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Stitch Fix Sales Fall, but Membership Rises

By Jennifer Saibil – Jun 9, 2020 at 9:53AM

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There were healthy signs amid the worse-than-expected earnings.

Stitch Fix (SFIX 2.27%) reported a 9% decline in revenue year over year in the third quarter, with $371.7 million, down from $401.9 million this time last year. Loss per share came in at $0.33, a huge drop from earnings of $0.07 in 2019.

Not as bad as other retailers

CEO Katrina Lake explained that the company ran into COVID-19 related glitches when it had to temporarily shut down two warehouses and couldn't fulfill some orders. If not for those challenges, she said, the company would have enjoyed a sales increase.

A woman trying on clothing.

Image source: Getty Images.

Despite the decline and the loss, Stitch Fix remained positive, noting that the general apparel industry saw an average decline of 80%, so a small decline wasn't all that bad.

Moreover, there were healthy signs for the business, including a 9% increase in new users, boosting the total to 3.4 million. Another positive signal was a 6% rise in sales per active user to $498.

Plans for moving forward

Lake also pointed out on a conference call that the company's direct-buy option was more popular during the third quarter. Stitch Fix's model is subscription-based, where a dedicated stylist sends customers boxes of curated clothing to try on. The customer pays for what they choose to keep and returns the rest. The direct-buy option lets customers choose additional items directly from the company website.

Lake was optimistic about the future prospects of the model, especially considering the current retail environment, and the company expects to return to growth in the fourth quarter. "As consumers rapidly shift their purchase behavior online at a step change in historic rates, we believe our model will outperform and continue to take share," she said.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Stitch Fix. The Motley Fool has a disclosure policy.

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