Not long after Stitch Fix (SFIX 3.93%) went public last year, bullishness toward Stitch Fix stock prevailed. After debuting at $16.90, the stock was trading at more than $52 by this fall. This gave the stock a market capitalization of about $5 billion on fiscal 2018 revenue and net income of just $1.23 billion and $45 million, respectively.
But as the company's growth story began to disappoint, shares started sliding. And now with active client growth slowing and management providing weak guidance for the key metric, the stock has slid to nearly $20 per share. As investors reconsider Stitch Fix's growth prospects, here's a look at five of the most important metrics from the company's recently reported fiscal first quarter.
Image source: Stitch Fix.
1. Revenue increased 24%
A key area where Stitch Fix has been performing well is revenue growth. The company's revenue increased 24% year over year in Q1 to $366.2 million. This beat an average analyst estimate for revenue of $357.8 million.
"We continue to demonstrate our ability to deliver growth and exceptional client experiences across all of our categories," said Stitch Fix COO Mike Smith in the company's first-quarter earnings release.
2. Active clients climbed 22%
Stitch Fix's active clients, or clients who have checked out a Fix at least once in the preceding 12-month period, rose 22% year over year to 2.93 million.
While this growth may seem notable on the surface, analysts had been expecting active clients to come in at 2.95 million by the end of the period. In addition, this client growth was a meaningful declaration compared to the company's 25% year-over-year client growth in its fourth quarter of fiscal 2018.
3. Gross margin was 45.1%
Stitch Fix's gross profit margin jumped from 43.7% in the year-ago quarter to 45.1%. This 140-basis-point increase was driven primarily by a decrease in inventory reserve, the company said.
4. Revenue per active client increased 2.3%
Helping Stitch Fix's revenue growth was a 2.3% increase in active revenue per client for the 12 months ending Oct. 27. Average revenue per active client during this period was $443.
"This improvement was driven by stronger personalization through improved styling and merchandising as well as our efforts to acquire clients better matched for our service," management said in the company's first-quarter shareholder letter.
5. Guidance for flat sequential growth in active clients
For its current quarter, management said it expects "active client count to be relatively flat" sequentially. But the company said it expects revenue per client to grow.
Management said this guidance reflects the company's historical trend of lower sequential growth for its fiscal Q2, which coincides with the holiday period. "We believe this is reflective of our clients' focus on buying gifts for others rather than themselves." In addition, advertising will have a smaller impact on client trends during the quarter, as the company expects its advertising as a percentage of sales to be lower in Q2 than it was to Q1.
Though it makes sense for investors to keep their long-term growth expectations for Stitch Fix in check, it's worth noting that management expects active clients to continue growing over the long haul. "Looking forward, we expect both active clients and net revenue per client to play a role in driving our top-line performance," according to the first-quarter shareholder letter.
