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Stitch Fix Withdraws Guidance Over 'Significant Constraints' on Operations

By John Ballard - Apr 9, 2020 at 2:12PM

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Two of its distribution centers were temporarily closed last month due to COVID-19, which has caused disruptions.

In a business update released on April 8, Stitch Fix (SFIX 4.20%) withdrew its previously issued guidance for fiscal 2020 due to uncertainty relating to the COVID-19 pandemic. Guidance had called for revenue to increase at a rate in the mid-teens for the full year. 

On March 20, the personal styling service announced it was temporarily closing two distribution centers in California and Pennsylvania to comply with local health mandates. CEO Katrina Lake said, "While we anticipated our business would be impacted, we did not have visibility into the extent to which it would disrupt our distribution centers." 

The disruptions have caused "significant constraints on our operations," Lake explained, forcing management to withdraw guidance. 

A woman browsing the contents of a package from Stitch Fix.

Image source: Stitch Fix.

Investors brush the news off

Despite the news, the stock has been moving higher in recent days. Stitch Fix is still shipping products through other distribution centers around the U.S., and even though the near term will be challenging, this pandemic could alter consumer behavior and provide a long-term tailwind for online sales.

Lake sees the same potential. "Even with this challenging macroeconomic climate, we believe our business remains well positioned to succeed long term," she said. Lake pointed to the company's consistent profitability since 2014, and its position to cater to the needs of consumers who want a convenient way to shop for clothes from home. 

"We believe this foundation, and our unique personalization capabilities, coupled with a convenient at-home model that offers an obvious advantage in the new reality and positive momentum on Direct Buy effectively positions us for the future," Lake said.

Stitch Fix ended the most recent quarter on Feb. 1 in a healthy financial position, with $300 million in cash and no debt. 

John Ballard owns shares of Stitch Fix. The Motley Fool owns shares of and recommends Stitch Fix. The Motley Fool has a disclosure policy.

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