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Stitch Fix Stock Soars on Earnings Beat: 6 Metrics You Should See

By Beth McKenna - Jun 8, 2021 at 7:00AM

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Investors were pleased that the online personalized-apparel retailer's revenue surged 44% year over year.

Stitch Fix (SFIX 18.33%) reported better-than-expected results for the third quarter of fiscal 2021 (which ended May 1) after the market close on Monday, June 7.

Shares of the personalized-apparel retailer soared 16.2% in Monday's after-hours trading session. We can attribute the market's positive reaction to both revenue and earnings beating Wall Street's revenue consensus estimates and management increasing its full-year revenue guidance. 

Here's an overview of Stitch Fix's fiscal third quarter and guidance using six key metrics.

A Stitch Fix package leaning against a lavender door.

Image source: Getty Images.

1. Revenue jumped 44%

Net sales jumped 44% year over year to $535.6 million, speeding by the $510.6 million Wall Street had expected. That result also easily beat the company's own guidance, which was for revenue of $505 million to $515 million, as outlined in my earnings preview.

In the earnings release, the company said demand was strong for its Fix offering from new and reactivated customers, which "resulted in our second highest quarter-over-quarter client additions on record." It also said its success rates were broad-based, across its three categories, women's, men's, and kids. 

Revenue grew 6.2% from the prior quarter (essentially the November-to-January period).

2. The number of active clients grew 20%

Here are Stitch Fix's two key customer engagement metrics:

Metric

Fiscal Q3 2021

Change (YOY)

Number of active clients

4.1 million

20%

Average annual revenue per active client 

$481

(3%)

Data source: Stitch Fix. The company considers an active client to be any customer who has bought at least one item in the past 52 weeks. YOY = year over year. 

Last quarter, the number of active clients increased 12% year over year to nearly 3.9 million, and average annual revenue per active client fell 7% year over year to $467. 

3. Operating loss landed at $24.2 million 

Stitch Fix posted an operating loss of $24.2 million, an improvement from the operating loss of $46.1 million in the year-ago period.

Certainly, this improvement is good to see. That said, the year-ago period is an easy comparable, as it was a terrible quarter. Like many consumer discretionary companies, Stitch Fix's business was particularly hard hit that quarter by the COVID-19 pandemic.

4. Loss per share narrowed 45%  

Net loss was $18.8 million, or $0.18 per share, up from a loss of $33.9 million, or $0.33 per share, in the year-ago period. Wall Street was looking for a loss per share of $0.27, so the company beat this expectation.

5. Used $40.7 million in cash running operations

Stitch Fix used $40.7 million in cash running its operations in the quarter. In the year-ago period, its cash flow from operations was negative $58.7 million.

The company ended the period with $222.9 million in cash and cash equivalents and short-term investments, down from $286.5 million in the year-ago period.

6. Revenue growth of 22% to 24% expected for fiscal Q4 

For the fiscal fourth quarter (which ends July 31), management guided for revenue of $540 million to $550 million, representing growth of 22% to 24% year over year.

Management also increased its guidance for fiscal year 2021. It now expects revenue of $2.07 billion to $2.08 billion, representing annual growth of about 21% to 22%. The prior outlook was for revenue of $2.02 billion to $2.05 billion, representing annual growth of 18% to 20%.

Encouraging sales growth

Investors should be pleased that Stitch Fix turned in a better-than-expected quarter with respect to both revenue and earnings. 

That said, don't get carried away. (Yes, I am going to rain a bit on the party.) Keep in mind the year-ago period was an easy comparable and bottom-line results are far from ideal. Moreover, the company is still eating up a lot of cash running its operations.

While there are no guarantees, shares are likely to get a big pop on Tuesday. But a good portion of the pop will be from short-sellers (those who are betting on a stock's decline) covering their positions, as the stock has considerable short interest.

 

Beth McKenna 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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