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Why Shares of Stitch Fix Are Down Sharply Again Today

By John Rosevear - Updated Mar 12, 2020 at 12:11PM

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Recession fears are mounting.

What's happening

Shares of Stitch Fix (SFIX 3.62%) opened down sharply for the third day in row on Thursday, as fears of economic disruption due to the COVID-19 pandemic drove a broad-based sell-off.

As of 10:15 a.m. EDT, Stitch Fix's shares were down about 10.4% from Wednesday's closing price.

So what

Stitch Fix has had a tough week. Its earnings for the quarter ended Feb. 1, reported on Monday after the markets closed, disappointed investors who had expected better sales growth. 

A woman carrying a Stitch Fix package.

Image source: Stitch Fix.

Guidance was even more disappointing, as the company cut its revenue-growth expectations for the full fiscal year on concerns about the effects of the novel coronavirus pandemic on consumer spending.

Those concerns have been exacerbated in recent days, as it has become increasingly apparent that travel and commerce in the U.S. and Europe will be disrupted for at least several weeks, possibly longer, as authorities grapple with the virus pandemic. 

Now what

Unlike its brick-and-mortar rivals, Stitch Fix isn't exposed to concerns that consumers will stay out of stores until the pandemic passes. But it is exposed to the possibility that its customers could cut spending in a recession, which seems increasingly likely now. 

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