 new active clients in the quarter to a total of 2.74 million, compared with an addition of 180,000 last quarter and 112,000 in Q2. Guidance for Q1 revenue is a range of $354 million to $360 million, for a midpoint a bit lighter than the $359 million analyst consensus.
Stitch Fix also announced it is launching in the United Kingdom in the upcoming year. Along with its ongoing expansion in men's, kid's, and plus sizes, there would appear to be plenty of growth opportunities ahead for the company, despite the slowdown in client additions. After the big drop today, shares have only retreated to levels seen in early August, reflecting continued investor optimism.
Tesla hits production goals for Q3
Tesla released third-quarter production numbers that revealed that the company hit its aggressive goals given three months ago and almost doubled production of its Model 3. The company produced 80,142 vehicles in total, up 50.3% from the previous quarter, including 53,239 Model 3 units, an 86% increase from Q2 and within guidance of 50,000-55,000. Combined production of Model S and Model X increased 8.7% sequentially to 26,903. Still, shares of the electric-car maker closed down 3.1%.
Tesla succeeded in its goal of delivering more vehicles than it produced in the quarter, despite concern that logistics challenges had become a barrier last month. The company delivered 83,500 vehicles: 55,840 Model 3, 14,470 Model S, and 13,190 Model X.
Not all the news in the release was positive, however. Model 3 production in the final week of the quarter totaled 5,300 vehicles after the company said it would increase production of the Model 3 to 6,000 units per week by late August. Tesla also warned about the impact of trade tensions with China, saying its vehicles face a 55% to 60% cost disadvantage compared with cars produced in that country, thanks mostly to a 40% tariff.
Investors will be waiting for Tesla's earnings report in about a month to find out whether it reached positive net income and positive net cash flow in Q3, an important milestone to achieve in order to avoid having to raise additional capital.