Stitch Fix (SFIX -1.08%) is slated to report its first-quarter fiscal 2020 results after the market closes on Monday, Dec. 9.
Investors are probably feeling more uncertainty than usual about the report. Last quarter, the online personalized apparel retailer beat Wall Street's revenue and earnings estimates but guided for much weaker first-quarter revenue than analysts were expecting. The market expressed its displeasure by sending shares tumbling 10.8% the next day.
Stitch Fix stock has pulled back considerably since hitting its all-time high in September 2018, which was just under a year after its November 2017 initial public offering. It's in the red by nearly 16% over the one-year period, but it's up 41% in 2019 through Dec. 6. For context, the S&P 500 has returned 19.1% over the last year and 27.9% so far this year.
Here's what to watch when Stitch Fix reports.
Image source: Stitch Fix.
Key numbers
| Metric | Fiscal Q1 2019 Result | Stitch Fix's Fiscal Q1 2020 Guidance | Stitch Fix's Projected Change (YOY) | Wall Street's Fiscal Q1 2020 Consensus Estimate | Wall Street's Projected Change (YOY) |
|---|---|---|---|---|---|
|
Revenue |
$366.2 million |
$438 million to $442 million |
20% to 21% |
$441 million |
20.4% |
|
Adjusted earnings per share (EPS) |
$0.10 |
N/A |
N/A |
($0.06) |
N/A; Flip to negative from positive projected. |
Data sources: Stitch Fix and Yahoo! Finance. YOY = year over year. Note: Stitch Fix doesn't provide earnings guidance.
On last quarter's earnings call, CFO Paul Yee explained that there were two reasons for management's Q1 revenue outlook being softer than its full-year outlook (which is for growth of 23% to 25% year over year, adjusted for the extra week in fiscal 2019 relative to fiscal 2020). First, because of the warmer-than-typical weather in much of the country, summer products like T-shirts and sleeveless tops were selling later than usual into Q1. These products carry a lower average unit price than fall items. Second, the company "spent less on marketing in late Q4, which meant we had fewer clients to contribute to revenue at the start of Q1," Yee said.
Why does Stitch Fix expect another loss rather than a profit like it posted a year ago? The company is investing in initiatives aimed at fueling long-term growth, such as its May launch in the U.K.
Key customer metrics
Investors will want to focus on two key customer metrics -- the number of clients and the average annual revenue per client. Last quarter, Stitch Fix grew revenue 36% year over year; this result got a boost from the extra week in the period relative to the year-ago quarter. That growth came from an 18% jump in the number of active clients, to 3.2 million, plus a 9% increase in the average net annual revenue per client, to $488. Adjusted for the period's extra week, net revenue per client rose about 7% year over year.
Q2 and full-year fiscal 2020 guidance
The market's reaction to Stitch Fix's upcoming report will probably hinge more on the company's outlook than on its results for the first quarter. (Stitch Fix provides an outlook for revenue but not for earnings.)
So, you should know the following: For Q2, Wall Street is modeling for revenue to jump 23% year over year to $455.3 million and earnings to decline 75% to $0.03 per share. For the full year, Stitch Fix previously guided for revenue of $1.90 billion to $1.93 billion, which represents growth of 23% to 25% year over year, adjusted for the extra week in fiscal 2019 relative to fiscal 2020.
If management guides for Q2 revenue below what Wall Street is expecting and/or ratchets back its full-year revenue outlook, look for the market to be punishing.
