Please ensure Javascript is enabled for purposes of website accessibility

Why Stitch Fix Stock Popped Today

By Jeremy Bowman - Jun 8, 2021 at 12:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online clothier beat estimates in its third-quarter report.

What happened

Shares of Stitch Fix (SFIX 2.22%) were soaring today after the online styling service turned in better-than-expected results in its third-quarter report and raised its guidance for the full year.

As a result, the stock was up 11.7% as of 12:25 p.m. EDT on Tuesday.

A woman opening a box of Stitch Fix clothes

Image source: Stitch Fix.

So what

After a disappointing second-quarter report back in March, Stitch Fix bounced back with solid results in its third quarter. Lapping the lockdown-impacted quarter a year ago, revenue jumped 44% to $535.6 million, easily beating the company's own guidance at $505 million to $515 million as well as analyst estimates at $510.6 million.

The company saw its second-biggest quarter-over-quarter gain in active clients, increasing by 234,000 to 4.1 million, showing new and reactivated clients returning to the service as the economy reopens.

On the bottom line, results were also better than the company had projected as it finished the quarter with an adjusted EBITDA of $11.6 million, compared to a forecast loss of $5 million to $9 million. Based on generally accepted accounting principles (GAAP), the company reported a loss of $0.18 a share, which was better than expectations of a loss of $0.27. 

Incoming CEO Elizabeth Spaulding said, "We're pleased with our performance this quarter and are excited to meet the
needs and enthusiasm of more and more clients as the world continues to reopen and the apparel retail backdrop improves."

Now what

Management hiked its guidance for the full year, now calling for revenue of $2.07 billion to $2.08 billion, above its prior forecast of $2.02 billion to $2.05 billion. It also provided full-year adjusted EBITDA guidance for the first time, at $25 million to $30 million.

For the fourth quarter, it sees revenue of $540 million to $550 million, representing 22% to 24% growth, which was ahead of the analyst consensus at $534.7 million.

Stitch Fix's big test will come at the end of July when it opens up its direct-buy platform to new customers, but the third-quarter results, which overcame what seemed to be conservative guidance, were good enough to reassure investors that the company is on the right track.

Jeremy Bowman owns shares of Stitch Fix. The Motley Fool owns shares of and recommends Stitch Fix. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

StitchFix Stock Quote
StitchFix
SFIX
$7.36 (2.22%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.