What happened
Stitch Fix (SFIX 0.47%) shareholders lost ground to a declining market through most of this past week. The apparel retailer's stock declined 12% through Thursday trading compared to a 2.2% drop in the wider market. That slump added to a tough year for Stitch Fix shares, according to data provided by S&P Global Market Intelligence, which are down 74% so far in 2022.
It was powered by darkening investor sentiment around economic growth and an especially weak outlook for the e-commerce niche.
So what
The main factor driving Stitch Fix's stock lower this week was the downbeat mood on Wall Street. The S&P 500 fell by over 2% and the tech-heavy Nasdaq index dove 3% through Thursday trading.
Many e-commerce stocks fell harder than that, including Stitch Fix, Wayfair, and Chewy. Stitch Fix is a favorite bearish bet for many investors right now, which can amplify downward moves.
Investors have some specific worries about Stitch Fix's business, too, after the company announced layoffs following a weak sales report in June. The company is losing customers as more apparel shopping shifts back to physical stores. Stitch Fix's growth struggles have been compounded by an attempted shift away from its styling model toward more direct purchases.
Now what
Management said sales are likely to fall by around 15% in the fiscal fourth quarter, which ended in late July. The earnings report covering that period is slated for Sept. 20.
It is possible that Stitch Fix stock will recover some lost ground if the next operating update shows improving profitability and stabilizing growth trends. However, most investors will want to look toward other growth stocks until management demonstrates that it has a firm grasp on its rebound initiatives.
The platform isn't attracting new customers, and without expansion there it will be hard for Stitch Fix to target sustainably higher earnings over time.
