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Why Stitch Fix Stock Plummeted on Wednesday

By Daniel Sparks – Sep 23, 2020 at 11:58AM

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The personalized online apparel company's bottom line was worse than expected. But investors shouldn't overlook management's optimistic view for growth to accelerate.

What happened

Shares of personalized online apparel company Stitch Fix (SFIX 6.33%) were slammed on Wednesday. The stock was down 17% as of 11:20 a.m. EDT.

The stock's decline followed the company's fiscal fourth-quarter results, which featured better-than-expected revenue but highlighted a much wider-than-anticipated loss per share.

A woman opening a Stitch Fix box

Image source: Stitch Fix.

So what

Stitch Fix reported fiscal fourth-quarter revenue of $443.4 million, up 11% year over year on an adjusted basis. On average, analysts were expecting revenue of $414.9 million. 

Perhaps explaining the market's bearish response to the report, Stitch Fix swung to a meaningful loss on its bottom line, reporting a loss per share of $0.44 -- worse than a profit of $0.07 in the year-ago period. Analysts, on average, were expecting a loss per share of $0.16.

Management seemed happy about the quarter and optimistic about the company's future. "I'm very pleased with our strong Q4 results and our return to topline growth," said Stitch Fix CEO Katrina Lake in a press release about the results. "We grew active clients to 3.5 million, an increase of 9% year over year."  

Now what

While the company held off on providing specific full-year guidance, citing an uncertain macro environment, Stitch Fix did say in its fiscal fourth-quarter shareholder letter that it expects year-over-year revenue growth to "accelerate meaningfully in the second half of fiscal 2021 as the impact of COVID stay-at-home orders subside."

Daniel Sparks 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.

Stocks Mentioned

Stitch Fix Stock Quote
Stitch Fix
SFIX
$4.03 (6.33%) $0.24

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