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Why Stitch Fix Stock Jumped 16% This Week

By Demitri Kalogeropoulos – Sep 24, 2021 at 8:49AM

Key Points

  • Sales trends were strong over the early summer months, and the supply chain held up well.

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The e-commerce specialist ended its fiscal 2021 with a bang.

What happened

Stitch Fix (SFIX 3.74%) shareholders trounced a rising market in recent days, with shares jumping 16% from last Friday through Thursday's trading, compared to a 0.4% increase in the S&P 500. The rally was powered by a surprisingly strong quarterly earnings report by the online apparel specialist.

So what

Stitch Fix on Tuesday announced sales and profit results for the quarter that ended in late July. The headline metrics both beat management's prior forecast, allowing the company to easily surpass its wider fiscal year targets. Revenue for the full year rose 23% thanks to the combination of a growing user base and increased average spending.

A customer pulls a shirt out of a delivery parcel.

Image source: Getty Images.

Stitch Fix's report eased some concerns for investors, who were worried about slowing growth or spiking costs. Instead, the e-commerce specialist kept its supply chain humming and had no trouble passing along higher prices to shoppers.

Now what

CEO Elizabeth Spaulding, who recently took over the company's top spot, has issued a conservative outlook for the new fiscal year that implies growth will slow to around 15%. Yet Stitch Fix has many opportunities ahead to push sales dramatically higher. It just launched a direct-buy option that puts it in a much bigger online shopping niche, even as it pushes into new demographics and new geographies.

The engagement of its current shopper base and new client acquisitions are the key metrics to watch when judging Stitch Fix's potential in these expansion areas. And, to date, these figures are heading in the right direction as the company kicks off its fiscal 2022.

Demitri Kalogeropoulos 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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