Wednesday morning was another downer for investors, who responded negatively to the global repercussions from weak U.S. economic data on Tuesday. Adding to the tension internationally is the ongoing debate over the U.K.'s attempt to leave the European Union, as Prime Minister Boris Johnson refines what could be a last-ditch offer of Brexit terms to the EU. As of 11:15 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 449 points to 26,124. The S&P 500 (SNPINDEX:^GSPC) fell 48 points to 2,892, and the Nasdaq Composite (NASDAQINDEX:^IXIC) lost 126 points to 7,783.
Earnings season won't officially start for another week or two, but Stitch Fix (NASDAQ:SFIX) weighed in with a look at its most recent financial performance. At the same time, as the impact of a big move in the brokerage industry continued to ripple outward, TD Ameritrade (NASDAQ:AMTD) decided to make its own push to sustain its competitive position among the financial institutions that help millions of people invest.
Stitch Fix keeps growing, but will it be enough?
Stitch Fix saw its stock drop 11% Wednesday morning as investors reacted negatively to its fiscal fourth-quarter financial results. The online personal styling specialist continued to see healthy levels of growth, but some weren't satisfied with the pace of its progress.
Stitch Fix posted revenue growth of 36% during the quarter, closing its fiscal year with 29% year-over-year sales gains. The service counted 3.2 million active clients as of the end of the period, which was up by almost 500,000 customers from where it was this time last year. CEO Katrina Lake has high hopes for the future, having "built a personalization engine with incredible potential" that will help Stitch Fix "expand on our platform in new and innovative ways" and create a more interactive experience for shoppers.
Yet some of those following Stitch Fix were concerned about where trends might be headed. Earnings were down sharply year over year due to the company's investments in growth initiatives, and projections for fiscal 2020 call for revenue growth slowing to 23% to 25% on a comparable-year basis. As investors start looking more critically at high-growth stocks and valuations, Stitch Fix's share-price decline is just the latest shoe to drop, and we'll likely see similar situations play out once earnings season starts in earnest.
TD Ameritrade follows Schwab down
Shares of TD Ameritrade lost about 3%, further weakening from their plunge of more than 25% on Tuesday. The brokerage company announced late Tuesday that it would slash its commissions on some of its most common trades, including the complete elimination of commissions for online trading in stocks and exchange-traded funds.
The decision follows rival Charles Schwab's move on Tuesday morning, and TD Ameritrade's approach looks almost identical to Schwab's. In addition to zero-commission stock and ETF trades, TD Ameritrade will eliminate the base commission on options trades, keeping only the per-contract fee and charging no fees for option exercise or assignment at expiration.
TD Ameritrade CEO Tim Hockey emphasized that the broker is in a solid position to be able to reduce its commissions: "We've been taking market share with a premium price point, and with a $0 price point and a level playing field, we are even more confident in our competitive position and the value we offer our clients."
Yet investors are still nervous about the impact the move will have on TD Ameritrade's financial results. CFO Steve Boyle tried to reassure investors, estimating the revenue impact to be about 15% to 16% of total sales and working out to around $220 million to $240 million per quarter. That's a big hit, and shareholders will have to wait until TD Ameritrade gives more details on its plan for fiscal 2020 later this month.