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Why Stitch Fix Stock Was Falling Today

By Jeremy Bowman - Mar 9, 2020 at 12:17PM

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Investors seemed particularly antsy about the apparel company's earnings report, on deck for tonight.

What happened

Shares of personalized online styling service Stitch Fix (SFIX 3.62%) took a dive today as part of the broad market crash. Though there was no specific news out on the company, Stitch Fix is scheduled to report second-quarter earnings after hours today, and investors may be especially nervous about the report given the tumult in the market over the coronavirus scare.

As of 11:11 a.m. EDT, Stitch Fix shares were down 9% after falling as much as 13.5% earlier in the session. Meanwhile, the S&P 500 was down 6%.

A woman looking at her Stitch Fix style card

Image source: Stitch Fix.

So what

Today's sell-off in the stock market was triggered by ongoing fears about the spread of coronavirus and a crash in the oil markets as Russia and Saudi Arabia appear to be engaged in a price war that has sent the price of oil plummeting.

Stitch Fix has no exposure to the oil markets, and as an e-commerce company could even benefit from falling oil prices, which lower shipping costs, so it was a bit odd to see the stock falling by as much as double digits today. Like other retailers, Stitch Fix relies on China for a substantial percentage of its manufacturing. However, the real reason the stock is falling faster than the broad market today as well as over the past two weeks may be that investors have largely backed away from apparel retailers, as they seem to believe Americans will put off discretionary purchases like clothing in favor of necessities like food and medicine in the face of an extended outbreak. Already chains like Costco have seen a run on goods as consumers stock up on items they would need for a potential quarantine.

Now what

Though Stitch Fix would likely suffer in the event of a recession, the company seems well positioned for a "stay-at-home" economy, as consumers who may be unwilling to visit crowded stores will be more likely to shop online. The outbreak could provide a tailwind for the company.

The stock has a tendency to swing big on its earnings report, and with the market a wreck over the coronavirus, investors should expect a big move one way or the other. Analysts are looking for revenue to have increased 22.2% to $452.3 million and for earnings per share to come in at $0.06, down from $0.12.

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Stocks Mentioned

StitchFix Stock Quote
StitchFix
SFIX
$8.59 (3.62%) $0.30
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$470.76 (1.24%) $5.77

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