Stitch Fix (NASDAQ:SFIX) is slated to report its third-quarter results for fiscal 2020 after the market close on Monday, June 8. 

Investors are probably feeling somewhat anxious about the online personalized apparel retailer's quarterly results. The COVID-19 pandemic has driven a decline in consumer spending on discretionary items, which doesn't bode well for a retailer of clothing and accessories.

Moreover, the company announced in mid-March that it temporarily closed two of its six distribution centers within the U.S. -- in San Francisco and Bethlehem, Pennsylvania -- to comply with state and local public health orders. So, we know Stitch Fix's supply chain has been disrupted. 

That said, there's a possible silver lining that could help mitigate the pandemic's negative impact on Stitch Fix. The company's online business model means that it probably stole some market share from brick-and-mortar apparel retailers in the quarter. Beginning heavily in mid-to-late March, brick-and-mortar retailers of non-essential goods were largely shut down across most U.S. states and some other countries to slow the spread of the coronavirus. 

Stitch Fix stock is up 9% since the release of it last quarterly report on March 9. This performance slightly lags the broader market, as the S&P 500 has returned 11.4% over this period. In 2020, shares are down 9.9%, compared with the broader market's negative 5% return.

Here's what to watch when Stitch Fix reports.

Close-up of a Stitch Fix package leaning against a bright yellow door surrounded by white trim.

Image source: Stitch Fix.

Key numbers 

On April 8, Stitch Fix management withdrew its previously issued guidance for both the third quarter and full fiscal year citing uncertainty surrounding the pandemic. For reference, the withdrawn Q3 guidance is included below.

Metric Fiscal Q3 2019 Result Stitch Fix's Fiscal Q3 2020 Guidance (Withdrawn on April 8) Stitch Fix's Projected Change (Before Guidance Was Withdrawn) YOY Wall Street's Fiscal Q3 2020 Consensus Estimate Wall Street's Projected Change YOY

Revenue

$408.9 million

$465 million to $475 million

14% to 16%

$410.6 million

0.4%

Earnings per share (EPS)

$0.07

N/A

N/A

($0.16) N/A. Result expected to flip to negative from positive.

Data sources: Stitch Fix and Yahoo! Finance. Fiscal Q3 period ended on May 2. YOY = year over year. Note: Stitch Fix doesn't provide earnings guidance. 

Wall Street is expecting Stitch Fix's revenue to edge up less than 1% from the year-ago period, or fall 9.1% on a sequential basis. But a 9.1% drop in revenue from the prior quarter sounds optimistic in light of the pandemic. 

The bottom-line result is expected to continue to decline year over year. This dynamic was in play before the pandemic occurred because the company has been investing heavily in growth initiatives, as is typical for newly public companies. (Stitch Fix held its initial public offering (IPO) in November 2017.) That said, analysts expect the global crisis to increase the magnitude of the earnings decline.

For context, in its fiscal second quarter, Stitch Fix's sales rose 22% year over year to $451.8 million, falling a little short of the $452.5 million Wall Street had expected. Net income landed at $11.4 million, which translated to earnings per share (EPS) of $0.11, down 8% from the year-ago period. Analysts were looking for EPS of $0.06, so the company easily beat this expectation.

Key customer metrics

Investors should continue to focus on growth in the two key metrics driving revenue growth: total number of active clients and the average annual revenue per client. Stitch Fix defines an "active client" as a customer who has bought at least one item from a "Fix" or received at least one item ordered from its direct-buy function in the last 52 weeks. (A "Fix" is a group of five items the company automatically sends each client each month.)

Last quarter, Stitch Fix's number of active clients increased 17% year over year to 3.5 million. Its average net annual revenue per client rose 8.3% to $501. Adjusted for the quarter's extra week relative to the year-ago period, net revenue per client rose about 6.3% year over year. 

Guidance 

It's possible that Stitch Fix won't provide any official guidance. However, on the earnings call, management should at least provide some qualitative color about the current demand environment for its products, as well as give an update on the health of its supply chain.

For context, for fiscal Q4, Wall Street is modeling for revenue to fall 5.8% year over year to $407 million, and expects the company to post a loss per share of $0.15, compared with EPS of $0.07 in the year-ago period.  

Investors should keep in mind that the pandemic makes this time extremely unusual. So, don't place too much importance on Stitch Fix's Q3 results. Management's post-pandemic outlook is much more important than the current quarter's results.

Ideally, management will give investors an idea of how the business was performing in the quarter before the pandemic wreaked its havoc.